Volatility is never something investors take lightly. Unfortunately, most cryptocurrencies are incredibly volatile and therefore investors tend to be careful. According to Kevin Godbold, the recent rally was nothing more than a bitcoin dead cat bounce and a huge drop is just around the corner.
Volatility is the name of the game as January saw bitcoin hover between $3200 and $3400. Almost 6 months later, the current price is $8783. Godbold firmly believes that this is a dead cat bounce.
A lot of experts seem to share the belief that a rally after a bear market, especially a prolonged one, is often followed by a huge price loss. According to Godbold, this huge price surge was due to speculators going on a buying spree. There is no longer a bargain however, since the prices of bitcoin have “stabilized”.
Godbold is quite open to admitting that he was wrong in regards to the recent rally. He stated that there is no actual way to determine if a cryptocurrency is overpriced or undervalued. Stocks on the other hand have very clear indicators that allow for analysts to make more reliable predictions.
This bitcoin dead cat bounce theory is just a theory
So, are bitcoin price guesses just…guesses? Yes and no. There are clearly no fundamentals when it comes to bitcoin investing and many central bankers and prominent crypto critics have always stated that “bitcoin is not a real investment”. Most crypto skeptics often mention that there is almost no difference between purchasing cryptocurrencies and going to the casino.
The same logic however, can be applied to Godbold’s theory about the bitcoin dead cat bounce. Sure, there’s no reliable way to predict if the price of bitcoin will surge higher, but there’s also no cemented proof that it’s going to drop, especially significantly.
The Motley Fool is centered around providing financial advice for investors. Needless to say, the website has been openly anti-crypto and the dead cat bounce theory will find many supporters. There is of course, a lot of truth to what Godbold mentions about cryptocurrency and volatility. No investor would deny that is near impossible to predict tomorrow’s price, but one thing is for certain, tomorrow belongs to cryptocurrencies.
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