Bitcoin Market Price Drop like 2015

The bitcoin price today has reached the same relative rate of decline as it did during the last major cycle almost four years ago. The decline has also taken almost exactly the same if just a few weeks early.

I’m posting this because I think its a rare event and I’m keeping an eye on the market for a correction and buying in.

The thirty day rate of change over time graph is showing that the current drop is so sharp that less than one half of a percent (13 days out of 8 years) of all past history exceeds it.

The drop from high cycle graph (red) shows the relative drop is now the same as it was in January of 2015. The time value (black) indicates that it has occurred slightly earlier than last time.

The average down from high data from this level to an all time high is 463 days, projecting forward that lands on March 14, 2020.

 

 

 

Bitcoin report projects the date of the next all time high

At AlgoMega.com I have a report the plots the relative ratio of the price as it compares with the last all time high. This is intended to show that the price cycles between periods of troughs and peaks.

The red line shows this ratio where 0 is an all time high and the higher the level reflects a drop. 1 would be a drop to a price of 0. Maybe I made this more complicated than it needs to be by inverting the trends.

I thought it would be interesting to project a possible date for the next all time high using an average of the past data where the ratio matches.

The process looks at the current DFH value and it’s trajectory noting if the price trend is down (bear market) or up (bull market). Then I collect all of the past dates having the same DFH value with the same trend.

The trend direction is important because the same DFH values have different times to the next ATH depending if they are heading down or up as a drop has to bottom out and return the other direction.

All of the DFH values are scanned forward to find the number of days to the ATH and the average of those days are taken.

So based on this method, when is the next all time high? It’s in 544 days on May 27, 2020.

 

 

Here is a markup image on how the calculations are made.

 

Update:

One hour later and the date is May 05, 2020. It is just an average so the value will jump around.

My thoughts on this result are of encouragement for the future of the market. I have read a lot of negative articles and posts on the web because of the recent price drop but over the long term these cycles repeat over and over. If you can wait a year and a half I am guessing that the price will in fact return to a new all time high or at least something interesting.

Anther very interesting date coming up in May of 2020 is the next mining halving from 12.5 btc per block to 6.25. This will reduce the production of currency into the next work going forward from that time.

 

Update Next Day:

Someone mentioned that they don’t like the implication there will be another all time high. So I think it’s more reasonable to use this projection as a possible future multi year high date.

Because the previous metric was inverted I decided to add a sin wave style graph oscillating a zero plane. This way you can see the cycles alternate between over and under valued. The light green line shows the drop from past high and the dark green line shows the same DFH value multiplied by the log value of the number of days since that peak.

 

Bitcoin Market Update

Since the BTC market is trading down about 35% in the past few days I thought I would write a quick blurb about my thoughts and personal trades.

I am buying small amounts at these prices and also anticipating the price will go down more from here. I made a withdrawal from an exchange in June of this year for a decent amount of dollars but it never came through. I asked to have the withdrawal canceled so I have the ability to buy right away. In Canada at least it can be difficult to move dollars to and from exchanges. I always keep a balance of cash in my bank account and stock brokerage accounts so that in the case where they go bankrupt I will have enough to pay taxes and live until I can move other assets around.

My thought is that BTC is a good thing to have as a long term investment. I think the chance of it becoming much more valuable in the next few years is higher than the chance it won’t.

The market tends to cycle through extreme peaks and valleys. Looking back you can see this between $0.30 – $30, $10 – $1000, $250 – 20,000.00. Being in a downtrend now I wanted to see how the current price relative to the last peak compares historically so I put a new report together.

The red line chart shows the relative level from the last peak. When the value is 0 that is an all time high. You can see that of all past data that I have collected only 8.7% of it has been been at a price level lower relative to the peak than is it currently. You can also see several trend reversals below our current level.

I think it’s reasonable for the price to go down lower so that it matches the same past levels but then hopefully it will continue in another uptrend.

Here is another chart I like to look at. It plots the relative rate of change. Currently the rate of decline in price is so fast that only 1.31% of the past data has exceeded it. I use this chart to sell when the rate of price rise approaches the previous maximums. When the rate of decline is low like it is now I buy small amounts regularly.

