It’s impossible to perfectly time any market, let alone an asset class as volatile as Crypto. It’s easy to look back and calculate the inordinate ROI any individual could have reaped from investing early in Bitcoin’s history and selling at each cycle high. But the funny thing, which no one seems to understand until they’ve got skin in the game, is that no one knows what the cycle high was until after it’s passed.
But what if you bought every top Bitcoin has ever had? Would you be broke and living on the streets? Would you ever get your principal investment back? How long would it take to break even, if ever? Let’s examine more closely.
2011
Bitcoin’s first major bull run occurred in Spring of 2011, where it rallied from less than $1 USD in April and rose until June 8th, when Bitcoin ultimately peaked at about $32. Over the course of just three months, this parabolic rise amounted to a stupefying gain of over 3,300%.
But what if you were one of the unfortunate souls who wanted in on the manic price rise too, and bought Bitcoin precisely on June 8th, 2011? Needless to say, you did not have much fun, at least in the short term, as the next 5+ months saw a ~94% depression in Bitcoin’s price from $32 back down to under $2. Psychologically, this would probably be devastating for any investor, let alone the average retail investor or individual making their first foray into the infant Crypto sphere. Fortunately for the worst investor ever, they were smart enough to secure their Bitcoin private key on a cold-storage wallet to prevent it from being hacked, stolen, or lost.
But how long did this investor have to wait just to break even on their investment after buying the absolute top in the parabolic 2011 bull market? It was a bit of a wait, but after Bitcoin put in a double bottom in November 2011, the price increased steadily, and not without 200-400% rallies followed by 60-70% corrections, for which Bitcoin has become notorious. After an agonizing and restless 631 days, the worst Bitcoin investor ever finally broke even on February 28, 2013, selling at exactly $32 and recouping 100% of their total investment.
2013
However, they were foolish for doing so, as the price action was clearly showing an uptrend, and Bitcoin not only saw a new all-time high the very same day they sold, but new all-time highs continued week after week, eventually climaxing mere months later on November 30th, 2013 at a new record-breaking second cycle high around $1,200 per Bitcoin. This price rise from the 2011 high of $32 to the 2013 high of $1,200, over the course of 908 days, resulted in a ~3,700% price increase, similar to the previous bull market’s percentage gain.
But let’s say the worst investor ever, who after selling their Bitcoin at $32 for a net gain of $0, realized how silly they were for selling their Bitcoin at the now-lowly $32 and wanted in on some of the gains they were missing out on again. Unfortunately, they acted too late and jumped in at peak hysteria, buying Bitcoin at the 2013 high of $1,200.
Lo and behold, the price pulled back sharply, higher highs became lower lows, and support levels broke one after another, first $1,000, then $800, $600, etc. Eventually, after 410 days, Bitcoin scratched its cycle low on January 14, 2015 at ~$162, an ~86% retracement from the 2013 high. “Not again!” agonizes the world investor ever, “Bitcoin will never get back to $1,200 again. My money is gone.” Instead of selling for a huge loss, they forget about it, leaving it safely secured in the cold darkness of the blockchain, writing it off as an technology investing experiment gone bad, and move forward with their life.
2017
A few years pass and the worst Bitcoin investor ever notices an increase of articles and posts about Bitcoin, marveling to themself ‘These people don’t know what they’re getting themselves into.’ The worst investor ever checks the prices and, voila, Bitcoin’s price is roughly $1,200! The investor frantically signs in online and sets a sell order for their Bitcoin, hoping for a miracle they can get their money back that they swore they would never see in their life again. The order fills, barely grazing $1,200 and pulls back a bit. A huge sigh of relief washes over the investor; they couldn’t have possibly imagined they would be ‘lucky’ enough for this day to come again. After all, they had bought Bitcoin at the exact cycle high of each of the two previous cycles, what are the odds they were lucky enough to get out of both investments without losing money? They shut their computer, and cheerfully continue on with their day.
But unbeknownst to the worst Bitcoin investor ever, the Bitcoin price rise to the previous all time high was, yet again, a sign of a fervent new bull market bubbling under the surface. As Bitcoin has shown in previous cycles, prior highs eventually become new support on the way to exponential new highs. Two months later, Bitcoin broke through previous resistance at the 2013 all time high, running up to $1,300 before pulling back. Bitcoin consolidated for no more than two months before stepping on the gas and steadily propelling up in price over the summer. The worst investor is now getting text messages from friends asking if they still had their Bitcoin and how much they’re up now that Bitcoin is over $5,000. A wave of fomo hits them in an all too familiar manner, but they remind themself of the pain and regret they felt the last two times this happened. In Fall of 2017, Bitcoin’s price added some gasoline to the fire and exploded to the upside, smashing through $6,000, $8,000, then $10,000, with no end in sight. ‘That’s it,’ the worst Bitcoin investor says to themself, ‘I’m not missing out on another run up, all it does is go up, I’ll look so smart to my family at Christmas dinner next week.’ The worst Bitcoin investor buys some Bitcoin on December 17, 2017, the day Bitcoin peaks at $20,000, and subsequently watches the price fall to $18,000, then $16,000.
“Your mother says you invested in something called Bitcoin recently, how’s that going?” asks the worst Bitcoin investor ever’s uncle. The family sits gathered around the dining room table and the mood is jovial and festive, except for the worst Bitcoin investor ever, who emits an aura of quiet concern. “Not bad,” the worst investor lets out, trying to sound as confident- or at least neutral- as possible, knowing Bitcoin printed another large red candle on the Daily chart, breaking below $14,000.
Now, obviously it would be impossible to sell at the exact top of any bull market, let alone catching the precise high of Bitcoin’s extremely volatile and parabolic rises. However, the data above clearly shows how an average investor with no specialized knowledge or skill in financial markets or technical analysis can buy Bitcoin relatively low by looking at a basic chart, and with a little patience, make a substantial profit by selling relatively high. But even more to the point of this article, is the fact that even if one does buy Bitcoin at the exact top of a bull market, they will eventually not only break even on their investment, but if one continues to show patience and hold through the day-to-day volatility and into the next bull market, they will most likely see an exponential net gain on their initial investment. History suggests it.
