Disclaimer: To modify a quote from Tim Ferris, “I am NOT a financial advisor, and none of this advice should be taken without speaking to a qualified professional first. Also, my results [are most likely] due to pure luck and zero skill.” But…this is working for me.
Warren Buffett is famously known for preferring bear markets over bull markets. That is to say, Buffett has thrived in markets that are languishing, where shares are cheap, and growth is stagnant, and gets nervous when markets are skyrocketing.
If we’re going to apply Warren Buffett’s advice to cryptocurrency investment then, should we be skeptical of the current market? Is cryptocurrency in the midst of a bull market? And if so, should we refrain from investing? My answer to the latter two questions is pretty simple: no, and no.
bo͝ol ˈmärkət/ — a market in which share prices are rising, encouraging buying.
be(ə)r ˈmärkət — a market in which prices are falling, encouraging selling.
Cryptocurrency came into being with the official release of Bitcoin in January of 2009. At the time it was worth around $0.008, and in 2010, Laszlo Hanyecz used 10,000 BTC to purchase two pizzas. With BTC being worth $1805.00 as of today, those two pizzas cost Laszlo ~$18 million.
While this anecdote may suggest that Bitcoin proves we are in a bull market, I believe that is not the case. The Bitcoin market has existed for just over eight years. Note this is not the case for the cryptocurrency market in general, as many cryptos weren’t invented for several years after Bitcoin was released. And similar to the Dotcom Crash of the early 2000s, the cryptocurrency market was inundated with “scam-coins” hoping to capitalize off of Bitcoin’s massive success. These scam-coins quickly took their gains and went home, leaving thousands of “get-rich-quick” investors empty-handed.
All this occurred around 2013–2014, and I believe it was just the growing pains of a new market being created. If you would have tracked the overall growth of the market, you wouldn’t have even noticed this “Crypto Crash” because of all the other solid companies that were rising to the limelight, drowning out the buzz of the scam-coin, and continuing to generate real growth.
Let’s be generous and pretend that the cryptocurrency market as we know it today really started existing in 2012, just three years after Bitcoin was initially released. This would date the market at just five years old! In comparison, most “bull markets” in the stock market last for a period of eight years on average — and this is based on data dating all the way back to 1926!
The cryptocurrency market is too young to know whether or not we’ve seen a bull or bear market.
For all we know, the growth that we’re seeing in the cryptocurrency market is the norm. Even if we generously suppose that the entire cryptocurrency market has existed since 2009, there is simply no way to know what is bull, and what is bear.
In light of the young age of the market, my simple suggestion to cryptocurrency investors is this: research, buy, and hold. Invest in what you know and believe in. And ask yourself these four questions. If you can’t answer yes to them all, don’t invest!
We may be in a bull market, and we may not. Regardless, we should use wise investment principles to maximize our gains and minimize our losses.
P.S. Enjoyed this article? Click the 💚 to help other people find it.
If you’d like to start investing in cryptocurrency, the easiest way is with Coinbase. Get $10 of free Bitcoin when you use this link — it’s my referral link — and get started now!