These charts are available at http://algomega.com. I plan on implementing email notifications of significant market opportunities as a service later on if there is any interest.

 

Update: Down From Peak with Time

Part of my interest in making charts to visualize relationships of price metrics over time is to find possible indicators that somewhat accurately measure the scenarios that correspond with with beginning of a bull run in order to buy and conversely the end of a run in order to sell.

In this case I have a drop from peak by time chart for use as a possible buy signal. The hypothesis is that the market runs up until it’s overvalued and people jump in and drive the price into a peak then it corrects and sags for a long period until everyone is convinced that the price has bottomed before people slowly start to reinvest. So I have added the time from the last peak as a multiplayer to the ‘down from peak’ value. This is because if the market is cyclical between under and overvalues states, the longer the market remains in a valley state the less likely it is to remain there. I suspect that people look at the price charts and recognize the undervalued state to buy in.

This report does accurately show the bottom price in 2015 as the black line is very high. The chart isn’t scaled very well in that it doesn’t show a consistent result between different cycles so I will keep thinking about this.

 

I don’t have much data for Ethereum, Litecoin and Dash but the charts are pretty interesting as well.

 

Update 2 – Nov 25, 2018

Just noting that after another day the price has dropped again and the rate of decline over thirty days is so fast that only 0.42% of past history or 11 days have been faster than this and only 2.92% of past history (76 days) has ever been lower from the last peak down from 9% two days ago.

Bitcoin Price Patterns to Predict Future Trends

I am putting together a report by overlaying recent Bitcoin price movements against the best matching past occurrences to see if there is any predicable continuation.

Currently there are no graphs or back testing to see how the different parameters affect accuracy.

I have some preliminary numbers based on comparing a dataset of 6 months, 8 months and 12 months then looking at the average outcome when looking forward from those matches out to four months.

6 Months  1        2        3        4      
 Upside  115  117  118  118 118  118  118  118 118  118  118  118  118  118  118  118
 Average  94  100  101  102  102  101  100  99  98  97  96  94  93  92  90  89
 Downside  105  96  95  93  88  86  85  81  78  75  73  72  69  67  62  58
8 Months                                
 Upside  115  118  121  126  133  149  160  165  166 166  166  167  171  175  178  183
 Average  94  103  105  108  111  114  118  121  123  124  126  126  127  127  127  127
 Downside  105  102  101  101  100  100  99  99  98  97  97  97  97  97  97  97
 12 Months                                
 Upside  117  128  134  159  195  251  297  323  333  341  350  352  353  362  368  374
 Average  95  106  113  122  132  146  163  178  188  194  199  205  211  216  221  226
 Downside  105  105  105  105  105  105  105  105  105  105  105  105  105  105  105  105

The columns are weeks projected into the future and the numbers are percentages. So when comparing 6 months of data to find the most similar past pattern the best outcome after one week is a return of 115%, the second week is 117% etc. All of these numbers are based on the price data pattern as of July 10, 2018.

A big disclaimer; this is not a prediction, just because the past data set closely matches does not guarantee that the trend will continue.

These are just a small sample of results with random parameters. When using a larger pattern to compare with past data can result in more specific matches but at some point reduce the amount of range to search through.

A big issue with this approach when comparing patterns on historical data is tuning the parameters to the dataset rather than fundamental patterns. This comes through in the fact that the 6 month pattern predicts a decline in price and the 8 and 12 month data set predict an increase in price.

I will have to experiment with back testing different parameters to get a good sense of accuracy if any on historical data and the future prediction. That will come later.

Update July 11, 2018

Here are a small sample of back testing results. The data samples are collected in days back from 180 all the way back to 1275 three and half years ago. The data sets were run using 6, 8 and 12 months of data respectively and the results are shown as projected average divided by the actual percentage change ninety days later.

