With bitcoin’s price dipping significantly below $100k again, the "buy the dip" cheerleaders are out in full force. But I’m here to offer a different perspective, which is simply: Don’t buy the dip.
Investment Perspective
Before I continue, let me please make it clear that nothing that I write in this Take is investment advice. I have other reasons for making such a statement.
Reasons to Avoid Buying the Dip
Why would I say such a thing? Is it that I hate bitcoin all of a sudden? The first reason is that I’m trying to keep you from becoming exit liquidity for people who are waiting to sell at higher prices. The second reason is that I prefer to buy bitcoin when it’s truly selling at a discount, not just when it appears to be selling at one.
Understanding Bitcoin Cycles
In the four-year bitcoin cycles, bitcoin’s price tends to skyrocket during the years of and after its halving. The year that follows tends to be challenging for bitcoin’s price, with a significant drop from the previous cycle’s high. For example, in 2022, bitcoin's price dropped to about $15,500, which was actually lower than the previous cycle’s high of $20,000.
Future Price Predictions
If a similar pattern were to occur in 2026, we might see bitcoin’s price at around $53k, which would represent a significant discount worth considering. While dollar-cost averaging is a good strategy for retail investors, it’s essential to be cautious when buying during minor dips.
Long-Term Investment Strategy
I encourage holding bitcoin for the long term to maximize financial upside. While factors like strategic bitcoin reserves and corporate investments may influence short-term price movements, it’s crucial to focus on the bigger picture and be prepared for potential dips in the future.
Conclusion
Opinions expressed in this article are the author's own and may not reflect the views of BTC Inc or Bitcoin Magazine. It’s important to approach bitcoin investments with a long-term perspective and be aware of the cyclical nature of its price movements.
Frequently Asked Questions
Is buying gold a good retirement plan?
Although it may not look appealing at first, buying gold for investment is worth considering when you consider the global average gold consumption per year.
The most popular form of investing in gold is through physical bullion bars. There are other ways to invest gold. It's best to thoroughly research all options before you make a decision.
If you don’t need a safe place for your wealth, then buying shares of mining companies or companies that extract it might be a better alternative. If you need cash flow from an investment, purchasing gold stocks is a good choice.
You can also invest your money in exchange-traded fund (ETFs), which give you exposure to the gold price by holding securities related to gold. These ETFs typically include stocks from gold miners, precious metallics refiners, commodity trading companies, and other commodities.
What is the best precious metal to invest in?
This depends on what risk you are willing take and what kind of return you desire. While gold is considered a safe investment option, it can also be a risky choice. For example, if you need a quick profit, gold may not be for you. You should invest in silver if you have the patience and time.
If you don’t want to be rich fast, gold might be the right choice. If you are looking for a long-term investment that will provide steady returns, silver may be a better choice.
How is gold taxed within a Roth IRA
The tax on an investment account is based on its current value, not what you originally paid. Any gains made by you after investing $1,000 in a stock or mutual fund are subject to tax.
The money can be withdrawn tax-free if it's deposited in a traditional IRA (or 401(k)). Only earnings from capital gains and dividends are subject to tax. These taxes do not apply to investments that have been held for more than one year.
The rules governing these accounts vary by state. For example, in Maryland, you must take withdrawals within 60 days after reaching age 59 1/2 . You can delay until April 1st in Massachusetts. New York offers a waiting period of up to 70 1/2 years. To avoid penalty fees, it is important to plan and take distributions in time to pay all your retirement savings.
How is gold taxed within an IRA?
The fair market value at the time of sale is what determines how much tax you pay on gold sales. You don't have tax to pay when you buy or sell gold. It's not considered income. If you sell it later, you'll have a taxable gain if the price goes up.
Gold can be used as collateral for loans. Lenders seek to get the best return when you borrow against your assets. This often means selling gold. However, there is no guarantee that the lender would do this. They may keep it. They might decide that they want to resell it. Either way, you lose potential profit.
So to avoid losing money, you should only lend against your gold if you plan to use it as collateral. You should leave it alone if you don't intend to lend against it.
What are the advantages of a IRA with a gold component?
The benefits of a gold IRA are many. It can be used to diversify portfolios and is an investment vehicle. You have control over how much money goes into each account.
You also have the option to roll over funds from other retirement accounts into a gold IRA. If you are planning to retire early, this makes it easy to transition.
The best thing is that investing in gold IRAs doesn't require any special skills. They are readily available at most banks and brokerages. Withdrawals are made automatically without having to worry about fees or penalties.
However, there are still some drawbacks. The volatility of gold has been a hallmark of its history. It's important to understand the reasons you're considering investing in gold. Do you want safety or growth? Is it for insurance purposes or a long-term strategy? Only then will you be able make informed decisions.
If you plan to keep your gold IRA indefinitely, you'll probably want to consider buying more than one ounce of gold. A single ounce will not be sufficient to meet all your requirements. You may need several ounces, depending on what you intend to do with your precious gold.
A small amount is sufficient if you plan to sell your gold. Even a single ounce can suffice. But you won't be able to buy anything else with those funds.
Can I hold a gold ETF in a Roth IRA?
While a 401k may not offer this option for you, it is worth considering other options, such an Individual Retirement Plan (IRA).
A traditional IRA allows for contributions from both employer and employee. Another option is to invest in publicly traded corporations with an Employee Stockownership Plan (ESOP).
An ESOP gives employees tax advantages as they share the stock of the company and the profits it makes. The money in the ESOP can then be subject to lower tax rates than if the money were in the individual's hands.
An Individual Retirement Annuity (IRA) is also available. You can make regular payments to your IRA throughout your life, and you will also receive income when you retire. Contributions made to IRAs are not taxable.
Statistics
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
External Links
wsj.com
- Saddam Hussein's Invasion Helped Uncage a Bear In 1990 – WSJ
- How do you keep your IRA Gold at Home? It's Not Exactly Legal – WSJ
irs.gov
bbb.org
cftc.gov
How To
Guidelines for Gold Roth IRA
Start saving as soon as possible to save for your retirement. Start saving as soon as possible, usually at age 50. You can continue to save throughout your career. It's vital to contribute enough money each year to ensure adequate growth on an ongoing basis.
Additionally, tax-free opportunities like a traditional 401k or SEP IRA are available. These savings vehicles allow you to make contributions without paying taxes on earnings until they are withdrawn from the account. These savings vehicles can be a great option for individuals who don't qualify for employer matching funds.
Save regularly and continue to save over time. If you don't contribute the maximum amount, you will miss any tax benefits.
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By: Frank Corva
Title: Why You Shouldn't Buy the Dip in Bitcoin
Sourced From: bitcoinmagazine.com/takes/dont-buy-the-bitcoin-dip
Published Date: Wed, 08 Jan 2025 19:34:20 GMT
