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| By Jim Nelson |
All eyes are on Bitcoin this weekend. The top crypto is flirting with $100,000.
On the surface, this doesn’t seem important. After all, most Bitcoin is traded in much smaller increments.
In fact, the smallest unit of Bitcoin is called a Satoshi — named after its mysterious founder — and worth 0.00000001 BTC.
But just below the surface, $100,000 is momentous. You see, we — as humans, as investors — absolutely love round numbers.
They dictate a lot more market activity than anyone would guess.
We’ve seen it play out hundreds of times over just the past few years. Take gold for instance.
Almost as soon as the pandemic began in 2020, investors reached for the safety hidden in the shiny yellow metal.
But $2,000 per ounce was a hard threshold to surpass, despite all the demand for it.
Every time it neared that price point, sellers came out in droves. It did surpass this round number twice, but only for a day or two at a time.
But as you can see, once it finally broke above the $2,000 price point for a week or two at a time, that created a platform rather than a ceiling.
If you like to use technical indicators to trade, you’ll know that often round numbers like this act as support or resistance. The above action in gold is the perfect example.
But why? Well, there’s more to round numbers than just the inner satisfaction of saying “$2,000 gold” or “$100k Bitcoin.” There is actually a reason.
People have a hard time deciding when to buy and sell. There’s so much emotion involved in investing. So, we’ve developed tools to help cut out some of that psychology of trading. Namely, stop losses.
These are powerful in that they can preserve gains and limit losses. But they also often come with a caveat.
Many investors choose to place stops at round numbers. Again, we as emotional beings are just bad at trying to time the market. So, we pick a number that makes psychological sense to us. Usually, that’s a round number.
Limit orders — both “buy” and “sell” orders — can have a compounding effect at round numbers. If many people place similar orders, it can tip the balance of buyers and sellers in a hurry.
I don’t know what Bitcoin is going to do today, tomorrow or the next day. But if too many people want to take profits after this remarkable rally, $100k is the logical exit. And that will create downward pressure.
Of course, as we saw with gold above, if an asset can surpass and stay above a round number for long enough, it becomes the new floor.
We have plenty of these round numbers in play right now. It’s not just Bitcoin.
The S&P 500 is currently dancing with the 6,000 figure.
Oil is hovering around $70 a barrel.
Heck, even Nvidia shares seem to be holding just below $150 until they can find the momentum to break through.
This psychology of round numbers is seemingly stupid on the surface.
But remember what the late George Carlin said: “Think of how stupid the average person is, and realize half of them are stupider than that.”
This is why we at Weiss Ratings like to consult data and sound analysis instead of trying to figure out what psychological thresholds other investors are placing on their investments.
And this week, your experts have plenty of sound ideas …
Put These 3 Surging ‘A’-Rated Names on Your Radar
Gavin Magor — our Director of Research and Ratings — opens up one of the best filters on our ratings site. He also shares the only three names that meet this tough threshold.
This Strategy Had the Power to Turn $100k into $3.5 Million
Gavin isn’t done just yet. He also shows us that if you combine those powerful ratings with his proprietary timing model, you can see extraordinary results … like 4x the S&P 500 and 8x the average hedge fund return.
Your Guide to Bitcoin ETF Gains
Sean Brodrick certainly believes $100k Bitcoin will be a floor rather than a ceiling. And he has 12 ways to play it.
The Future of Construction Is Here
Your startup and private equity expert, Chris Graebe, has found the future of construction. Specifically, he has a company that is transforming the way we build our homes.
The Transformation of War & Defense Profits
Michael Robinson is looking into the future of the defense industry. Several important trends are emerging. And he has the all-in-one investment to play them.
Have a great weekend!
Jim Nelson
Managing Editor, Weiss Ratings Daily