 Days Back  1275  1095  910  730  545  365 180 
 Date 2014-10-02 2015-04-05

2015-10-07

2016-04-03

2016-10-25 2017-05-26 2018-01-10
 Price  $373  $254  $243  $418  $657  $2177  $14000
 6 Month Set  89/85  105/100  102/177  130/156  120/176  188/199  260/48
 8 Month Set  46/85  93/100  121/177  110/156  116/176  216/199  199/48
 12 Month Set  214/85  113/100  123/177  129/156  148/176  265/199  141/48

Overall the results were kind of interesting. There are some correlation but also some significant misses. More resolution and adjusted parameters may make this a more useful report.

Financial Planner

I met with an old school friend that is a financial planner to discuss some available investment options. Currently I manage my own investments across different asset classes and re-allocate based on market trends and imbalances. I look to sell overvalued assets and reinvest in undervalued yet fundamental alternatives.

My primary hesitation with using an advisor is the commission structure and limited available asset options. I would be happy to pay an advisor a high fee for their time and advice on as regular basis but not on a commission of total invested assets. Commissions based on invested assets causes several issues, one being because the available investible assets are a subset of what I am interested in they are disincentivized to help allocate towards assets they don’t sell. Secondly the commission fees are disproportionately high when investing a retirement level of assets.

In my case I plan is to grow my assets and place one million dollars in index stock and bond funds and use the expected four percent yearly return as backup income to cover my cost of living. My current living expenses are around twenty something thousand dollars per year making my monthly draw about two thousand dollars. If I was to have a financial advisor invest one million with a 1.5% commission that works out to be $1250.00 a month. With a drawdown of $2000.00 a month to live that is a high percentage considering that the alternative is a $25.00 fee for managing my own investments through an online broker. Note that each of the stock index funds have a commission fee attached that applies weather they are self directed or managed through an advisor.

Ultimately I want to make my own decisions for where to invest and have the responsibility to research opportunities and learn from the experience.

 

 

 

 

Life Insurance and Emergency Prep

noah

Here is a summary of some plans and strategy i’m using for general life related insurance and risk hedging.

I have a twenty year old adopted daughter living with me while she originally moved back in with me to finish school but she dropped out and is just working. Unfortunately for her she isn’t able to earn enough to live in this city so I subsidize her housing and food. If something was to happen to me she would have extended family to help her if she needed and she would inherit my assets and be financially ok. My current concern in that scenario is that she wouldn’t know how to manage or maintain investments and loose the benefit of financial independence. I will impart what I can over time but ultimately her choices will be up to her.

I also have two small dogs that come from a past relationship and I love them. They have been by my side for ten years are the most important part of my life so I want to make sure they are safe and healthy. I bought a Nest Protect smoke detector because it has a feature that will notify me if there is a fire. This would at least give me a better chance to rescue them if I was out but nearby.

Screen Shot 2018-04-01 at 8.02.19 PM

I’m in the process of also putting together supplies for an earthquake or other emergency. This includes food, water, lights and a bag with warm clothes, and cash that I can grab if I need to leave in a hurry.

It’s always a good idea to maintain and check the coverage details of your property or rental insurance policy.

If you have dependents and don’t have financial independence levels of equity and depend on income that would disappear if you died it’s probably a good idea to look into a life insurance policy. Be sure to shop around because there is a big difference between offerings.

Other than that it’s always a good idea to keep an up to date will or let an emergency contact know your wishes should something happen to you. Now let’s hope nothing bad does happen.

Trading Bitcoin Manias

This post describes a trading strategy that I am using with digital currencies specifically Bitcoin. The system I use to trade is available online for free at http://algomega.com. To use it you would need to open an account on an exchange and that can take several weeks to complete.

My expectation of gains is high, 50% per year for the next two to five years. In my eyes this is an opportunity for gains if the market continues it’s volatility and or upward trend. Even as a small portion ones invetments this strategy could add a boost to financial independence.

These high expected returns make a big difference. As a comparison, I met with a financial advisor recently about managing my stock and bond investments. I currently hold self directed accounts and do rebalancing myself. The management fees of the financial advisor in the ballpark of 1.5% meant he would be making 65% of the income I wanted to withdrawal on for living expenses. That is a lot. If Bitcoin does go up by 50% per year it could be used to make gains not possible elsewhere at the same level of risk.

