Calm Down! A Few Thoughts about Investing and the Ups and Downs of the Cryptocurrency Markets
To no great surprise, this morning there was a rash of "bloodbath" articles everywhere, following Bitcoin's tumble from over $19,000 to $10,900 a low and change.
And, of course, many alt. coins followed suit in the decline... showing us, once again, that the world still clings to the (mis)perception that "digital currency = Bitcoin."
Maybe we should just take a deep breath and poke around in the underlying reality here.
Don't Panic! We've Seen This Before
When you're "in the thick of it" in a nascent industry, it's easy to become a bit myopic and think "OMG this has never happened before!" But seriously, folks, we have seen this before. And we've seen it in somewhat recent history.
Crypto price chart in nature?
Many believe that cryptocurrencies represent "the future of money" and the way we interact with doing business with each other. I think that may well be true... but we're part of the earliest stage of developing a revolutionary new technology.
Assuming we believe this is true, let's step back for a moment and think about a couple of other "revolutionary technologies" we have recently seen: The Internet and Mobile Phones.
The Internet revolutionized the way we-- meaning ALL of humanity-- communicate and do business. It was the opening of the virtual world. But the early days of investing in Internet related technologies was an extremely bumpy ride. And the industry went through numerous adopt-reject-adopt-reject cycles before it truly became mass market... in fact it was close to TEN YEARS before "being online" was not considered something "weird" for nerds and academics.
Looking backwards... to see what's ahead
Mobile phones revolutionized the way we talk to each other. In the early days they were seen as a "fad" and perhaps something for wealthy business people. And yet... today pretty much everyone has a cellphone. In fact, the market penetration is so thorough that there are people in developing nations who have no technology AT ALL... except for their smartphone.
My point here being that if you were an early investor in either of these technologies, there were just as many huge rises and dips during the early years. People who bought Yahoo or Nokia stock lived with their investments tripling in value in a month, and then cutting in half.
These wild price swings are normal with the sort of new technology we are dealing with! Why? Because at this point the market is trying to price the potential of something, rather than the actual developed product... and potential tends to run more on rumors than reality.
"Investing" vs. "Playing the Lottery"
A solid foundation
I know there are a lot of people out there who are "traders" and are trying to build their fortune by investing in the next hot tip they come across.
To be honest, trying to "time the market"-- whether you're in high-flyer tech stocks or cryptocurrencies-- is treacherous water, unless you dedicate your entire life and every waking moment to understanding the micro-trends of what moves a handful of securities you're expert at.
If you don't have that level of dedication and expertise, you're pretty much "tossing darts," sorry. And that can be a really costly experience, because most neophyte investors tend to bail from the market at precisely the wrong time.
The sun hasn't set on us yet...
So... unless you're an expert, trying to "time" the ups and downs of cryptocurrencies it far more like "Playing the Lottery" than it is actual "Investing." And I say that as a former day trader in technology stocks.
Investing suggests that you like the fundamental premises of an industry or a product, and buy into it for the long haul-- holding the asset until conditions change to where your original reason for investing no longer holds true. If you believe in the fundamental promise of cryptocurrencies and blockchain technology, just hand on to your coins.
So... my suggestion is that you just chill out and enjoy the ride!
What do YOU think? Do people freak out too much over market swings? Has Bitcoin (and certain others) been in an upswing for SO long we've forgotten that prices also go down, sometimes? Did you know that the price of Bitcoin tumbled all the way to where it was... on December 6th? Do you believe in the fundamental technology that fuels cryptocurrencies... in the LONG run? Are you invested for the long run? Or are you a trader? Leave a comment-- share your experiences-- be part of the conversation!
created by @zord189(As usual, all text and images by the author, unless otherwise credited. This is original content, created expressly for Steemit)
Created at 171222 12:52 PDT
There is really no need to worry because what goes up , must come down . Which means that this is the perfect time to buy
Yes, totally agree with that... if you have any cash sitting on the sidelines, this might be a good time to invest.
