Should You Buy Bitcoin If It Falls Below $15,000?
The Bitcoin (BTC -0.31%) bear is out in force. With the digital currency trading around $16,900, fear more FTX contagion, recession, inflation and geopolitical risk in China could push it down above $15,000. Understandably, even the most die-hard buy-the-dip Bitcoin investors are getting worried right now.
Right now, $16,900 represents a significant retreat from a previous support level of $20,000 that Bitcoin maintained over the summer. So far so good. As long as you buy it now, you’re still buying the dip. But now comes the big moment of truth: Do you buy if it falls below $15,000?
The worst case scenario for Bitcoin
Until the FTX contagion, $15,500 was supposed to be the worst case scenario for Bitcoin. But then came FTX, and now there’s a new worst-case scenario: $6,000. This would represent a massive 65% drop from current levels and will inevitably bring out more Bitcoin bears. It would also lead to an eventual mass surrender and run to the exits by investors, or a total market capitulation.
Image source: Getty Images.
Previous Bitcoin bear markets have required this panic before Bitcoin could reach a final bottom. In short, there must be a point of such intense pain in the crypto market that even the most stoic Bitcoin investor decides to wave the white flag. Most likely, the market needs one last final move down to make a total, full capitulation. Only when Bitcoin reaches a final bottom can we expect to see another long-term rally.
Buy the dip — and double the dip
The silver lining in all of this is that Bitcoin at $6,000 will still be double the bottom of the bear market in 2018. If you buy it at $6,000, you’ll be setting yourself up for some potentially exciting price gains in the coming months.
Consider, for example, the price estimates of California-based crypto hedge fund Pantera Capital. It has set a price target of $149,000 for Bitcoin, based on expected performance around the next halving event, scheduled for 2024. According to this model, Bitcoin will bottom out by the end of 2022, to be followed by a gradual recovery in 2023, before a huge acceleration in gains by 2024. Pantera Capital estimates that the crypto will reach $36,000 by 2024 before skyrocketing to $149,000 thereafter.
Admittedly, this $149,000 price estimate is probably on the high end of what most investors would expect. But even if Bitcoin only goes back to $20,000, investors who buy this bottom will be looking at incredible gains. This may not be very likely, but it is certainly within the realm of possibility; Bitcoin was still trading near $20,000 in mid-June after the initial market decline triggered by Terra Luna (LUNA -0.95%).
Bear market millionaires
There is a popular saying in crypto circles: “Bear markets are where millionaires are made.” That’s when normal, everyday investors are able to acquire valuable crypto assets at rock bottom prices. Buying Bitcoin for $6,000 and then patiently waiting for the price to rise to $149,000 is the kind of investment move that can make you a millionaire.
Yes, this is a very risky investment strategy, especially given crypto’s historical volatility. And, yes, you have to buy and endure some pain for it to work. The final market capitulation for Bitcoin will be head-spinning and gut-wrenching. But when that day comes—when every single one of your neighbors says you’re crazy for investing in Bitcoin—that’s when the market will be at an absolute bottom.
Total capitulation in the crypto market sounds terrible, except it’s not. It’s just a function of the system. It helps to remove all selling pressure from the market. All risk-averse investors are replaced by risk-tolerant and risk-seeking investors, and the market has nowhere to go but up. That’s why I’m long-term bullish on Bitcoin. I buy dips – and I especially buy double dips when it falls below $15,000.