This strategy is based on the assumption that the price of Bitcoin will go up over the next few years. Trading the extreme peaks and valleys reduces the risk of buying at an all time high and also grow a cash reserve hedge. It’s pretty clear that Bitcoin has done well in the past but there have been times where people have bought in at a price that quickly dropped and then it took years to recover. This strategy hopes to reduce the likelihood of this happening by indicating times when not to buy when the market is overbought. This strategy also keeps a cash reserve as a hedge so that if the price was to drop unexpectedly you have some assets remaining to buy in or use for other purposes.

I personally believe that there are several reasons the price rise is likely but I won’t cover them all here. Some of the top reasons include the rapid activity of the developer community, improvements to the software and supporting infrastructure and businesses starting to work with digital currencies, the increasing user adoption rates and the gradually reducing production supply of the currency all play parts in my personal assessment.

The mania is a metric that measures rate of change both up and down over time. When the price rises at a rate that is higher than 99% of the past historical trading data then it is seen as a good indicator to sell a portion of holdings as the price and rate of rise always reverts in the other direction. The same applies to drops in price. When the price falls at a rate that is faster than 99% of the historical data it has always followed a reversal upwards and is a buying opportunity. When everyone is selling cheaply people panic but it has historically been the best time to buy.

The trends measured take into account a long term timeline. This means I look at trends based on the largest frequency of price cycling to reduce the risk of being caught out from an unexpected trend reversal. The long term objective is to accumulate bitcoin and trade when the indicators mark opportunities that only occur a few times per year at all. This makes it a low time commitment strategy.

btc_mania

Here is an example report showing the Bitcoin price (Blue) against the mania (Red and black). You can see that durring the past price spikes the mania levels went above 1.5 and this would have been a good time to sell and definatly not a good time to buy. Durring the downturns when the mania droped below 0.4 the price has over time gone up and this has been a good time to buy in my experience.

A lot of people tend to think that they need to trade daily or weekly on short term trends but this is more work and not something that I do. I originally started out down this road and there is a reason why I don’t do this any more. I wrote a stock and crypto trading bot that used a genetic algorithm to learn an optimal strategy for profitable trading. After letting it run for months and years the bot did make a lot of money but less than simply buying and holding Bitcoin or dollar cost average buys.

This is not financial advice. Any investments you make are at your own risk. The value of Bitcoin or any other digital currency could for unforeseen reasons go to zero. It is important that if you buy into these currencies you are aware and can accept this risk. Only buy an amount that you are comfortable loosing.

 

Money, Hate it and Love it.

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I wanted to share some interesting observations about money. I think a lot of people make assumptions about it that don’t make much sense.

The title is a play on words from the saying love it or hate it but the strange thing about money in particular is that people do hate it and love it at the same time.

People want money but don’t want it at the same time. Everyone wants a lot of money but as soon as people get it they want to get rid of it. If you put a stack of cash under your mattress people would say that is totally irresponsible, someone could steal it or there could be a fire and destroy it. If you instead put that cash in the bank the tellar will tell you you need to invest it because it’s not doing anything for you just sitting there. I.e. you need to trade money for somthing else that isn’t money. Such as a share in a company, a bond as a promise to repay or a physical asset that might appreciate. Inflation destroys the value of money but no one says it like that.

Using money is like putting watter in a bucket with holes in the bottom that everyone thinks of as beeing super important. It’s commical and tragic as most of my friends are spending their entire lives working to make money just to live while not understanding what money is or how it works.

The thing most people don’t know is that dollars are created as dept by banks in the form of loans as they are needed. Most people think that dollars represent the labour they traded to earn them and are simultaniously frustarated at rising prices and living costs. The truth is that while most people work for money, some people / companies / banks just create it from nothing and charge interest. The really tricky part that most people don’t grasp is that because banks issue the currency with interest attached there is always more money owed than exists. It’s like a game of musical chairs. This is why economists are fearfull of deflation in the economy. As soon as the currency supply starts to contract people become fearful and stop spending on non essentials in order to pay down depts. Unfortunately there are more debts owed than there are dollars to pay them off so all available currency quickly dissapears and you end up with a depression.

