With bitcoin’s price dipping significantly below $100k again, the "buy the dip" cheerleaders are out in full force. But I’m here to offer a different perspective, which is simply: Don’t buy the dip.
Reasons to Avoid Buying the Dip
Before I continue, let me please make it clear that nothing that I write in this Take is investment advice.
Why would I say such a thing? Is it that I hate bitcoin all of a sudden?
I have other reasons for making such a statement.
Protecting Yourself from Exit Liquidity
The first is that I’m trying to keep you from becoming exit liquidity for people like this:
Don’t worry guys.
The retards are coming. January 8, 2025
Buying at a True Discount
The second is that I like to buy bitcoin when it’s truly selling at a discount, not just when it appears to be selling at one.
Let me explain.
Right now, bitcoin is trading about 13% off of its all-time highs. While that may be a significant discount for an asset in the world of traditional finance, it’s hardly more than a daily fluctuation in the world of bitcoin.
Understanding Bitcoin Price Cycles
In the four-year bitcoin cycles, bitcoin’s price tends to skyrocket during the years of and after its halving. And then the year that follows tends to be pretty terrible for bitcoin’s price. During that year, bitcoin’s price hits a low, which tends to be in the range of the prior cycle’s high.
That was a bit confusing, so let me give you an example.
In 2022, the last "pretty terrible" year, bitcoin's price dropped to about $15,500, which was actually about $3,500 lower than bitcoin’s top from the previous cycle — $20,000.
Future Price Predictions
If something comparable were to happen in 2026, we’d see bitcoin’s price at approximately $53k (23% below the previous cycle’s all-time high of $69k). Now, that would be a significant discount and a dip worth buying.
I don’t share this perspective to dissuade you from continuing with something like a dollar-cost averaging bitcoin investment strategy (one of the best strategies out there for the average retail investor). Instead, I share it because if a loved one came to me and asked me if now was a good time to buy bitcoin, I’d say "not really."
Long-Term Investment Strategy
I try to maximize the financial upside (in fiat terms) of investing in bitcoin as much as possible for those who ask me about investing in it — especially those who are new to it. And while I could maybe help someone trade in and out of a bitcoin position in the next year or so, I don’t like to do this, as I encourage people to buy and hold bitcoin for the long haul.
But, Frank, the U.S. might announce a Strategic Bitcoin Reserve and other nations may follow suit! And look at all the companies buying bitcoin for their treasuries!
Yes, these things are happening, and so are things like Bhutan selling bitcoin and so have things like Germany selling bitcoin and Tesla selling bitcoin.
Up until now, all bitcoin price cycles have been similar. So, while it looks like we have another year of bitcoin price upside in store for us, I think we drop far lower than this current price level when the tables turn.
And that’s when I’ll be proactively buying.
This article is a Take. Opinions expressed are entirely the author's and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Frequently Asked Questions
How does a Gold IRA account work?
Individuals who want to invest with precious metals may use the Gold Ira accounts, which are tax-free.
You can purchase gold bullion coins in physical form at any moment. You don't have to wait until retirement to start investing in gold.
An IRA allows you to keep your gold forever. Your gold holdings won't be subject to taxes when you pass away.
Your gold is passed to your heirs without capital gains tax. Your gold is not part of your estate and you don't have to include it in the final estate report.
First, an individual retirement account will be set up to allow you to open a golden IRA. Once you've done so, you'll be given an IRA custodian. This company acts like a middleman between the IRS and you.
Your gold IRA custody will take care of the paperwork and send the forms to IRS. This includes filing annual returns.
Once you've set up your gold IRA, it's possible to buy gold bullion. Minimum deposit is $1,000 You'll get a higher rate of interest if you deposit more.
You will pay taxes when you withdraw your gold from your IRA. If you're withdrawing the entire balance, you'll owe income taxes plus a 10 percent penalty.
However, if you only take out a small percentage, you may not have to pay taxes. There are some exceptions, though. However, there are exceptions. If you take 30% or more of your total IRA asset, you'll owe federal Income Taxes plus a 20% penalty.
You should avoid taking out more than 50% of your total IRA assets yearly. Otherwise, you'll face steep financial consequences.
Can I buy Gold with my Self-Directed IRA?
You can purchase gold with your self-directed IRA, but you must first open an account at a brokerage firm like TD Ameritrade. Transfer funds from an existing retirement account are also possible.
The IRS allows individuals to contribute up to $5,500 annually ($6,500 if married and filing jointly) to a traditional IRA. Individuals can contribute up $1,000 per annum ($2,000 if they are married and jointly) directly to a Roth IRA.
You should consider buying physical gold bullion if you decide to invest in it. Futures contract are financial instruments that depend on the gold price. These financial instruments allow you to speculate about future prices without actually owning the metal. However, physical bullion is real gold or silver bars you can hold in your hands.
How much are gold IRA fees?
Six dollars per month is the fee for an Individual Retirement Account (IRA). This fee covers account maintenance fees, as well any investment costs that may be associated with your investments.
If you want to diversify, you may be required to pay extra fees. The fees you pay will vary depending on the type of IRA that you choose. Some companies offer free check accounts, but charge monthly fee for IRA accounts.
In addition, most providers charge annual management fees. These fees are usually between 0% and 1%. The average rate is.25% per year. These rates can be waived if the broker is TD Ameritrade.
Statistics
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
External Links
cftc.gov
irs.gov
wsj.com
- Saddam Hussein's InvasionHelped Uncage a Bear In 90 – WSJ
- How do you keep your IRA Gold at Home? It's Not Exactly Legal – WSJ
forbes.com
- Gold IRA, Add Sparkle to Your Retirement Nest egg
- Understanding China's Evergrande Crisis – Forbes Advisor
How To
Investing with gold or stocks
Gold investing as an investment vehicle can seem extremely risky these days. This is because most people believe that it is no longer economically profitable to invest gold. This belief is based on the fact that gold prices are being driven down by global economic conditions. They think that they would lose money if they invested in gold. However, investing in gold can still provide significant benefits. Below are some of them.
One of the oldest forms known of currency is gold. There are thousands of records that show gold was used over the years. It was used all around the world as a reserve of value. It is still used as a payment method by South Africa and other countries.
You must first decide how much you are willing and able to pay per gram to decide whether or not gold should be your investment. It is important to determine the price per gram you are willing and able to pay for gold bullion. If you don’t know what the current market price is, you can always call a local jewelry store and ask them their opinion.
It is important to remember that even though gold prices have dropped in recent times, the cost of making gold has risen. Although the price of gold has dropped, production costs have not.
The amount of gold that you are planning to purchase is another important consideration when deciding whether or not gold should be bought. It makes sense to save any gold you don't need to purchase if your goal is to use it for wedding rings. If you plan to do so as long-term investments, it is worth looking into. Profitable gold can be sold at a lower price than it was when you bought it.
We hope this article helped you to gain a better appreciation of gold as a tool for investment. We strongly recommend that you research all available options before making any decisions. Only after you have done this can you make an informed choice.
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By: Frank Corva
Title: Why You Shouldn't Buy the Dip in Bitcoin
Sourced From: bitcoinmagazine.com/takes/dont-buy-the-bitcoin-dip
Published Date: Wed, 08 Jan 2025 19:34:20 GMT
