By Jesse Stretch | USA
Newcomer Bitcoin hotshots are panicking on Reddit, crypto forums, everywhere. We read these quotes and sigh:
“Why is it crashing? Help!”
“Soon it will be worthless. SELL OUT NOW.”
“Bitcoin is dying! Agh!”
According to an article in Newsweek, the international suicide hotline is/was advertising on the Cryptocurrency Reddit forums.
The “Fear of Missing Out” or FOMO sell-off attitude in the crypto space prompts criticism from a wide host of onlookers and participators alike, and yet as it occurs, those same writers preaching “hold hold” have their Binance accounts open dumping everything they can back into Coinbase on the prayer of cashing out ahead or at a slight loss.
But alas how some of us forget that this was and is the point.
Volatility. Lots of movement. Big Charts. Big gains, big losses.
Without volatility, cryptocurrency is boring. After all, what small or medium-sized investor wakes up and checks the price of Ford stock every single day—virtually none. Glance at the Ford Stock Reddit and see that in the top four topics is this heading, Why does Ford price fluctuate so little day to day?… Enough said. The stock market is basically a bore to this caliber investor, and rightfully so.
Young crypto-minded investors don’t want to wait. The tech culture doesn’t have time to wait. We need lunch delivered to the office, we need fast electric cars, we need Prime for toilet paper, leggings, and custom bearding kits. We don’t have a decade to gain 40% on Ford stock like Grandpa did. In a decade, many of the Bitcoin investors will be in their late twenties or early thirties—nearly dead and/or retired! There’s simply no time to wait for the NYSE.
Bitcoin is a rollercoaster, and roller coasters are a short, wild ride; but, the ride starts again at some point or another when new people get on. Sometimes, if you know the ride operator like we did when we worked at the theme park growing up, you get to ride over and over again as many times as you like. When you’re done, you have nothing to show for it, but it was a wild ride. Such is the same with Bitcoin—but maybe not if you hold.
In his seminal guide, the Intelligent Investor, Benjamin Graham espouses the idea that in the instance of a very large short-period investment gain of over 100%, the investor should consider selling half of the investment to safeguard the principal and capture some gain on the initial capital. This is an easy theory to read and comprehend, but it’s a bit harder to practice. One might argue that with prices moving from $10k to $20k and back to $10k, all essentially inside of one rolling month’s time, this is exactly what has happened—profit grabbing, a correction, a harvest of income. It is one of the most common occurrences in high-risk investing.
My point here is that the FOMO selloff on Tuesday and Wednesday the 17th and 18th of January of 2018 were expected, was predicted, is expected to continue for an indefinite time, and is likely not the “end” of crypto-currency. People harvest profits, and harvesting profits lower the market cap and price of the stock or commodity. This is normal. What we are seeing here is just another exaggeration of what would usually take much longer to happen in your grandad’s brokerage account.
In crypto, the equivalent of weeks on the NYSE happens in mere minutes, sometimes moments. Percentage gains and losses are exacerbated by an eager, new, and often timid investor who is likely not as flush or seasoned as the rich boys on Wall Street. For this reason, there is a great hunger for a rapid gain and a great fear of a rapid loss. Were it Gold these crypto investors were trading in, we’d see the movements occur much slower, but this isn’t gold—it isn’t, arguably, anything.
The FOMO selloff may be just so, or rather it may also be a high-volume version of the traditional marketplace profit grab. Tomorrow, Bitcoin may be worth $2. Tomorrow, Bitcoin may be worth $25,000. Neither would surprise anyone with a history in this market space. The fear (and the hope) is real.
But as bulls, let’s be optimistic: Any high-volume selloff will ultimately increase the strength of the crypto market, should it sustain itself, because it will trim out the weak-stomached investor. When this investor returns, he/she will return with a confidence in the market, which will make FOMO selloffs less likely to occur in the future. Should the crypto market continue to grow over the coming years, this is how its legacy and stability will be forged. The new investor must experience both gain and loss, and then a recovery from loss, in order to develop a trust and a respect for the market, and through time this trust will stabilize the currency and lessen its fluctuation as an investment vehicle and/or pseudo-commodity.
And so as you distractedly read this article, I will continue clicking my mouse to see if Coinbase will finally process the lagging sale all of my holdings and transfer them safely back to my FDIC insured big-brother bank account—all for a hefty but reasonable fee.
Relax… I’m kidding…
Author’s Note: The author currently holds positions in numerous cryptocurrencies and is not engaged in a volume-oriented selloff of these positions—but he knows you are.