This means that there is a hidden penalty for holding debts that compounds with greater levels most people don’t realize.

What to do about it? Save as much as possible. There is a sliding scale between your networth being negative and positive. The more negative or in debt you are the more of your life you have to spend paying other people. Conversely the higher you are on the net worth scale the more easily money can come to you. Be on the positive side of the debt equity threshold.

There are a lot of social conditioning beliefs that we have to spend our money and finance debts to the same level as our income. In my area the average house price is $830,000.00 and everyone strives to buy one and finance it with thrity years of mortgadge payments. That is $4000 per month. Half of the payments to a mordgage go to interest charges by the way.  If not house then a car, toys, or vacations etc.

Reducing your expenses has a greater effect on your financial future than increasing your income in some cases.

There are a group of people that save large portions of their income and share their experiences online. They are known as the Fire community and it stands for financial independence and early retirement. Some popular bloggers on the subject include https://www.mrmoneymustache.com (US) and https://www.millennial-revolution.com (Canada). Check them out and leave me your comments.

Like Minded Persons Wanted

giphy

I am looking to find likeminded people that share the same interest and passion.

My focus this year is on personal growth. To me this means reading on new subjects, building things people want, and most importantly meeting new people and sharing life together.

Most of the people that I know are limited in what they can do because of the amount of free time they have. They don’t have the opportunity to spend extended amounts of time doing things that would make them happier or allow them to learn or transform beyond what a certain basic level allows. Most people have a certain number of hollidays or a limited amount of money to travel or go to conferences as an example. Even the people I know that are high net worth are also highly leveraged with liabilities that bring them into comperable levels of work commitment and the stresses that come along with that.

How much of your day is really yours?

I have long been aware of common sayings about money not brining happiness or once you get a bump in lifestyle you will just acclimate to it and then feel just the same as you did before. I don’t agree with this though. I think this only applies to us when we are not growing or moving forward as people. Growth isn’t about comfort though and is mostly doing less with targeted action and letting go of bad habbits.

Are big changes realistic?

What does it feel like to hold an extravigantly rediculus idea of your future that feels impossible to achieve but unreasonably commit 100% to it? Uncomfortable and isolating, but in a good way that makes you feel alive.

There is an interesting phenominon I believe that if you could offer random people a life that they want more than any other they will sabatoge it if it is too far outside their comfort zone.

The difficulty in intending to change your life drastically also comes with a greater reward than can be gained by the regular toils of daily labour. This is because that impossible idea in your head will eventually and quickly become real and part of regular living as long as you hold it with mental certanty and conviction.

I made some investment descissions over the last ten years that brought me to financial independence. While the decape prior was pay cheque to pay cheque, I spent most of the day working just to have an hour or two to myself in the evenings. Now I have all the time to do what I want and need. The nuts and bolts of the investments are built on a strategy that was the result of several algorythmic learning systems evolving over the years.

One interesting observation about stepping through financial goal boundaries is that the expectation of what it would be like has nothing to do with reality. I had a belief that once I reached a certain dollar amount of investments I could live off the interest and then I would feel free. However when that happened to me and I reached that dollar amount I didn’t feel free I said to myself when I have twice that number then I will feel free. Then if the stock market crashes I will be ok because I can also invest in these other assets. Somewhere around the time when my investments reached just about twice what I needed to live on I was fired from my job. I wanted to leave but really was stuck in a mindset of conservative fear. I’m still trying to break off pieces of my personality that are over conservative to the detrement of my well being.

What is it like to be financially independent? It’s amazing, It’s a new normal and at the same time it’s an environment perfectly suited to figuring out what is important to my life now so that I can go do that. However I don’t know many people that are also in this situation.

What am I doing…

1 Ongoing projects, some I will talk about later. One is a car company I am starting called http://opencarproject.org. This is a passion project and I love working on it.

2) Network of investors to share or discuss investment strategies that helped me become financially independent so that more can do the same. The investment strategy I use is available to anyone on the website http://algomega.com

3) Youtube vlog I plan on starting to capture life, learning and fun with the intention of connecting with like minded others for growth and friendship.