Very true, I know lot money that was off the table is coming back in. This course correction has made Christmas come early for many who have been chomping at the bit to come back in. For those who stayed true to those convictions it looks looking good for them right about now.
"Are you invested for the long run? Or are you a trader?"
It is not such an either/or as you dichotomize (is that a word?) it into.
I am in crypto for the long run, I believe in the power for change and the future of the technology. But I will most certainly seize any opportunity I see to make an even quicker buck by moving from say, bitshares to steem and then back again as I assess their relative shorter term prospects.
But I would also submit that you are a pretty seasoned investor-trader and know quite a lot about cryptos based on having been involved for a long time. In other words, you have wisdom and experience which you are putting to work... that's very different from tossing darts.
I do believe a lot of these wild swings are increased by newcomer investors who have just bought into the whole idea that "cryptos are a hot ticket" so they take their money and act on every FOMO rumor they see... and bail every time something goes down 20%.
As I mentioned above, I used to be day trader in tech stocks... and I just followed a handful, but knew them really well, which certainly allowed me to make some short term gains that most people didn't "understand."
It is my theory that unless you (as opposed to someone else or "society") pay for your mistakes, you do not learn from them and will most likely repeat them. I have learned from my mistakes :-)
During my forex days I use to leave bigger positions in but short the market corrections. That way I never missed the boat or get a lousy re-entry back in and took some profit taking on the way down.
Then at least here I think they made that tactic illegal lol.
Ah the good old days of being woken up at 4 am because of margin calls and not understanding what sleep was anymore.
"Ah the good old days of being woken up at 4 am because of margin calls and not understanding what sleep was anymore."
Kinda like with bitcoin mining in the early days of ASCICs!
I still got some block erupters somewhere. Ran so hot partially melted a keyboard cable once that landed on them.
Nothing like checking for a software update and finding out the developer came forward that he’s been “borrowing” a couple cycles here or there in the background and didn’t think it was important to disclose that information.
Mine had been some knockoff cheap brand that I got off amazon the red light kept flashing on and still be running. Wake up to find out the mining pool you were on got DDoS and your script failed to switch to another. Still, crazy amount better than whatever GPU and CPU I had been using before while getting my feet wet.
I never did put money down on anything bigger. They always seem to delay shipping for 6 months to a year while coming up with endless excuses for why it was taking so long. I recall one black Friday sale one site discounted everything by 50%. Was so tempting but I know if I did they never ship them by Christmas like they claim. Rants years later on forms where rather funny as if they didn’t know they would be taken for a ride like everyone before them.
Ah, nothing like knowing there was a 75% chance to get scammed out of your coins but you had to take a chance anyway. I gave up for a while after cloud mining started to be a thing and no matter what you mined just a little less then what current value of your shares where to sell back. But they are happy to give you million and one alt coins while mining that truly where so worthless they were removed years later when I came back hoping one of them went to the moon.
I would say those days where much worse lol. Cryptocurrency these days almost looks civil.
Yup, to everything you said .
I no longer mine anything. I switched to DPOS technology back in 2014 and have never looked back. Mining is wasteful and definitely not sustainable in the long run.
Well written and spot on. It isn't a loss until you sell.
Most of the coins I have were bought at lower points than this anyway.
In my opinion, times like this are a good time to pick some more of your favourites. Market now excepts higher prices. Just time before we see it rise again.
A lot of it can come down to mindset. People are losing their shirts because they see a loss and they panic and exit trying to “prevent further loss.” Then they buy back in at a higher price because they missed the boat yet again. Now that is losing.
When in reality if they did not need the money today, and don’t see themselves getting out of the market entirely they should have just kept the money in.
A lot of people are just going on gut reaction more than anything.
What they have is an "unrealized gain" that got smaller, but they interpret BTC going from $19000 to $12000 as a "loss" even though they actually paid $3000 in the first place, and are still sitting on a 4x gain.
That's gonna be my epitaph: "It isn't a loss until you sell."
You're absolutely right on that one!
