Bitcoin: How Low Can It Go?
This is a million Dollar question (actually more like a billion Dollar one). Since neither me nor anyone else knows the answer, we have to approach it with a proper strategy. Part of it is to define certain price points that Bitcoin may visit in reasonable future.
An all-time-high (ATH) price of Bitcoin of roughly $65,000 has been achieved (twice) last year, in 2021. Currently, Bitcoin (BTC) trades around $30,000 or somewhat less than a half of that maximum price. Can it go lower – it sure can. Is this the bottom – probably not. I am not trying to predict where or how low the Bitcoin price will go. But I can sure respond with my purchases at certain price levels if we do go there. I can develop a trading plan.
Recently, there were many who claim Bitcoin is in a bear market, meaning the price will continue dropping lower. As I mentioned, nobody knows. However, everyone is happy to speculate. While speculation sometimes pays off, it is not necessarily the most savvy way to invest.
Therefore, I will propose two major Bitcoin price levels that we may see or that may prove in hindsight to have been the bottom:
- $20,000 USD/Bitcoin
- $10,000 USD/Bitcoin
These are both just some round and convenient numbers to work with. Will we ever see these prices? I don’t know, but I can develop my strategy around them.
A Strategy that Works!
I have devised a powerful investing strategy back in 2009, before I even heard about cryptos. I have successfully used it ever since in equities (shares), futures and Forex markets. Later on, I have applied the same strategy principles to crypto coins.
Here, I will lay out one possible capital allocation plan according to the principles of my strategy. The objective is to reduce the risk while at the same time achieve above-average investing returns. The strategy does not use leverage.
The premise is you have certain amount of capital ready to be invested. You know how much you have and you have it in some form of cash (perhaps bank account or a good stable coin).
The capital is never plopped in (invested) all at once at any one price point. Instead, we divide the capital in number of smaller chunks that get allocated to be invested at different price points IF/WHEN those prices are achieved (if or when they actually happen). How low the price drops determines how much of our capital ultimately gets invested. Most of the time, not all capital gets invested as the price never drops to the bottom of our capital allocation table.
Capital Allocation Table
Spreadsheets are the most convenient way for me to plan allocation of trade capital. I normally use MS Excel, but any spreadsheet software will do the job. For this specific post, I have developed a table that shows number of different Bitcoin price points with corresponding amounts of Dollars to be invested at each price point as the price keeps dropping.
Screenshot of the table is given in the image below:
You can also download actual Excel spreadsheet file HERE.
In the spreadsheet I have used certain assumptions about Bitcoin prices and desirable distribution of individual Dollar amounts allocated to each individual price and the two price ranges/tiers (Upper and Lower). You can use the default values, but also feel free to change anything you see fit and let the spreadsheet do the calculations for you. Cells with blue text/numbers are meant for spreadsheet users to fiddle and experiment with.
How to Use the Capital Allocation Spreadsheet [Video]
To better understand how to use the spreadsheet and how changing certain values affects the capital allocation, please watch the following video:
