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  • Writer's pictureAgris Gruzdas

Common sense test: is the 1000% increase of Tesla shares a bubble or not?

We really live in interesting times when the whole market madly goes up and you can’t do much except witness new price records swooshing by. And you look at all this and some sense of euphoria creeps in, it makes you feel at ease, relaxed since everything looks so bright, even solid. You look for information around you, see what’s written in various forums, websites, see tons of arguments and hype around these newest possibilities, the sky is a limit attitude and numerous preachers of nearly endless opportunities, and of course, it affects you in some way.

Since everything goes up, you most likely don't see the possibility that it could be different. Like there really haven’t been COVID-19 or significant market turbulence initiated by it. Simply because market recovery was so swift and quick with all the unprecedented support companies and individuals received over the last year that for some it seemed a rather short inconvenience.

I have to admit that there’s really something new this time. With all “helicopter money” pouring in you may start questioning your common sense or reality of overall economic situation. This big influx of money, lockdowns and the increase of public debt make me think that WE LIVE FOR THE MOMENT, for today. Nobody cares that we will inevitably have to pay back this money in one way or another. We all supposedly know that nothing is free in this world. The free cheese is lying around only if it is attached to mousetrap. Right? This is the common sense.

And what’s going on in real world right now?

1000% rise of Tesla shares! It does not look unreal for many. Great, bring it on! Even if you jumped that wagon along a way and made only 100% it is great anyway, right? And if you want to keep your sanity in check, you better not immerse yourself in various forums where the new generation of upcoming “buffets” praise themselves and don’t give a hoot for “unearned” millions.

Now, more than ever, everything looks like a bubble. In these circumstances, I believe that we need to be even more cautious. Because I don't think it will all end well for many hype investors and the crush will be similar we experienced last March. Just do not know whether the market will recover as quickly as previously. Of course, it is just my opinion, and it is not carved in stone. What I am saying is that be prepared that the bubble will burst. Still, just as well this growth may continue for months and even years, it depends. As a trader, you have to be prepared for any scenario. You need to be able to look at things from both points of view.

For example, if you have bought Bitcoin and are overwhelmed with it – you have to think about what you will do if the price starts to fall sharply? How long and for how far “in red” are you ready to "sit"? What profit are you after? What are your goals? Isn't it that your eyesight is blurred by greed and your emotions are overtaken by FOMO effect?

Do you find an adequate increase of BTC value over the last year? Are you mentally prepared that BTC price can change by 10% during the day? Remember, such fluctuation is a standard movement for Bitcoin. Are you able to withstand such fluctuations? Can you sleep well knowing all this? Aren't you too vulnerable risking too much money? What is your risk management?

You need to be able to "cool your mind" to answer these and other questions. And this issue applies to all transactions, really. You have to do your homework and BE CALM. Especially now when the current rise is unprecedented, especially when the economy does not show such growth at all.

How do I cope with current situation?

I have slowly and steadily bought the crypto, both the Bitcoin and Ethereum. And I bought real cryptocurrency instead of one of the derivatives offered by many brokerage companies. And I am fully aware that I have invested money in a very risky activity. Even when prompted with the choice between stock indices, stocks, and commodities - I chose cryptocurrencies. Why? Simply because I believe there is a huge potential in crypto, as well as some risks, of course. If we assume that Bitcoin is already acting as digital equivalent of gold, as an alternative to the existing system, then in theory BTC should work as an insurance policy against the impending crisis. Will it be? Nobody knows, time will tell. I have decided to keep my funds there (for a short time) until the bubble burst. Or I will fix my positions sooner, if necessary, because I don’t want to hold onto cryptocurrencies at large loses. I am ready to fix BTC positions aggressively and rapidly switching to Fiat currency. I'm not a crypto fanatic who stand by it until the last breath. I am a swing trader, and I am using trends to make money, as simple as that.

And in terms of BTC's arguments and counter-arguments, I suggest watching this video. A good discussion between BTC defender and a BTC skeptic. As for myself, I am a trader. My main task is to choose a good asset that will bring more profit. I am not a defender of BTC whatsoever, but I follow this asset very closely and understand many things associated with it. And I believe that no revolution will take place. I strongly believe that this will be evolution. I believe that there will be groups of people, communities, and associations that will develop a certain environment and choose to use BTC as their mean of payment, the alternative, different way of payment and storage of money. I have already written about it previously, so you can read it here.

There are people who believe and understand Bitcoin and there are people who will refuse to even think about it. And both worldviews must be understood since both views are going to co-exist for some time. I believe that both sides can work very well together and complement each other. Because the current system and order of things is far from perfect. And BTC is not a perfect system either. What I personally believe that there is a huge potential in the tokenization process. The process by which you digitize your assets.

And last but not least – my February trading results.

In short: everything goes almost on its own. I made a small number of transactions and fixed small profit - precisely one percent, before I bought the crypto. And I feel rather good about the crypto, my stop loss mark is already at zero, so I can't lose anything there anymore. Now I can observe how the situation around BTC unfold. I have been through many ups and downs with cryptocurrencies, and even mined some ETH in my farm, I have kept the crypto in my wallets throughout 2018 and 2019 when the crypto was in "downtrend". Well, I don't want to be in a position when my portfolio is in red again for a year or more. I don’t want to be hard-core crypto holder, and I can quickly sell if the market will fall. I have had enough over the last six months when my trading account have been in the "flat" position.

Stay tuned!


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