Of all the cryptocurrencies on the market today, Ethereum and Bitcoin continue to haunt the news cycle along with the dreams of investors. This is largely because they do not seem to be going away. Bitcoin is the wonderkind, the first of the virtual currencies to emerge from the seedy murky culture of the Dark Web to become and actual form of money that people will accept. Ethereum is the newer kid on the block, smarter, more talented, more grounded, but with less personality. Both, however, will likely stick around. Like any other tradeable commodity from long-established railroads to new high-tech start-ups, it is impossible to identify with any accuracy the right time to sell or to buy Ethereum or Bitcoin.
But it would be accurate to say, “keep an eye on both, and keep your trigger finger close to your keyboard.” Here’s why:
Bitcoin may have come through the last few years with some bumps and scrapes. Fiascos like Mt. Gox have revealed its numerous flaws – primarily that it is subject to the same human corruptions as any other technology. But it has persevered: it has continued to climb in value. Discussions and arguments about the efficiency of transaction times, scalability, mining protocols and the ultimate questions about what happens when the 21 millionth coin is struck, stand as great unknowns in a technology that continues to invent itself.
Similarly, Ethereum, new, sophisticated and with a human name and face to speak for it, grows in stature as banks and global organizations get serious about their blockchain trials. Ethereum is intimately wrapped inside the blockchain infrastructure, and Ether (the money part) is intimately wrapped inside Ethereum. Its future as a supporting pillar of the 21st century global economy seems assured.
But for both currencies, the ascent to new heights of valuation is irregular. They have both suffered surprisingly severe crashes in value, recovering mostly in mere hours, but they are both subject to the same types of market hysteria – enhanced by automated stop loss selling – that investors have observed for decades.
Think also about the current U.S. President’s own personal power over the markets: one bad tweet, and blue chip companies like Boeing take a tumble. But true to form, new forms of analytic technologies exist to calculate the emotion potential of tweets as fast as they are posted, allowing for immediate selloffs, but also allowing investors to ride out the crisis and bounce back upwards.
When should you buy Ethereum or Bitcoin? No one can accurately say whether the price will rise or fall in the next hour, or when it will change direction. Extremely sophisticated investors like hedge fund billionaire Michael Novogratz, quoted in Fortune, has put 10% of his considerable fortune into digital currencies. He sold off when Bitcoin hit $3000 and Ethereum was at $400. Both have dropped a great deal since.
Obviously it would have been nice to have bought Bitcoin for $100, but the chances of that happening again are slim, and even if it does happen, as a result of a “flash crash,” it is likely to rebound as quickly as it fell.
Ideally, then perhaps the best strategy is to keep watching the charts and strike when you think they have hit their extreme. Pithy, predictable advice perhaps, but the speed of progress for these and other currencies is truly that of real time. Both rise and fall in spiky arcs. Mr. Novogratz seems to think investors are in the “third inning” of a baseball game, indicating it is still early days overall. Another Mt. Gox, DAO, or divisive fork may instill permanent damage on either of these currencies, given that both are writing their own rules as they go along.
For individual investors, the suggestion is, follow the markets and follow the news. Obviously, as large banks, companies like Walmart and cities like Dubai delve further into the blockchain, the credibility of the technology moves forward. Bitcoin’s established brand dominance makes it appear strong for a rebound towards and then past the $3000 mark once more, ideally before the end of the year. Keep close control over your wallet, and be ready to execute a buy or sell when you feel the sine wave has hit its extreme.
For the long haul, it looks like it might be good idea to buy Ethereum and Bitcoin both. At least consider doing more buying than selling, since that sine wave pattern could continue to lumber towards new highs in the years to come. However, whether or not you buy ethereum consult with your investment advisor first and as always, caveat emptor.