In this blogpost, I’ll walk you through my investing thought process of my last trade.
On April 13th, 2021, Bitcoin was at its historical peak price, 63,650 USD. 12 days later, Bitcoin’s price fell by 22.8% ($49,180).
On April 23rd, 2021, I purchased 0.0075 BTC for a total amount of 396.43 USD through the app [Celsius]
(Mobile Cryptocurrency Wallet)
Recently, Bitcoin had a price collapse. As an investor and supporter of cryptocurrency, I believe that it was a good bargain price to buy as some investors were panic selling.
After Bitcoin’s price collapsed, my prediction was that it would decline further until $45,000 or lower. Thus, I planned to buy more then. However, I was wrong. It quickly rebounded back to $55,000 within 3 days.
From this, we can see that these “buy” opportunities are scarce and investors must act quick.
Next, we’re going to move onto the analysis that I’ve performed before executing my trade.
Cross-check Analysis of My Trade
Seeing that the price of Bitcoin declined, I jumped on the chance to purchase more. However, before executing my trade, I made sure to cross-check using the Relative Strength Indicator (RSI is a technical analysis indicator to check if an asset is undervalued or overvalued).
If you have no idea what I’m talking about here, I recommend you to learn about the basics of technical analysis and cryptocurrency here! Make sure to come back to this post after!
This is Bitcoin’s RSI from April 13th to April 25th. We can see that the purple line peaked on April 13th and hit rock bottom on April 25th. It was close to its “rock bottom” when I’ve made my trade (April 24th).
Whenever the purple line is close to or crosses the bottom boundary, it means that targeted asset (in this case Bitcoin) is undervalued. On April 25th, Bitcoin is definitely undervalued relative to the cryptocurrency market.
This is when I was completely convinced to add some Bitcoin to my current holdings.
How much Bitcoin did I purchase on April 24th?
I’ve purchased 5% of my total Bitcoin holdings.
What does that mean?
Take this for example:
My total Bitcoin holdings is worth $10,000.
5% of my total holdings would be = $500 (10,000*0.05=500)
If Bitcoin’s price continued to decline, I would’ve purchased an additional 5% of my holdings for every 5% declination of Bitcoin’s price. However, this was not the case, so I only purchased a total of 5% of my total holdings. (This is known as Dollar Cost Averaging, the next blog will be about this!)
My Further Expectations of This Trade
In terms of investing, what I look forward to the most is Bitcoin’s next reclination. I believe there will continue to be opportunities where I can purchase Bitcoin at a bargain.
What would be my next move in the market?
Currently, I’m researching and investigating on wine and physical commodity investments. As wine and physical commodities have a low correlation with the stock market, it helps to diversify my stock and cryptocurrency assets.