And you bring up another important point here.
People are "crying" because the Bitcoin they bought three months ago for $5,000 have dropped to $11,000... boo-hoo-hoo. You didn't LOSE anything.... you still have an unrealized gain AND an investment that DOUBLED in 90 days. That's pretty extraordinary, right there.
YES!!! This is what so many people don't understand. Even in the 'traditional' stock market - I forget the exact statistic - but even the best professional day traders only beat the market (S&P) 20% of the time - and that's collectively, not as individuals.
Your 'tone' here reminds me very much of J L Collins on his stock series website, or sort of Boggglehead-esque theories applied to crypto (ok inherent contradiction - as both would most likely advise against crypto - but you know what I mean). Like you said, unless you're an expert with niche knowledge, market timing is a losing proposition for the majority of us (that doesn't even factor in the logistics of frequent exchange crashes, and lack of stability when converting gains from one alt coin to BTC then back to the dollar)
Looking at the limited data we have on the 'established' (relative term) cryptos - they have mostly gone up over time (like the S&P, VSTAX, etc). Sure there have been wild dips and losses - if one invested in VSTAX in 2008, their portfolio would have lost 1/2 its value...if they panicked and sold, they would have locked in losses...however the holders recovered within 2-3 years as long as they didn't touch the principal. A similar comparison can be made with BTC...the bitcoinira website actually has great charts for theoretical BTC investments made over the last couple of years.
Anyone who 'invests' in crypto couldn't go wrong by reading up on traditional investing strategies (of the long term versions). Eventually - that's what crypto trading will become - I think their future trajectory is more like stocks than as currencies.
Thanks, and well said!
One of the things I bump into is that this is a whole new paradigm. I talk to people through email and messages and suddenly we live in this world were "long term" is a month or two... and people look at me in complete befuddlement when I say "Errrmmm.... I was thinking more like five YEARS."
Maybe our world is moving so fast now that a five year time horizon has become nonsense. Still, one of the things I said very early on when I first came to Steemit was that I would give it six months to see if it was scammy (it turned out not to be... mostly) and otherwise I was going to park my content here for five years, of which this is barely year one.
The time warp is mind blowing! I certainly hope that in five years Steemit is still around, a bit more user friendly, and certain snags have been cut out...but 5 years is an eternity in cyberland. I remember thinking MySpace was everything...how long did it last (in its original incarnation)...wasn't it about 5 years?
Hey Steemit Gods - don't let this become the myspace of crypto :-P
(and congrats on 1 year!!! - sorry for the stingy upvote, been going a little crazy and need to recharge a bit)
I happened to have similar thoughts and treat them more like stocks as well. The more main stream cryptocurrency becomes the more “normal” money is put in. Resulting in that money having to follow normal business patterns and hopefully a better rational thought of trading.
Yup. The ride will be less wild by then - the days of 1000% overnight gains long gone, but by that point using the technology should be smoother - and yes, some 'normality' could be a very good thing !
(I can't deny I do get a bit of a gambler's high watching XRP go from $.009 to over a dollar...but also that low when crypto I'm in plummets, even temporarily lol...it would be nice to know the long term trajectory, and that my crypto is as 'safe' sitting on an exchange as my IRA is with Vanguard.)
Many years ago when i was into forex. I was looking thought all the currency pairs that where available on the platform I was using for over the counter trading. All the way at the bottom I noticed this one pair that had just massive drops. It was the Zimbabwean dollar at the time. I was just a stupid kid. Had no idea what hyperinflation was. Thankfully I didn’t take the gamble because I would lost my shirt and then some. I check in on it every day just not understanding how it could be taking such a massive dump day after day.
The only people who should truly be panicking are the ones who got greedy. The ones who took a mortgage out and then leverage it. Which if they live in America I’m sure a few regulators would like to have a word with them about that…
You cannot have massive gains without their being a major course correction and a “profit taking” session. Which always happens. It happened so many times I don’t understand people’s insanity over freaking out.
