Bitcoin – Relatively Speaking…

Health Check

Every so often, it’s advisable to visit your GP for a checkup. This will often incorporate testing one’s blood pressure, sugar levels, and a number of other tests, depending on pre-existing conditions. A similar idea can be applied to financial markets. Gathering information and data from multiple sources, indicators, and charts helps to form the basis of an accurate assessment. There are so many “points of collection” that need to be visited. Data is then extracted and processed, in order to eventually produce a fairly accurate thesis in regard to the “condition of the market“. Many tend to look at where markets or assets are, in relation to their previous highs. This is unfortunately only half of the story.

It is important to note where a particular asset has fallen from. However, it is also equally important to establish from where it has come, in terms of appreciation prior to the drop. Having an investment that is up 2000% and then proceeds to drop 70% is actually inconsequential in terms of losing initial investment capital. In a scenario, as I have just mentioned, the investment would still be up in excess of 600%. Relativity ratios are different for all investors. Entry points matter and should be considered in relation to the “stage” of the market.

When you compare the performance of Bitcoin against Facebook from the 2020 lows you begin to see something of tremendous importance and relevance, in regard to ascertaining the overall health of the Crypto market. Currently, META is trading below its 2020 low.

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The chart above clearly reveals that META is currently trading well below its 2020 low. In actual fact, at the time of writing, META is approximately 30% below its 2020 low. That is significant, especially by comparison.

What About Bitcoin?

Well, despite Bitcoin being down substantially, as well, it is doing a lot better than Facebook! Bitcoin’s 2020 low was approximately $3800, depending on which exchange you are referencing. At the time of writing, Bitcoin is trading above $20K, which is more than 400% higher than its 2020 low. So, you have a blue chip tech stock trading at 30% below its 2020 low, while Bitcoin trades at 400% above its 2020 low. This is something that should be noted.

If Bitcoin were to be trading at a similar level to META in percentage terms, it would be trading at approximately $2600! When you begin to look at the market in context, Bitcoin is performing relatively well, especially as it is considered to be volatile and risky.

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Many will argue that META has had a bit of “bad luck”, and so on. It doesn’t matter. Wouldn’t you consider the China mining ban a significant and unfortunate event? More than half of the network’s hashrate was at that time coming out of China. Facebook (META) is also a blue chip share, which is supposed to offer good returns, stability, and security. The risk factor is also meant to be extremely low when it comes to blue chips.

This is what I have been trying to bring across in multiple posts, especially in regard to inflation. Analyze appropriate time frames and you begin to see the appropriate results. Contextual analysis is imperative. Extracting data randomly can often create a misrepresentation.

As I am writing this article, the market is eagerly awaiting an announcement from the FED in regard to further interest rate hikes, and whether there will be a softening on the horizon. Further pain will serve to create further opportunities. Eventually, there will be a pivot. However, for now, we wait.

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