Find Where You Stand
Time in the market beats timing the market. The more volatile the market, the truer this statement becomes. Bitcoin’s current range, the bottom of which is $5800, has held steady for the last months. This provides a solid base for the cryptocurrency. Why is this important? It matters because after the rocket trajectory we had last year and the subsequent dives it has taken early this year, crypto needs a little stability to build a solid foundation from which to take off again.
Neither I, nor anyone else, has any way of knowing where the exact bottom is going to be, but given how well the high $5’s and low $6’s have held up, this indicates it’s a good buy in point. If you’re new to this market, the question you have to ask yourself is this: Do I believe crypto will become widely adopted and continue its growth pattern? If the answer is yes, then I suggest you keep reading. If no, then sell all of it you have and get out now.
Ignore the ‘Experts’ Who Change Their Tune Twice a Week
If you pay attention to the ‘news’, you’ll see weekly announcements that “Bitcoin is dead! This time we really, really mean it!” followed a day later by some article about “Why this time, Bitcoin is finally headed back to $20k!”. They don’t know. I don’t either, but the difference is that I’m aware of that fact and will use it to my advantage, instead of running around aimlessly, carried in whatever direction the current news trends tell me to go. The fact is, nobody knows how long it will take for price discovery to complete, and where we’ll end up. What we do know, based on many years of cumulative experience and learning from others, is how to take advantage of the current situation.
By ‘Experts’ I’m not just talking about CNBC, but they’re 100% in that group. In case you missed it, doing the opposite of what they’ve recommended for crypto has had a 95% success rate.
Keep Buying
Yes. It’s as simple as that. Once you feel or have sufficient evidence that the worst of the fall is over, that’s when it’s time to start averaging down. How far down will it go? That’s right, nobody knows. What we’re operating on is that we assume that cryptocurrencies will go through another parabolic move up, thus making short term losses averaging down worthwhile in the long run. This is also why you don’t want to be one of the people mortgaging their house and selling their first born for crypto. The market could just as easily take a 50% hit in the short term as it could pull a 4x in the next month.
Not only is dollar cost averaging simple, but it’s the surest way to ensure you don’t miss out on the big moves. In all markets, 90% of the price action happens on less than 1% of the days. This is why it’s a mistake to go ‘all-in’ all at once, or to continuously wait for the ‘best price’. The only way that will work for you is if you’re extremely lucky.
As an anecdote, it was recently revealed that Tulsi Gabbard, a member of the US House of Representatives, purchased crypto back in December. Chances are pretty good that her portfolio’s taken a beating since then. However, even for our LTC and ETH owning surfer, she too can turn things around by simply dollar cost averaging down. Though with the way crypto moves, even if she bought the very top she’ll still probably stand a solid chance of making her money back and then some at the top of the next cycle.
Historical Example: The Stock Market Crash of October 1987
As an example, many traders missed out big in 1987, because they kept waiting for the market to crash further. Why? Because they looked at the past, and the past said that a few bad days like they had just seen was the lead for another massive crash, Great Depression style. However, the fall never came. The smart traders went ahead and continually opened small positions, while the ones who were waiting to be ‘lucky’, waited for years. Literally. Some of the more renowned bears in this period maintained for a long time that ‘The big crash will come’. Meanwhile, their bullish colleagues were making money nonstop.
That’s not to say that unbridled optimism or caution are always correct. It does mean that small, continual steps are the most reliable way to make money. Personally, the way I look at it is that if the crypto market crashes to zero, the world and I will have bigger problems than holding worthless digital assets. I have the exact same outlook with the traditional markets.
What Does This Mean for Crypto Enthusiasts and Investors?
As mentioned above, nobody ever truly knows what will happen in the long term. You either believe in something or you don’t. This market has proven to move in such a way that belief is well rewarded for the patient. Yes, there are some hard times. But what makes up for those hard times are parabolic moves upwards, which is why when times are hard for the market, you should buy. In the immortal words of Nathan Rothschild, the 1st Baron Rothschild, The time to buy is when there’s blood in the streets.
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