I do feel some empathy for those who got caught trading on margin... and then had to "chase" their margin calls all the way yo the bottom. In a market like, this, don't gamble with the grocery money... that's both greedy, AND banking on getting "money for nothing."
Sadly in situations like that you can’t have empathy for them. It will just encourage them to keep doing it again. It’s a sad harsh lesion.
I like many were also expect a correction before or on Christmas. It was long overdue and now a bunch of money that was off the table is coming back and people for most part get to enjoy the holidays.
On the one hand I fully agree, but on the other hand I think Bitcoin is a dinosaur - I've made a lot on it and gotten out before this crash.
And although I might buy it back cheap, I don't expect to ever go big on it again - right now I've moved on to potentially far bigger returns.
In cryptos you are either ahead of the trend or about to be played by the bankers.
I'm a long term investor - two to six months - but always ready to jump ship - if I turn out to be wrong about Bitcoin I can buy it back for a hell of a lot less than I sold it for a week ago, trading cryptos is fast and easy.
Long term in crypto 2-6 months, long term in the fiat world 10+ years lol. I still don't think I'd call long term 2-6 months, at least in the US if you sell in that period, you're getting taxed to death on those short term gains. I think long term is still at least a year in crypto - some of my biggest gains have come from cryptos I purchased circa 2014/2015 (then imagine, the guys who got in "WAY BACK" in 2009!).
Agree on BTC though - it has the first mover advantage, but very little practical use (exorbitant fees, long transfer times, a pain for the avg person to change into fiat or visa versa). That said, I feel like in the "future" (1 year? 5 years? 6 months? lol) BTC will retain value as digital memorabilia. Since it was the first of its kind, it will have value to collectors. (ok there were failed attempts at bitcoin-esque things in the 1990's, but damned if I - or many people -know their names without googling)
I happen to agree. 2-6 months is short to midterm at best. With that said I have many short to mid goals that exceed a year’s timeframe. While scale of time is important and bitcoin really is not that old a part in my shivers at the idea of long term just being a month or two
Until majority of large exchanges adapt better. Bitcoin will have a fair bit of use in its life. Everything is still too tied down to btc. What I find most interesting are some retailers who were accepting btc as payment are pulling their support sighting “exorbitant fees.” I hope they are able to address that issue before getting to greedy and it toppling over like a pile of dominoes taking out everything that didn’t adapt in time.
100% ! Those fees are seriously killers....
There are several points in your comment that have gotten me thinking.
In NZ we have no capital gains tax, and anyway we are not putting any crypto profits into banks - even gold bullion can be purchased here using a range of cryptos.
When I was doing share trading I was thinking in terms of a year or two, but cryptos are much faster - the longest I've ever held a crypto is 7 months.
For some reason a lot of people are really attached to Bitcoin - I use it sometimes when I have to, but would rather use Dash or Litecoin for example, for a convenient cash coin.
And I don't leave much $ in Bitcoin because I now expect it to crash (fully crash down to about $5000) any day now - it's being played.
You've probably been following a lot longer than most. Most of those rushing to BTC now just heard about it ;-) I guarantee you go up and ask someone on the street what Dash is, and they'll tell you it's a condiment (again, in America lol) or look at you like you have 10 heads.
If you then ask them - ok, you've heard of Bitcoin, right? Then they will probably start reciting headlines to you and assume DASH is the same thing lol. I'm going to maintain that BTC will always retain value as digital memorabilia. And since I picked one up when it was $400...I really have nothing to lose lol.
(NZ sounds like paradise...)
Yep, and the view is OK too :)
Sure enough, Bitcoin is a bit of a dinosaur... it keeps going because of its "legacy status." Last time I sent some BTC, the confirmations took almost three hours, and the fee was the equivalent of 18 USD. Hardly fast and cheap.
I'm hoping 2018 will be the year where alt. coins develop an identity of their own.
