Learning opportunities in the current crypto bear market
Now is the right time to re-examine your investment decision process which will help you become a better investor
Source: Coin360
As the crypto market continues with its bear trend, many people are using comparisons with previous Bitcoin bear markets to tell you that the current downturn is not as severe as, say, 2011 or 2014. While it may comfort you and help you bear the losses, it may also hinder your investment decision process as you may conclude to “weather it out and wait for the better times.”
Don’t get me wrong; I think that HODL-ing makes the most sense right now, but I also believe it is imperative to use the current situation to learn as much as you can. If you don’t, you will most probably make the same mistakes in the future. Do you think it can’t happen to you again? Take a look at the following chart:
Source: Investment Company Institute — 2015 Investment Company Fact Book
This chart shows the cash flows for the U.S. equity funds over a 15-year period which includes the dot-com crash from 2000 to 2002 and the financial crisis of 2008, but the pattern has been the same since the early days of investing. The most money flows in at the market tops and flows out at the market bottoms. The lesson? Human nature doesn’t change — greed and fear have always been and always will be the predominant market forces.
Time for some serious questions
You were most probably not in the crypto market during the previous crashes, so this is your first opportunity to learn. Ask yourself some serious questions:
Why did you think that buying crypto made sense in (late) 2017?
Because of the hype and the potential for the short-term gains? Or you believed — and still do — in the long-term potential of crypto?
If you have sold some crypto lately — what reasons led you to this decision? Did you succumb to the pressure of heavy losses and gloomy articles in the media?
If you think that crypto is worthless now and everything will go to hell — why do you have such an opinion?
If you think now is a good time to invest — why do you believe this is the case?
Drill into your mind for the answers and strive to be completely honest with yourself If you find that you have invested because of the media hype, short-term profits potential, gut feeling, etc., you may fall into the same trap again. It can lead you to sell at the bottom, wait too long to re-enter the market, invest additional money at the next market top, and so forth.
The only suitable approach to crypto investing is to do the homework, get real knowledge, and make informed investment decisions.
Are you a firm believer in the long-term potential of the crypto but you find it really hard to sustain the crazy volatility? Then you should design a system which will help you protect the profits during the next bull run and reduce the volatility. How? I will write about this in my next post.
If you find this post useful, share it with the crypto community and help others become better investors
Follow me on steem to get notified about all my future posts. I also regularly share my thoughts on crypto markets on social media. You can find me on Twitter, LinkedIn and Instagram @gregzupanc.
I would say now is a pretty great time to invest because the market shed about 90% of value in the last year.
I will make sure that during the next major dip I have plenty of cash on hand to buy back at lower prices. I bought a little in this last year but I'll be better prepared next go round.
I agree that now is a good time to enter the market. But... there might or might not be another major dip. If you intend to invest a larger amount in crypto, I would suggest you break it down in four to five smaller chunks and invest it over a course of the next few months. This way you can reduce risk as you "average in" - if the market really goes lower, your average buying price will be lower and if it doesn't it will be a bit higher.