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Is Bitcoin At It’s Bottom?

Bitcoin Magazine Pro summarizes the September FOMC meeting's medium-term thesis and discusses how to approach the looming macro volatility.

Below is an excerpt taken from Bitcoin Magazine Pro's most recent edition. Subscribe now to be the first to get these insights and other analysis on-chain bitcoin markets straight to your email inbox.

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Maximum Pain: Still Ahead Of Us

Pain is the word of today. This was the favorite word of Federal Reserve Chairman Jerome Powell during the September Federal Open Market Committee meeting. A simple economic announcement and the subsequent press conference sent markets into mild panic. Rates soared higher, volatility heated up, and equities sold off with bitcoin following. The S&P 500 Index fell below 3850 and bitcoin crashed to $18,100. The 2-year Treasury was at 4.1%.

Markets were not turned around by a 75 basis point increase, as the Fed's forecasts and Powell’s speech combined gave risk assets even more to worry about. Powell repeatedly reiterated that there would be more economic pain in the future (job losses, declines in housing markets, etc.). As a result, the inflation problem is being solved. He mentioned a lack inflation in their favorite "corePCE" measure (personal consumption expenditures), and reiterated his Jackson Holehawkish speech, noting they will not stop until the job's done.

It is now either do or die when it comes to risk assets. There are two options: an immediate rally this week, or a more gradual decline in valuations and prices.

As long-term bull-biased Bitcoin proponents, our thesis at Bitcoin Magazine Pro is that macroeconomic headwinds are driving the market. Given the volatility in global currencies and bond markets, we believe the panic moment has yet not arrived. While we are flexible and open to changing our stance, as market analysts, it is not impossible for us to see and report on what is happening. We'll get to this in a moment.

On-Chain

On-chain cyclical metrics are useful in assessing long-term value buying or selling opportunities, but we haven't highlighted them as much over the past few months because we feel they are less relevant to price action than current macro headwinds.

When looking at the history and bitcoin market cycles, one notices immediately the consistent fall in bitcoin prices below their realized price (the average cost basis of all bitcoins as per their last movement via on-chain). This is the case during bear markets. This has happened in previous cycles. However, it's not a rare event. It is a cycle that comes with time. For months, we have been emphasizing that this bear market could last longer than many expect and that the duration is more painful than the percentage decline.

"As an average holder is underwater most marginal sellers have already started to sell their holdings. While further downside may be possible, the 'pain market participants feel it in the form a prolonged period spent underwater rather that rapidly declining prices which characterized the beginning of the bear market." When will the Bear Market End? July 11, 2022

The daily BTC/USD exchange rate is completely set at the margin. Given the growing macroeconomic headwinds marginal sellers will likely continue to dominate marginal buyers up until a significant change in liquidity conditions.

This zoomed-in view shows how the capitulation process transfers the coins into more powerful, and better-capitalized hands.

The realized price of Bitcoin is weighted to show that we are in bear territory, but there is still room for improvement.

The realized market cap, which tracks the growth in bitcoin's price over time, is a reassuring chart for those who see this as the right time to buy long-term undervalued bitcoin. The cost basis has dropped by a maximum 24.07% over the cycle highs, and it is currently at 12.71%. This chart is what most non-bitcoin investors are not able to see. Despite the volatility of the exchange rate, even in the "everything speculation" bubble that bitcoin is part of, the cost base of the network is always increasing or decreasing.

The cost base is at 12.71%.

Frequently Asked Questions

How much should you have of gold in your portfolio

The amount that you want to invest will dictate how much money it takes. A small investment of $5k-10k would be a great option if you are looking to start small. As you grow, it is possible to rent desks or office space. You don't need to worry about paying rent every month. Rent is only paid per month.

Also, you need to think about the type of business that you are going to run. In my case, we charge clients between $1000-2000/month, depending on what they order. If you are doing this type of thing, it is important to think about how much you can expect from each client.

If you are doing freelance work, you probably won't have a monthly salary like I do because the project pays freelancers. You may get paid just once every 6 months.

You need to determine what kind or income you want before you decide how much of it you will need.

I recommend starting with $1k-$2k in gold and working my way up.

Is buying gold a good retirement plan?

Although it may not look appealing at first, buying gold for investment is worth considering when you consider the global average gold consumption per year.

The best form of investing is physical bullion, which is the most widely used. There are many ways to invest your gold. The best thing to do is research all options thoroughly and then make an informed decision based on what you want from your investments.

