How to look at the stock market, individual stocks, or Bitcoin with more insight and less fear

I created amREADY to empower people to be healthier and happier by providing information and support. One of the areas I’ve noticed that can have a profound impact on happiness (stress, worry, etc.) are financial related issues. In this post I am not focusing on figuring out how to earn more money (by investing in your skills and experience) or saving money. Those are the best FIRST priorities before you even think about investing. 

However, if you do have investments that are managed, or you manage them yourself, you might find this helpful. 

 (SEE the INFOGRAPHIC, GRAPH, and LINKS below)

I’ve had a lot of people reach out to me for my take on Bitcoin. I don’t pretend to know all the answers about that, but I don’t think anyone does. There is certainly a lot of misinformation, so perhaps I can shed a little light on that from my perspective. 

I’ve also had a lot of people contact me about the stock market. As many of you know, I started doing my own investing 5 years ago. I am not an investment advisor and I am certainly not telling you (or anyone) what to do. In fact, I think you should be VERY CAREFUL when dealing with anyone who says they know what the market is going to do, wants your money for a ‘sure thing’, or is overly confident. 

What I can do is provide an approach that I use to help navigate around the headlines, the misinformation, the various schemes, scams, and fake experts. This is what works for me and it is simple, practical, and easy to follow. However, you need to do what works for you and your money.

In the following graphic, I am providing a short summary of how I guide my investigation into the market and financial summaries. I wouldn’t say that I don’t pay attention to the so called guru’s and headlines, but I certainly don’t use them to make decisions. 

In the graph that follows this summary I provide a more in-depth analysis of prices and volatility. 

5 tips for analyzing investment info

A graph of the price of Bitcoin relative to the stock market and it’s trend lines:

A description of how to read it follows.

Bitcoin and the stock market trends

Bitcoin vs. it’s trend lines and compared to the stock market (S&P 500)

Here is a summary that shows the price of Bitcoin in blue with shading under it. You will see that I have included the light blue line which is the 50 day moving ‘price’ average (50d MA) for Bitcoin as well. That takes a lot of the day to day price ‘noise’ out of the view. But to really see the general price trend I am also comparing those against the 200 day moving ‘price’ average (200d MA).

The prices aren’t important, so I have just used a scale of % increase or loss. What is important is to see that Bitcoin goes through periods where it trades below it’s averages, and periods above. (That’s why they are averages). Seeing that, it helps put the price changes in a perspective. It also shows that when it’s price breaks down, it might break down to it’s 50d MA, to its 200d MA, or even below it. That volatility doesn’t mean that it is a flawed ‘asset’, it just means that there are swings in price above and below the average. 

What you might also note is that from July of 2019, the stock market went up about 24% (the purple line) and Bitcoin went up almost 200%. But the 200d MA of Bitcoin (the red line) actually under performed the stock market until just recently (where the red and purple line cross on the bottom right.

You can see how the price of Bitcoin really heated up and climbed much faster than stocks, it’s 200 or 50 d MA. But as assets do, they often fall back to their average price and once in a while below it. I wouldn’t be at all shocked to see Bitcoin fall below it’s 200d MA which is at $17,500 USD (and climbing). If it doesn’t break down now, the new 200d MA will be in the $22,000 range in the coming weeks, so that is a perfectly conceivable level for Bitcoin to hit. Granted, this is a very simple analysis, but what you might take away from it is there is a distinct lack of emotional involvement, fear, or stress. These patterns are normal, they play out in every stock and in the market as a whole. 

In fact, you can see that the price of Bitcoin in blue and shaded partially followed the dips in the stock market. It isn’t a hedge or a flight to safety, when the market went down, so did Bitcoin. Lately Bitcoin has been outperforming the market, so does that forebode a softening of Bitcoin, will the market go up to catch up, or will they trade with less correlation going forward? I don’t know, but those are really good questions to ask.

So back to one of the questions. What is Bitcoin going to do? Will it explode up? Crash down? Nobody knows. The longer it holds the mid $30,000 (about $35,000 at time of writing) level, the greater the chance you will see it either go up to all time highs or should it fall apart, fall to higher lows than it experienced before. How is that for certainty?

And what about the stock market. Will these retail traders short squeezing a few select stocks out of the 100’s on the market cause a total meltdown? That answer is certainly more clear – that would be a no. It might leave a makr or a ripple. It might surface some underlying issues that need to be addressed. But if you look at the market as a whole, it has shown itself to be amazingly resilient in the face of Covid and lockdowns. Headlines or single events rarely ‘drive’ the market. Buoyant sentiment drives the market up, and souring sentiment drives it down – quickly.

We simply aren’t seeing negative sentiment. That won’t always be the case, but for now, there is a low risk of a meltdown or crash.

But nobody knows for sure.

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I used Visme to create this infographic above (not the price graph, that was from Investing.com. #ad

If you wanted to purchase a little bit of Bitcoin, this is the safest and easiest exchange that I have found. Coinbase   #ad

Be well.

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