Uncharted Territory

Do I buy or do I sell?

Tesla’s big announcement of buying $1.5 Billion of Bitcoin yesterday caused the price of Bitcoin to skyrocket. Just remember, Square bought $50 million of Bitcoin back in October and that was a huge deal. Bought Tesla bought 30x that amount. It’s no wonder Bitcoin went up almost $10,000 in 1 day. Completely unprecedented! As you can imagine, I have a lot of people that are looking to buy more Bitcoin and the question is always around when should they buy.

Part of me says, don’t buy here. Why? A key metric I use is called the Bitcoin Mayer Multiple. This is the ratio between the current price and the 200 day moving average. Right now, the 200 MA sits around $18,700 while Bitcoin is currently trading around $47,000. That makes the Bitcoin Mayer Multiple to be 2.51.

You will notice from the image below, that since 2017, every time the Mayer Multiple gets to 2.4 there’s a significant correction. And at the very least, if the price doesn’t correct, the price will stabilize to allow the 200 MA to catchup, which would also cause the Mayer Multiple to decrease. So just based on this metric you would think that the price would either dip or range for a while.

On the other hand, we are seeing incredible real adoption. The price isn’t going up for no reason. With the combination of new stimulus packages north of $2 Trillion, fears of inflation being recognized by hedge fund managers like Ray Dalio, and public companies buying billions of dollars of Bitcoin, it’s no wonder the price is up so much.

In reality, the concept of public companies buying Bitcoin as part of their treasury management strategy is just getting started. Michael Saylor, of MicroStrategy, just held a Bitcoin for Corporations Conference last week. During the 2 day conference, he went over his playbook so other companies can figure out how they too can buy Bitcoin. In a tweet, Michael Saylor announced the conference attracted 8,917 attendees from over 6,917 different enterprises!

So yes, Bitcoin has gone up a lot already, but are you prepared for when these 6,917 enterprises start buying as well? Now, I’m sure most enterprises are not publicly traded companies. I mean, I attended the conference using one of my personal business emails. But still, imagine if 100 public companies announce they recently purchased millions of dollars of Bitcoin? Did you know that there is $2.5 Trillion of cash on the balance sheets of public companies?

Where does this leave us? Based on the charts, I’d say we’ve gone up too high too fast and we need a breather. But in the same breath, I’d say, we’re just getting started. So what do you do?

(This is not financial advice)

First, you make sure you have some exposure to Bitcoin. Start small. Buy at a regular cadence, like once a week. Then if there is a significant pull back, then you can buy more. I have no idea what the price will do tomorrow, next week, or even in a month. But in the long term, I have to imagine the price keeps going up.

I’ve been saying Bitcoin will reach $100,000 in 2021 for over a year now. At first, this seemed pretty far fetched. Now, not only does it seem realistic, but it seems a big pessimistic. My new target for 2021 is north of $180,000, with a stretch target of $220,000.

I hope this helps! If you want to join a community of crypto enthusiasts, you can join my Patreon at $3/month and get added to my Slack group. Don’t forget, my Cryptocurrency Course is still on going. Check out the landing page to watch a free 16-min preparatory class. I’ve had over 30 people go through the course and everyone has found the investment worth while. In addition, I offer a $50 referral fee to anyone that gets someone to take my course as an incentive to share with your friends and family.

Best,

Spencer