A few people have asked me recently some version of the following: the crypto market is down, is it time to sell? do I wait and buy until after the “bigger” crash?
So let’s address what’s going on. Is it time to sell your crypto?
There are a lot of reasons why the crypto market is choppy right now. The three I believe have the most impact are:
Lack of disposable income from everyday investors like you and me due to inflation
Position rebalancing by institutions after a good year for risk-assets (including tax selling)
Psychological scare around the end of the year which produced the previous top in December 2017
Yet, despite all this, I believe this bull market (prices going 📈) is not over yet.
We have not yet seen record participation from individual investors. The world hasn’t gone crazy about crypto yet.
Yes, we had a speculative craze in NFTs this year. But the sky-high prices were mostly driven by people who already owned ETH and had extra cash to spare.
But real crypto adoption is here. Institutions are pouring into the space at a record pace, and brands are realizing the importance of Web 3.
Investment funds start the year fresh in January, with new profit-and-loss and investment mandates.
I suspect they will allocate more to crypto this year than they did the last. Institutions alone could drive prices higher and could extend the bull market well into this coming year.
Of course, I don’t have a crystal ball. No one does.
So to mitigate our own blind spots, here are couple of rules that have served me well:
Don’t trade short-term movements. You will lose. Anyone who tells you otherwise is trying to sell you something or is lying.
There is no secret fancy technology in the “AI” trading robot you’re being sold - mostly just “Anonymous Indians”
Don’t use leverage. You’ll probably lose everything.
Don’t speculate too much on small coins/NFTs/whatever-the-hot-thing-of-2022 becomes.
If some new coin is in the news (a la Shiba Inu, Dogecoin, etc.) you’re already too late to the party. Don’t chase it.
Your best bet is to have a core portfolio of bitcoin & Ether.
Then, if you have the stomach for it, you can add more infrastructure coins, some NFTs, and one or two highly speculative projects to round out your portfolio and take a swing at massively outsized returns.
But keep the last part SMALL. Don’t go putting your life savings into some dog coin, or an NFT of a funny-looking robot.
If you find yourself making consistently bad choices, just stick to bitcoin.
Then, leave it be and go do something more productive with your life. Walk your dog. Talk to your spouse. Play with your kids.
Don’t check crypto prices every day or week. Recognize your own behavior. If you do check prices too often, you’re likely either:
over-exposed to crypto (i.e. you have too much to lose)
too eager to get short term results (i.e. “get rich quick”)
addicted to dopamine (yeah I knew you weren’t going to like this one)
If you’re over-exposed, reduce your exposure to something that feels comfortable. You don’t have to be all-in.
And if you’re anxious for short-term results, remember that all good things in life come from compound interest. Zoom out.
If you’re addicted to dopamine, like most of us are, take a total break to reset your dopamine receptors. It will make you happier, calmer, and a MUCH better investor.
Look - the world and the media love to tell you:
BITCOIN IS CRASHINNGGG
Is this the end of Bitcoin? (or some version of “Bitcoin will be banned”)
This is the NEXT BITCOIN YOU MUST BUY
Bitcoin is bad for the environment!!
NEW COIN WILL MAKE YOU A MILLIONAIRE!!!”
I get it. It would make anyone anxious to look at this all day.
So tune it all out. 99% of it is garbage.
Remember, the role of the media is to make every problem your problem. But most news - including crypto news - are totally irrelevant to your life.
“Experts” of all kinds may sound the alarm about the world, and make you feel like it’s all coming down. But betting against progress has never been a good bet.
Pessimists sound smart. But optimists make money.
Crypto is late enough that everyone’s realized it’s a big deal and early enough that big exponential gains are still ahead of us.
It’s a generational opportunity.
So tune out the world, don’t fall prey to the fear and paranoia of the media, and go enjoy life.