First, a quick answer to the question above, no, it’s not.
In times like these, when the crypto market is down by 20, 30, 40, 50% or more in a short period of time, I always get calls, texts and emails from friends who see me as the crypto expert (I’m not, I’ve just been doing this for a bit longer than they have), and they ask “should I sell?” or “the market is crashing, is it all over?” and such.
I always try to calm them down and give them some perspective, so in this post, I’m going to discuss what the best strategy is for markets in this situation. Also, it’s important to mention that this is just my personal opinion, and that I am not giving or pretending to give any investment advice. Do your own research before making any investment decisions.
Let’s dive into the data:
Have a look at this chart. It’s covers a period of a few months and seems really gloomy, right?
This isn’t a crypto chart. This is the S&P 500…
And here’s the S&P 500 if I zoom out a bit, the red square is the chart from above.
How about that?
Let’s just do one more:
Here’s Apple’s stock, over a period of a few months.
And here it is again, zoomed out.
We humans have a very short memory, we tend to focus on the immediate perception of danger. This served us when we were hunter gatherers and we needed to make sure there aren’t any lions lurking around trying to eat us. It doesn’t really matter if there weren’t lions there yesterday or a year earlier, there could still be one out there today and it would eat us if we weren’t careful.
Now, this type of fear doesn’t serve us anymore, especially when amplified by social media, FUD and other so called “sources of information”. Our fearful tendencies get amplified by our primitive minds and every “the sky is falling” article or “expert opinion” help to drive us crazy with fear.
One last chart:
This is the crypto market cap, over 3 months.
Look at the crypto market cap chart above. We are in early February now, and the market cap is still double than it was in November!
Yes, it sucks if you bought in on January 6th (that incidentally is the date of one of my test portfolios which has been DECIMATED so far), but in the long run, nothing really changed.
Just like with stocks, markets go up and markets go down. If you buy high and sell low, you will lose money. If you are driven by fear, and worried you will lose even more, then perhaps crypto isn’t for you. But, if you realize that this “dip” is just that, a dip in the market, you will be able to realize that this is more of an opportunity than an obstacle.
I’m actually beating myself up for not buying even more ETH when it dropped below $800 this morning… it’s at $930 as I write this!
In any case, I’m not telling you what to do with your money, but when you see this type of a dip, take a step back, forget about your fear for a second, and try to see what’s happening in the market on a longer term scale.
That’s why I’m a huge fan of AI in this space. It takes away the fear, and allows trading to happen based on data, not “something I saw some guy on facebook post”.