The Great Bitcoin Crash of Yesterday, and two months ago, and four months ago, etc.

by JDH on December 23, 2017

Kinda fun to watch, eh?

At 8:30 am on December 17 Bitcon was trading at almost $20,000 US.  On December 22 at 9:15 am it was trading at just under $10,500 US.  That’s almost a 50% drop in less than a week.  Cool, eh?

By 4;00 pm on December 22 it was back to $14,800, so you could have made almost 40% trading on Friday alone.  Sweet.

So what does this all mean?

Not much.

First, the numbers I’m quoting you are based on prices on the Bitfinex exchange; different exchanges will have different prices.  That’s important to understand, because Bitcoin is not like a stock.  If anyone wants to know what Apple is trading at (more on that shortly), we can all go to the NYSE and we all see the same price.  Cryto currencies are not yet that mature.

In fact, the cryptos are not mature at all.  We are in the wild west at the moment, with no rules, no established exchanges, and a bunch of novices expecting to be millionaires trading a thing that didn’t exist ten years ago.  So the big flash crash of December 22, which knocked almost 50% off Bitcoin’s value, put Bitcoin back to where it was on December 1.  Wow.

So is now a good time to buy?

How would I know?

The obvious way to play Bitcoin, or any of the other cryptos, would be to place your buy order for half of your intended position at 30% below the peak, with further orders for a quarter of your intended position at 40% and 50% below the peak.  There’s a good chance that at some point in the next few weeks your order will get filled.  Then, place your sell orders in reverse:  Off the bottom, sell at portions at 50% and 100% above the bottom, and your orders are likely to be filled, eventually.

Of course Bitcoin could be a big Ponzi scheme, so you want to be out long before the ultimate crash, so have fun!

(For the record, I have invested the equivalent of a few cups of coffee, so when the crash happens it won’t matter.  Even I am not crazy enough to try this with real money).

Apple

Last week I made the comment that AAPL – Apple is a nice cash generator.  I said that the obvious strategy is to buy it, and then do a covered write, where you sell call options, expiring at the end of the week, at above market value (ie. out of the money).  I did it again this week, but my timing wasn’t perfect.

Apple was up nicely on Monday, but I didn’t cover until Tuesday when it had already given back some of those gains.  However, I did sell the $175 calls, I did get a premium, and it worked out well as Apple closed the week at $175.01.  I don’t yet know if my shares will be called, but if they do, I get $175, and I keep the premium, so it worked out nicely, and I can do it again next week, or the week after, if I wish.

Lather, rinse, repeat.

That’s the update for this week.  Merry Christmas to all, and to all a “see you next week”.