After the Robinhood investors the investing community is now seeing a wave of Crypto Investors.
They talk about the death of fiat currency in the near future and that the old ways of valuing things is dead.
They are the “modern investors” who are going to be the part of next big thing.
But where did they get all this conviction from? A tweet. (or perhaps, a news article)
Eventually, these excited Crypto investors will realize that the game changes significantly when you start putting in substantial amount of your wealth in it.
With substantial percentage of your wealth, comes the element of fear.
Right now, many of them are investing few bucks and if that gets doubled they might confuse that with them having the brains to predict the move.
This is the reason that there is a saying in stock market that, “Don’t Confuse Brains With a Bull Market”. (This is exactly what is happening with Crypto Investor.)
A famous personality has shared his vision about Crypto currency and the world has gone nuts behind being the part of it.
Well, alright let’s assume you double your money. What after that?
The amount of time these people are wasting in tracking these coins is huge which won’t come back. They constantly track it and try to time the currency. Remember, you just have to be wrong once to loose all that you have gained from this speculation.
Plus, the money you are investing is definitely not huge enough to let you retire for life. If it was then you would act rationally.
Here is a meme to explain what is happening these days:
I might partially agree that in the very long run Crypto currency could be the future. But then which one and do you have the ability to hold it for so long?
If you believe answer to the second question is an easy YES then you are definitely a newbie.
The conviction one needs for holding an asset for a very long period of time requires great knowledge and understanding.
There would be a sudden downturn and you would loose your shit. Elon Musk might sell out, people might get scared, the tech itself might fail (regulator issues), etc. the reason could be anything.
Only that person would be able to hold who would have the brains to analyze the situation (at that time) by seeing things through a lens of edge they might have over others. Not by reading tweets or news articles.
I do not posses enough knowledge to make an investment decision with regards to Crypto currency but I can surely understand the thinking and behavior of these Crypto investors.
I am not saying ditch everything and follow value investing.
The purpose of this article is just to make someone stop for a moment and introspect what they are doing when they are investing their money, be it stocks or Crypto currency.
Always have a sensible rationale behind the decision you make for your money.
It shouldn’t be that you read some bloody news article or your Reddit group is bullish on something.
Just be rational. Think deep. Protect the downside.
Don’t invest in Dogecoin just because Elon Musk believes in its future. Even, if Doge goes to zero he won’t loose much but you my friend will certainly be disappointed.
Let me be clear, not all Crypto investors are like what I have described above. I know a group of people who quite believe and understand the tech behind it and therefore, they are invested.
But on the other side I also know some people who have invested just because some news article had predicted that its going to reach the moon.
If you believe making money is so easy that you just follow some articles online and invest as per Elon Musk’s tweet then you have a lot to catch up.
When you invest in a company you estimate that the company is currently undervalued because there is huge market opportunity left to be captured, the company’s management is honest & competent to capture the market share, and company has some edge over competitors.
But with Crypto I get stuck with two questions (mainly): When do you know that a currency is overvalued? and When do you sell? (Of course, deep understanding of the technology behind it is also criteria which I do not pass). I fail to understand Crypto currency deeply therefore, decide to stay away.
Definitely there are people out somewhere who have the answer to the above questions but I am not one of them.
Inshort
My only request would be towards the new Crypto investors that stay honest with yourself.
Understand what you are doing. If you accept that what you are doing might be gambling then one can stay rational and not take loans to invest more money when they are out of their life savings.
Always remember, “A bird in hand is worth two in the bush”
Disclaimer: This post could be bias against Crypto investors due to my personal experience of listening to aggressively stupid arguments for Dogecoin soon reaching the “moon”.
Also do watch this funny video I came across, credits to them for the title of this article.