Topics i’m brewing on for the blog and vlog inlude: health, fitness, travel, cars, money, investing, humor, food, relationships and more to come.

Cryptocurrencies

bitcoin
This is a brief summary of my thoughts on cryptocurrencies specifically Bitcoin as an investment. Going forward I will add more about different aspects of the currency and surrounding products/markets as well as alternatives.
I am buying Bitcoin now at regular intervals because I believe that the price two years from now will be higher than it is now.  If the price four weeks from now is down ninety percent I will not be bothered. It dropped ninety percent between June and December 2011 and seventy five percent between November 2013 and August 2015. Aside from those notable drops it also saw fifty, forty and thirty percent declines many times. If you are going to buy Bitcoin be prepared for drops like these.
So why buy when the price plummets like Humpty Dumpty? Well in my opinion only because Bitcoin has always put himself back together again and in the process accumulated more users, new use cases and higher demand. Over the few years that Bitcoin has been available and trading the rate of returns is significantly higher than most if not all other options.
Why I think Bitcoin is going up:
1) It provides strong utility that will likely be useful in a wide variety of areas including: international settlement, peer to peer payments, trust-less money transfer contracts between remote parties, store of wealth, etc. Before Bitcoin there was no method of distributed transactions that did not require a third party that I am aware of. Given the current trend, more people will use and adopt Bitcoin in the future and with a fixed supply the value of units should be bid higher. I will expand on use cases and potential opportunities in the future.
2) User adoption numbers are going up. Google trends results for people searching for ‘Bitcoin’ is increasing 400% per year, ‘what is bitcoin’ 150% and ‘buy bitcoin’ also at 150%. Each year more exchanges open with better infrastructure funding options and trading services. Stores and payment processors are also opening slowly allowing people to buy and earn Bitcoin from their work.
The experience of most new users is good, while some leave and some stay,  the ones that stay are usually hooked. Some or a lot of people obviously bought at the peak times and then watch the price plummet and want to get out. Based on number of users active and signing up for exchanges, wallets web and forums, the user base is growing year over year.
3) Legality. In the early years of Bitcoin there was a lot of uncertainty that it was legal. The closest thing to Bitcoin, E gold and others were shutdown for violating money transmission laws in the US. Because Bitcoin doesn’t fit any traditional definition of money creation and transmission it was uncertain that it would be legal to use, own, trade, earn or buy using Bitcoin. Since then many countries have issued statements and guidance as to how they will allow and regulate the markets adding some level of certainty to investors and users.
Bitcoin is illegal in some countries however so you should check with your local authorities to ensure you are compliant with the law.
Criticisms of Bitcoin:

1) Deflation is Bad.

The issuance of Bitcoin is set at a fixed rate that is cut in half every four years until 2140 when it will stop and the only source of the currency will be that of existing owners. In the next ten years the rate of inflation will drop from 4.2% to 0.8%.

The concern is that during increased demand for currency, its availability will shrink because of a perceived higher future value. People will hold off purchases because they expect to get more bang for their buck by waiting. This will cause economic velocity to go down and prevent new lending and future growth.

