Many people are not sure, when investing, to which strategy to stick to. As I have discussed in my previous article (link here), many of us are seeking the Get-Rich-Quick scheme because of our greed. Like any thing greed pushes us to do, this is generally not a good mentality and it can transform the novice investor into a speculator. Read this article to find out about a conservative investor’s cryptocurrency investment strategy.
After the Internet appeared, people were taking up stock day-trading because of the increased liquidity stocks began to have. You were just a few clicks and a short time away from making a hefty profit. In the 90s, the stock market was in a hugely-overoptimistic bull run (big daily winnings). This meant that anyone who could make an online trading account and buy some random tickers was seeing profits in a few days.
This huge number of people becoming day-traders eventually became toxic for the market. It ended in a recession in which stock went down as much as 90%. If you think about it, this is what we are experiencing now with Bitcoin.
The situation in the blockchain market is quite similar. Cryptocurrencies bring an even higher liquidity than stocks (since there are no fixed trading hours – the market is open 24/7/365). Nowadays, any cryptocurrency investment strategy focus more and more on the short term, rather than HODLing.
Participating in several enthusiast communities, I have seen how much interest is in this direction. For instance, there are Telegram groups (with hundreds, if not thousands of members!) that are giving buy/sell signals. What is even more damaging than this is that online platforms like BitMEX offer margin trading with 10-15x leverage. What this essentially means is that if you enter when BTC is $3000 and it goes up to $3100 you win $100, but only putting a $300 deposit (you get the trading difference of 1 BTC by only depositing 10%). Websites like these offer short positions too, which can be even more dangerous for someone without very good financial knowledge and years of experience. What is weird, at the end of the day, is that these hundreds/thousands of users are following a guy or two who are sending signals on Telegram.
I have to admit I am a very conservative investor. I am using the same strategies in cryptocurrency with the ones I use in stocks, bonds and commodities investments. Which is not necessarily good.
I was browsing my Quora feed (profile here) to see what people were trying to find out about cryptocurrency. I have found a question asking if it’s better to stick to long-term or short-term. One of the answer said that it’s easier to trade short-term, not being so exposed to the huge volatility of these assets. That made me slightly reconsider my opinion.
Individually, it’s ok to day-trade, because this way you don’t need to take the risk of volatility exposure. But this volatility is determined exactly by these short-term “investors”. I believe that after Bitcoin will become much more stable after it will reconsolidate its position as the one and only digital asset. I believe that only time will be able to make this change. Once this shift will be done in people’s mentalities, I think that Bitcoin will really be the new gold.
In regards to the market, what is happening now is certainly toxic. People need to stop doing this in order to reconsolidate the position of the market. High volumes are not helping it heal from this bear market. It’s good to make a profit for yourself. But start thinking about the market’s health.
Anyhow, thanks for reading. These are my opinions in choosing a cryptocurrency investment strategy. If you want to share some new ideas, make sure to leave a comment below. I am open to any chats, therefore, don’t hesitate to use this link.