Is it too late to invest in Bitcoin? [INTERVIEW]

I had the pleasure to talk to Daniel Kostecki on the pages of our website, on building a retirement portfolio and his original investment idea. This time, we focused on the cryptocurrency market and its potential.

We currently have a really interesting time for digital assets where Bitcoin strikes new historic heights. Many investors may now ask themselves if it is not too late to replenish their wallets with cryptocurrencies. Is it too late for this market? How to choose the right moment to buy? What factors should be taken into account when analyzing digital assets? We discussed these and many other issues with Daniel Kostecki, the chief analyst Cinkciarz.pl. I invite you to the interview!

Daniel Kostecki - Is it too late to invest in BITCOIN?

 Demand for BTC is still visible on the market, do you see the potential to invest in it right now?

Bitcoin continues to attract the attention of both institutional and individual investors. Recent market developments, such as Tesla's purchase of BTCclearly show that even after strong gains, there are still people willing to buy bitcoin, hoping that it will be a good investment. Of course, with each increase in price, the potential for further increases may diminish, and bitcoin becomes the ninth largest asset in the world by market capitalization. It is getting closer to the market value of $ 1 trillion.

Looking at these events, it can be concluded that since US investment funds and companies see potential for further Bitcoin price increases, this potential may still be there, even after such a sharp rise in price.

What factors (technical, fundamental) do you follow when buying cryptocurrencies?

I've been watching the cryptocurrency market for a long time. It is a natural activity in everyday duties. However, I have never participated in it before. Nevertheless, I had the impression that in terms of technical analysis, the market was able to move more book-like, because even then this market was ruled by individual investors. They, in turn, play technical patterns better on charts and are more susceptible to emotions that the analysis of trends and various theories try to describe.

However, the main impetus to enter this market, strange as it sounds at this point, was fundamental analysis - and very simple as well. Seeing what central banks and governments have started to do in response to the economic crisis triggered by the pandemic, I only asked myself one question, what has the greatest potential for growth with such a gigantic money supply in the banking system. In other words, the increase in the supply of paper money is equal to its loss of value because there is more of it and it is more easily available. If new, gigantic and easily accessible deposits of oil, gold, silver, etc., were discovered now, the price of these goods would drop. The same assumption was with paper money. 

As a result, I considered various possibilities, but the natural choice was cryptocurrencies, led by bitcoin, as goods, which, unlike paper money, have a limited supply reducing their dynamics with each successive halving. In addition, in spring 2020, bitcoin capitalization was smaller than the capitalization of all companies on the WSE, and the potential was global. A microscopic market in the scale of the entire financial world and additionally with a shrinking supply. Thus, macroeconomic and fundamental analysis turned out to be crucial.

Does building an investment portfolio based on cryptocurrencies still have potential? If so, how many% do you think should be a healthy cryptocurrency portfolio diversification?

Currently, it has been assumed that about 5 percent. your investment portfolio can be found in cryptocurrencies. It is also an assumption for companies that can diversify their balance sheets in this way, and traditional financial investors can participate in the cryptocurrency market with a relatively low risk of only a small part of the entire portfolio, such as 60%. shares, 35 percent bonds and 5 percent. cryptocurrencies.

In fact, further expectations for increases in the cryptocurrency market may be based on this. That is, the commencement of mass diversification of funds on the part of institutions and companies. Just imagine how big this transfer of funds could be if each entity decided to allocate only 1 percent. your cash reserves to buy cryptocurrencies.

The number of addresses with a non-zero balance continues to grow. This means that more people are investing in Bitcoin with the long term in mind. What is the situation with addresses above 1000 BTC?

In the analysis of the number of addresses, the key seems to be to look at how the ones with the status of over 1000 BTC are shaped. Recently, which was an interesting phenomenon, as the bitcoin price dropped to $ 30000, the number of addresses with such a large BTC state was increasing. It still means that the big players are active in the market and willingly buy bitcoin from small investors, among whom it is easy to panic.

It's worth noting that, unlike the traditional cryptocurrency capital market, everyone can see it all. Data from blockchaina are publicly available to everyone. This is a huge advantage for small investors who can see and know exactly the same thing and at the same time as big fish. There is no information asymmetry or faster access to data. This seems to be a huge advantage for the cryptocurrency market for an individual investor compared to the traditional stock exchange. It is true that they are also available on the regulated market data on the positioning of institutional investors on futures contracts for various commodities or currencies it provides CFTC commissionbut you have to wait a week for this data. On the cryptocurrency market, everything can be seen here and now.

The cryptocurrency market capitalization is growing all the time and there is little sign that this situation will change. What are your forecasts for this market? What opportunities (apart from technological ones) do you see?

The most interesting race seems to be the race between bitcoin and the gold market, as well as the capitalization of American companies. For example, the largest cryptocurrency fund, GBTC, has assets under management of more than $ 30 billion, while the largest gold fund, SPDR Gold Shares, has assets of $ 67 billion. This race seems fascinating, i.e. when and whether the crypto fund will outperform the gold fund, and bitcoin will actually become gold 2.0. Likewise, the capitalization of all bitcoin, which is approaching $ 1 trillion, and the capitalization of Google owner Alphabet, which exceeds $ 1,4 trillion. The largest listed company in the world, Apple Lossless Audio CODEC (ALAC),, has a capitalization of more than $ 2,2 trillion and such an achievement on the part of BTC would surely be an epochal event.

Changes in the approach of the American supervisor over the capital market may also be significant. After the change of head, the SEC at the beginning of 2021 may be more favorable to the creation of an ETF based on BTC or other digital currencies. Such events would certainly be recorded in history and could increase the capitalization of the cryptocurrency market.

If you could give advice to a beginner looking to start investing in cryptocurrencies, what would they be?

The basis for risky investment products such as stocks, contracts or also cryptocurrencies is to risk only as much money as you can lose. This means that these should not be funds needed for the current life, or funds set aside for a specific purpose that we invest, because we want to multiply them quickly. 

It is also worth being aware of the high volatility, which may be around 30% on the most popular cryptocurrencies. in just tens of hours. It can be even more on the smaller ones. You have to be mentally prepared for this.

It is also worth adding the risks associated with the exchanges themselves, the collapses of which we have heard many times in the past. Hence, in addition to physically buying cryptocurrencies, you can also consider having exposure to them, e.g. through contracts for differences, which, for example, on bitcoin, Ethereum or litecoin offered by Conotoxia.

Dziekuje.

Daniel Kostecki

The above commercial publication does not constitute an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of 16 April 2014. It has been prepared for information purposes and should not constitute the basis for making investment decisions. Neither the author of the study nor Conotoxia Ltd. are responsible for investment decisions made on the basis of the information contained in this publication. Copying or reproducing this work without the written consent of Conotoxia Ltd. is prohibited.

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