This is what happens to dollar based economies. The comparison doesn’t hold though because a dollar economy is based on fractional reserve lending that has a different dynamic applied to the supply that is not applicable to Bitcoin. All dollars are created by banks as debt with interest attached but the interest that needs to be paid was never created. There is an ever expanding amount of debt attached to all actors in the dollar system. In the event of deflationary changes in the dollar economy all available liquid cash would not be enough to even pay the interest on debts let alone living expenses like food, rent, clothing. This causes all available supply of currency to quickly go to zero. Banks cant lend because they don’t have enough reserves and individuals can’t lend because they have to pay everything they have to cover existing interest payments.
This wouldn’t happen in a Bitcoin based economy to nearly the same degree. Granted during an uptrend most people would presume a higher future value of the currency but the supply would likely only contract in a linear fashion. People will still buy things, just at an adjusted value, probably.
2) It’s Too Volatile.
Bitcoin is volatile so be careful. If you are not comfortable losing your investment in Bitcoin do not buy any. If you can set aside some funds to buy without any exception on timeline for withdrawal, Bitcoins historical high rate of return and potential future expansion could outweigh the risks provided you can commit to a plan. The plan should help you avoid the case where you feel tempted to panic sell after a price drop.
Volatility in the several markets are a really good aspect to Bitcoin in my opinion. It means that users have the ability to buy and sell at prices they choose any time they decide.
There are strategies for mitigating market volatility like dollar cost average purchases and sales over time so that highs balance out lows.
3) Criminals and Drugs.
A lot of people only associate Bitcoin with drug dealers on the dark web committing crimes. They don’t want any part of something associated with criminals.
The bottom line is that a currency for everyone has to work for everyone or it wouldn’t be valuable. Regardless of how you feel about it, you can’t control what others do. I believe Bitcoin is helping people and will continue to do so in new ways. Obviously using it is a form of support and you are entitled to choose not to use it if you feel that is the right choice for you.
4) Not a Real Currency and People are just Speculating.
Some say buying Bitcoin is not an investment it is gambling because you are betting that the price will go up just because it has gone up in the past. You shouldn’t assume that past performance is an indicator of future returns. Sure but the distinction between investment and gambling is a grey area of one slippery sliding slope. Based on someones opinion all investments have some level of risk of collapse and assumption of growth based on past performance. Most people just don’t think about the risks because they may happen infrequently. Most people recommend buying stocks and government bonds because stocks are often evaluated based on past performance and bonds are still subject to default or devaluation risks.
The fact is people are using Bitcoin as a currency. People are right now earning income in Bitcoin, buying everyday things with it and trading it with others.
Some people say that Bitcoin has no intrinsic value. My thought is that nothing has intrinsic value. Everything is relative and depends on relationships with everything else. The network that connects Bitcoin users really is the essence of its value.
Detrimental factors affecting the price:
1) Inflation Rate
New currency is issued with each new block on ten minute intervals. This new currency is issued to miners and results in an increase to the total supply of Bitcoin. When the new currency is sold on exchanges it creates additional downward pressure on the price. Every four years the number of Bitcoin issued for each block creation is cut in half, reducing this downward pressure.
Back in 2013 at the peak around $1000 there were 25 BTC issued every ten minutes. The price dropped after that peak but for comparison the value of currency created each day was $3,600,000. When I started this article in July  the daily created value was $4,860,000 and by the time I finished it the price had risen resulting in a daily value of $6,120,000.
While this value is high the currency is traded world wide so dividing this dollar amount by the increased number of participating traders makes this a more optimistic metric.
The most interesting observation about the amount of this newly created currency will be to compare it to the inflow of currency which I am sourcing now.
2) Technical Risks.
Bitcoin could fail catastrophically for unforeseen technical reasons. Or something new could come out tomorrow that makes it irrelevant. My estimation of this actually happening is very low because the mechanics of the currency are used in a lot of diverse and time tested systems.
3) Crime and Safety
Holding cryptocurrency involves a certain level of risk as criminals could steal your holdings using malware. It is important to understand the risks and proper use of cryptocurrency to ensure you keep it safe.
4) Regulatory Legal Risk.
While this is a much lower concern now than it was years ago, in the future government agencies may place restrictions on your ability to buy, hold and sell cryptocurrencies. As adoption grows and government agencies from around the world make their position known it is becoming clear that road blocks of this type are minimal.
My Strategy
My strategy in the past has been to buy when the price is historically low and going up then sell when the price is historically high and going down. This allows me to accumulate during periods of undervaluation and take some profit during periods of overvaluation.
Currently I am buying small amounts every pay cheque to accumulate an amount over a fixed period because I believe there with be growth over the next year.
I have built and use a web service that tracks top cryptocurrencies and reports on different metrics. I also have a trading bot that I can test against historical data. Despite my best efforts so far the best strategy is still to buy and hold when you have capital and to buy regular amounts over time if you have income.
As a final thought. Personally I find crypto currencies very interesting but if you want to invest there is a lot you need to know to use it properly and even with precautions it is very risky. This is not financial advice and I do not recommend that you invest with money you are not willing to lose.