For example, purchasing shares of companies that extract gold or mining equipment might be a better option if you aren't looking for a safe place to store your wealth. If you need cash flow from an investment, purchasing gold stocks is a good choice.

You also can put your money into exchange-traded funds (ETFs), which essentially give you exposure to the price of gold by holding gold-related securities instead of actual gold. These ETFs can include stocks of precious metals refiners and gold miners.

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What are the advantages of a gold IRA

An Individual Retirement Account (IRA) is the best way to put money towards retirement. You can withdraw it at any time, but it is tax-deferred. You control how much you take each year. There are many types available. Some are better for those who want to save money for college. Some are for investors who seek higher returns. For example, Roth IRAs allow individuals to contribute after age 59 1/2 and pay taxes on any earnings at retirement. These earnings don't get taxed if they withdraw funds. This type of account might be a good choice if your goal is to retire early.

The gold IRA allows you to invest in different asset classes, which is similar to other IRAs. Unlike a regular IRA you don't need to worry about taxes while you wait for your gains to be available. This makes gold IRA accounts excellent options for people who prefer to keep their money invested instead of spending it.

Another benefit of owning gold through an IRA is that you get to enjoy the convenience of automatic withdrawals. This eliminates the need to constantly make deposits. To make sure you don't miss any payments, you can also set up direct deductions.

Finally, gold is one the most secure investment options available. Because it's not tied to any particular country, its value tends to remain steady. Even during economic turmoil, gold prices tend to stay relatively stable. As a result, it's often considered a good choice when protecting your savings from inflation.

What is the best precious-metal to invest?

This question depends on how risky you are willing to take, and what return you want. Gold has been traditionally considered a haven investment, but it's not always the most profitable choice. Gold may not be right for you if you want quick profits. If patience and time are your priorities, silver is the best investment.

If you don’t desire to become rich quickly, gold may be your best option. Silver may be a better option for investors who want long-term steady returns.

Should You Buy or Sell Gold?

Gold was once considered an investment safe haven during times of economic crisis. Today, many people are looking to precious metals like gold and avoiding traditional investments like bonds and stocks.

The trend for gold prices has been upward in recent years but they still remain low relative to other commodities like silver and oil.

Some experts think that this could change in the near future. They believe gold prices could increase dramatically if there is another global financial crises.

They also note that gold is increasingly popular because of its perceived intrinsic value and potential return.

Consider these things if you are thinking of investing in gold.

  • Consider first whether you will need the money to save for retirement. It is possible to save enough money to retire without investing in gold. The added protection that gold provides when you retire is a good option.
  • Second, ensure you fully understand the risks involved in buying gold. Each one offers different levels security and flexibility.
  • Remember that gold is not as safe as a bank account. You may lose your gold coins and never be able to recover them.

You should do your research before buying gold. You should also ensure that you do everything you can to protect your gold.

Statistics

  • You can only purchase gold bars at least 99.5% purity. (forbes.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)
  • Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
  • If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
  • (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)

External Links

forbes.com

bbb.org

law.cornell.edu

investopedia.com

How To

3 Ways to Invest in Gold for Retirement

It's crucial to understand where gold fits in your retirement strategy. If you have a 401(k) account at work, there are several ways you can invest in gold. You may also be interested in investing in gold beyond your workplace. If you have an IRA (Individual Retirement Account), a custodial account could be opened at Fidelity Investments. You may also want to purchase precious metals from a reputable dealer if you don’t already have them.

These are three easy rules to remember if you invest in gold.

  1. Buy Gold with Cash – Avoid using credit cards or borrowing money to fund investments. Instead, instead, transfer cash to your accounts. This will help to keep your purchasing power high and protect you against inflation.
  2. Physical Gold Coins: You should own physical gold coins, not just a certificate. Physical gold coins can be sold much faster than paper certificates. Also, there are no storage fees associated with physical gold coins.
  3. Diversify Your Portfolio. Never place all your eggs in the same basket. This means that you should diversify your wealth by investing in different assets. This will reduce your risk and give you more flexibility in times of market volatility.

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By: Dylan LeClair And Sam Rule
Title: Is The Bottom In For The Bitcoin Price?
Sourced From: bitcoinmagazine.com/markets/is-the-bottom-in-for-the-bitcoin-price
Published Date: Sat, 24 Sep 2022 02:00:00 GMT

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