The Motley Fool

This is what I’d do about Bitcoin right now

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Light bulb with jester hat perched on top
Image source: Getty Images

The price of a Bitcoin is just over $4,000 as I write. About a year ago it was knocking on the door of $20,000. It got that high from almost nowhere very quickly, but looking at the chart it seems clear that the price shot up in a speculative bubble. Now, the price has topped and broken down, and the big danger for speculators who buy Bitcoin now is that they could be suffering from what ace US trader Mark Minervini calls ‘broken leader syndrome’.

He reckons it works like this: speculators who didn’t buy a dynamic market leader as it emerged and before it shot for the stars suddenly get interested in it after it has topped and the price has fallen back. They are buying because they think it is cheaper then and will shoot back up. But guess what, it probably won’t. They are actually buying a broken leader that won’t work anymore.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Stage analysis

Minervini has a great way of analysing growth stocks and anything else you can plot on a chart – such as Bitcoin. He reckons prices cycle through four stages, and if you look at price charts you can see the phenomenon occurring over and over again. Stage one is the neglect phase, which is where Bitcoin languished before it took off. Stage two is the advancing or accumulation phase, which is where Bitcoin shot for the moon and almost touched $20,000. Stage three is the topping phase which is usually characterised by volatility that precedes stage four, which is the declining phase or capitulation, which is marked by a relentless decline in the price and an unwinding of almost all previous speculator gains (if you haven’t sold by then).

Now, it is possible that Bitcoin will move through the stages again, but my bet is that it has had its day in the sun. It was only in March 2017 that the price was below $1,000 dollars and measured in just three figures. I think it’s heading back there again to complete the round trip, and then the petrol in the tank will run out forever.

A basket full of bad apples

The interesting thing is that the price charts of most of the other cryptocurrencies look similar to that of Bitcoin, so I’d apply the same stage analysis to them. Ether, Ripple, Litecoin, Stellar and others, they all look the same and they’ve clearly all suffered from the same kind of speculative bubble. In betting parlance, I think the whole cryptocurrency hand looks like a busted flush.

This is what I’d do now. If I held any cryptocurrency I would sell because I think the ‘asset’ class is going lower and will stay there. I would cut my losses if I had losses and take my profits if I had profits. Then, I would forget about cryptocurrencies completely and chalk the whole sorry episode up as a 21st century occurrence similar to the Dutch tulip mania in the 17thCentury. Finally, I’d find out as much as I could about shares and invest in companies with real assets. A good place to start is right here on the Motley Fool. 

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.