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  • Writer's pictureAndre Pappas

BITCOIN AND CRYPTO ARE GROWING (understand a parabola)

Bitcoin and other larger coins for this matter move in cycles. This is due to a few things. First, Bitcoins code which cuts the mining block reward in half every four years. This is referred to as the halving. If you aren't familiar READ HERE but let's talk about the result.

This Microeconomic supply shock has caused upward pressure on bitcoins price every time it has occurred. Investors call this a parabolic run. So let's go back to high school math without the formulas and talk about a Parabola.

If you don't know...this is what a parabola looks like. You can see that the price action in the second photo below has similar curvature to the right side of the image 1 parabola.

Import note: in investing, parabolic runs only last so long, then they retract coming to a temporary end. Bitcoin has shown this over and over throughout its cycles with up to 90% pullbacks after parabolic runs in the past.

So what does a healthy parabolic run in crypto look like? It actually involves small sell offs aka corrections (temporary share price reductions during the period of growth/uptrend). A parabola can be extended horizontally (time) and vertically (share price) if corrections occur. In investing terms: A parabolic run can last longer and go higher in share price if corrections occur through the duration of the run.

What does this look like? For bitcoin its around 30% ish corrections (this % becomes reduced as btc market cap grows). Some of you traditional investors this is outrageous but it actually very standard, especially considering this markets volatility. Each time the price trends up, it will top out, correct downward, find its bottom and then continue its upward trend of setting higher highs. Here is a chart from the early 2021 rally. You can see circled in purple that the first correction of the run was 31.27% and 2 more following it. Each time the price continuing to a higher high.

These pullbacks are healthy and allow any asset to find a price where there is no more sellers due to the current circumstances. But all fun euphoric runs must come to an least for a little while. Nothing to get upset over, especially considering bitcoin is still a top performing asset over the last decade. From January 2017 to its November 2021 all time high its up a little over 8000%.

In my other post I will cover the road back down and how to avoid putting your entire 401k in crypto before it drops 70%+ (seen it done before) thanks for reading!

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