So today, J.P. Morgan came out with a $146,000 price prediction for bitcoin:
“In a research note to clients, analysts at JPMorgan Chase predicted a long-term bitcoin price target of more than $146,000 based on the assumption that the cryptocurrency will grow in popularity as an alternative to gold, which has traditionally been used as an inflation and volatility hedge, as well as protection against a falling U.S. dollar.”
While most bitcoin enthusiasts are jumping for joy (and understandably so), I’m EXTREMELY skeptical of J.P. Morgan’s actions and motives:
In 2017, JPMorgan CEO Jamie Dimon says bitcoin is a ‘fraud’ that will eventually blow up.
This quote may not be so bad if in 2020, JPMorgan wasn’t set to pay a $1 billion fine for metals market manipulation. The SEC, federal government, Justice Department and others were the accusers. J.P. Morgan was charged with manipulating the markets for EIGHT YEARS!
Per the article:
“JPMorgan is reportedly set to pay nearly $1 billion to settle a government probe into allegedly illegal fake trades.
“According to multiple reports on Wednesday, the $2.9 trillion megabank is close to paying the fee to end ongoing investigations by the Commodity Futures Trading Commission, the Justice Department and the Securities and Exchange Commission into the bank’s alleged manipulation of the prices of metals and US Treasury bonds.” Read the article HERE.
So here are the the million dollar questions:
- Is J.P. Morgan manipulating bitcoin?
- Did they purposely tell people bitcoin was trash while secretly buying it?
- Did J.P. Morgan build a position in bitcoin at these lower prices, only to announce a tremendous price gain that could prompt the price to go higher?
Pump & Dump
As investors, it’s critical we understand how markets work, as well as various tricks of the trade. If a person did not know about J.P. Morgan’s history, they wouldn’t think twice about the bitcoin price projection. But they have a HISTORY of manipulating securities.
This could be a classic example of pump and dump:
- Client buys large amount of shares of unpopular stock at a cheap price
- Media attention is generated, giving misleading or exaggerated statements (pump)
- Stock price rises considerably on the news
- Investors take note and buy the stock near the highs
- Original client sells the stock (dump)
- Stock price drops
- New investors lose money upon price drop
This happens time and time again.
Avoid Emotional Investing
Individuals who manipulate stock prices know that investors buy stock with their emotions, not logic. They see the price rise and get excited. Sensing a chance to make good profits, they buy the stock. Buying on emotion can be a mistake. It’s critical we keep our emotions in check when buying stock.
It’s critical you do your research and learn everything you can before making an investment.
Have a Strategy: Set A Stop-Limit
There’s a very good change that our favorite investment is being manipulated. We may never know, so the key is to be defensive and monitor your investments closely. This means locking in profits when they become available. This is accomplished with a stop-loss.
In its simplest terms, a stop-loss occurs when a security is sold once it reaches a specific price. This limits how much is lost on a position.
Using bitcoin as an example, if a person purchases bitcoin at $30,000 and it jumps to $40,000, a stop-loss could be placed at $38,000. So, if the cryptocurrency drops to $38,000, it is sold, locking in that price (and $8k in profits).
If the price increases, the stop-loss is increased as well. This helps you lock in your profits, whether the security is manipulated or not.
Bonus Strategy: Buy More Assets
We are living in unprecedented times. Thanks to covid, we have seen entire countries shut down, trillion dollar budget deficits, and potential risks of inflation. In addition, the excessive printing of fiat currency has many believing the purchasing power of those dollars will dramatically decreased.
Another option with those profits is to purchase other assets with those dollars. In other words, instead of investing it all in stocks and paper assets, consider investing in tangible assets:
In this picture, China is purchasing gold using American dollars. This strategy can be used by every investor. Each time you take profits, invest that fiat currency into an asset that retains its value and generates income.
Examples of tangible assets include real estate, franchises and small businesses.
By using this strategy, you now own an asset that is not affected by stock market fluctuations and offers cash flow instead of capital gains. If that currency loses its value in the future, you are still the proud owner of a tangible asset that you may have cost much more money if you would have waited. Other types of tangible assets to consider are precious metals, such as gold and silver.
Will bitcoin reach $146,000? It is very possible. is it being manipulated? We may never know. But for bitcoin and stock market investors, the key is to watch your portfolio closely and be prepared to take some profits when the opportunities arise.
Many of the best life lessons are not taught in school. It’s critical you don’t rest on your laurels and continue learning. Get more great tips in my book Invest For Success: Winning Wealth Strategies Not Taught in School. Available on Amazon.