I bet it will be, and unless BTC forks again or the existing version gets a complete overhaul (I read something about lightening technology...) - I doubt BTC will be the most practical. (when it comes to talking tech aspects, I admittedly know...not much lol. Enough to grasp a concept - no more)
These days I only use it as a medium to exchange between coins. It’s to slow and costly otherwise for the amounts I use. I fear if they do not get that issue resolved more places that are currently accepting only bitcoin will view all of cryptocurrency like it and just not accept any of it at all.
Watching it yesterday take two hours to do something that should take less than two seconds, reminded me that Bitcoin is a total dog! And Monero for example, as well as being fast, is also free.
https://getmonero.org/
Bitcoin is a bankers scam now:
The tide and waves we ride on the little canoe that is Crypto in the big SEA of moneys is a fun ride... After you chill and realize that each dip is that sale day and the peaks are fun to buy stuff with the crypto turning it into real things. This is one of the reasons I like running a mining rig or two they earn more when crypto when the price drops and when the price is high I can buy some more hardware. Steem is also a fun safe place to ride up the storm as we get tossed and turned as the world breaths in and out we are watching the pulse of the planet and right now a few drops in the bucket are sloshing around. When we grow to the size of a floating island the ups and downs are less noticable. I for one am loving this ride bring on the roller coaster. When you look at CoinMarkets.today and set it to the 1 month you see the market is still all green. You can set it to the past hour and see what it is doing right now It is going back up so hope you all picked up some discount crypto on the ride down... 2018 here we come!!!!
I think 2018 will be a great year! In 2017, we saw the industry go from "nerd money" to "somewhat known," and market caps grew from $18.3 billion in January 1st to over 0.5 trillion as I write this. I think 2018 might be "the year of the alt coin" as people more and more realize there's more to cryptocurrency than "just Bitcoin." Just earlier, I was reading about the Facebook-Litecoin connection... I think we will see a LOT more things like that.
And you're right, the longer you set your time horizon, the more stable your upwards curve looks.
ahh the good old days of double digit billions.... yes this year was one hell of a ride. I also heard the rumor of litecoin to Facebook... and picked some up on the dip, yeah I bought it with other crypto so it is more like jumping from one ship to the next as the ocean keeps rising. It is going to be fun to look back at the good old days of only .5 trillion Market caps. And facebook accepting litecoin we can go tell the users hey check it out they accept it but don't pay it... want to earn some crypto for your efforts... come right this way we have a super fast free to use crypto called STEEM and oh yeah you hold the keys to your own social presents on STEEM... so many good points to bring them over to the STEEM side of the force.....
what I think is interesting is that less and less people are panicking and the bounce back seems to be taking place a lot quicker. at some point we could be suckered into taking big losses if the whales were to test our commitment. If you won't split with a 25% hit, would you sell at a 60, 70, 8- percent hit. Where is the psychological parachute point? I'm not saying this will happen, just interested in the thought experiment.
Well, it's an interesting thought experiment. And I suppose it also depends on why you are here. I personally kept powering up when Steem dropped to 7 cents, earlier this year... then watched it go up to $2.65 in June... and then back down. And now back up. I think the bailout point would depend on many things, including how much you NEED the money, and how much skin you have in the game.
OH man to get steem at 7 cents... what a dream... I guess people will look back at the $3 mark and say the same in a year.
I am not worried at all.
I see this as a typical correction in crypto and since I am just starting and looking for the long term I am not bothered by it.
2018 should be a great year for steemit and crypto
I imagine 2018 will be a great year-- I think we will see the "mainstreaming" process continue, and now that the market cap is substantial, I also think we'll start to see more businesses using cryptos as actual currency, not just as an investment asset.
They do freak out far too much. For some they never seem to look at the long term trend!!
It's the casino finance mentality. Gamblers never listen.
It's weird... it's taking the whole "be here NOW" thing to the point of insanity. There IS a history here...
I think some of them need to switch to decaf coffee and stop letting main stream media tell them the world is ending every other day. Large piles of panicked money can be bad for everyone or perfect opportunities for others to make money depending on how you look at it.