If you bought Bitcoin in the $17 – $20k range, you might be starting to feel fear and regret. That is normal, but your best bet is to shrug it off. Or at least, historically, literally since Bitcoin started, those who shrugged off the fear did better than those who sold at a loss and didn’t rebuy.
Thus, unless you are going to sell and try to time a lower buy, you might want to consider “holding” (that isn’t investment advice, that is me conveying a very general longstanding and historically effective Bitcoin adage).
UPDATE Sept 2018: This article was written on December 8th, 2017. At the time BTC had gone from almost $20k all the way down to $13k. I made people aware they could HODL like those who came before, and HODL was indeed the right answer for a time. You then had a few weeks to HODL on and take profits or break even on BTC, and a few more weeks after that to HODL and take profits in alts (massive profits in some cases). You then had some time to take a small loss if you hadn’t got out yet, to let those stops hit or scale out a bit like I mention below. However, time passed, and as I warned below it might, the harsh bear market did come and those 80%-ish losses became real. With that covered, even today, even after all of this… HODL is still an option. HODL aside, another solid tactic for those who bought too high is to average down and lower their average price. Anything you do with crypto comes with risk, but HODLing and averaging are two simple things that have a historic record of working well for those with patience. In fact, the lower it goes, the worse idea it is to jump ship historically speaking. Anyway, only time will tell if history repeats or not.
NOTE Sept 2018: For those with experience and skill shorting the market when you buy high is an option. However, shorting requires a degree of skill and knowledge that HODLing and averaging do not. Thus, I would not advise to short, even as a hedge, as a general rule of thumb (hence it not being mentioned in the original article). Learn how to short Bitcoin and other cryptos.
Original Article Continued:
Here is what happens with crypto. One second everyone is manic, they speak of rockets, lambos, and moons. The media jumps in and grandma is opening a Coinbase account. Then five seconds later everyone panics and starts selling at a loss. The sell walls come up on the exchanges, the buyers disappear, and it feels like the end is near.
People and markets are way more emotional than you might think. It is sort of strange. However, it pays to understand what is up.
What is happening is a mix of things. The news is going sour, starting to warn everyone of the bubble and bans (because they are creating a narrative to drum up viewership and readers; same reason they put out the glowing headlines last week). The whales (investors with deep pockets) start taking profits and pushing down the price (generally so they can buy more; they know they can get you to sell low). A chunk of new buyers get scared and start selling (reasonable; no one wants to take a loss). Meanwhile, seasoned investors see this and wait for the correction so they can buy the dip. Meanwhile, everyone else just holds (and thus they don’t affect the market).
The result is there are more sellers than buyers in the market. The result is the price looks like it is on a slippery slope to nowhere.
Look, the on-paper losses are real (trust me, I’ve lost a lot of on-paper satoshis and dollars in the process of getting more dollars than I started with), and the actualized losses when you sell are real (I’ve also taken some absurd losses; especially on altcoins, on those you should consider setting stop losses). However, all that said, the mania of the manic times don’t come from nowhere.
The mania comes from the fact that those who hold through the bad times and buy the dips end up with insane profits on a good day (which ideally offsets their bad trades, washes, and stop losses hit on altcoins).
Does it suck to hold through the bad times? Yes it does! Does it sting extra hard when you see a big artificial sell wall on the exchanges and get the sense that you won’t be seeing profits in the near future (but will instead be seeing more losses)? Yeah, of course. However, this time of fear and worry is when you hold or look for lows in which to average in. Meanwhile, that time of mania is when you hold or start taking profits (do that opposite of what you might instinctually do).
Sure, if and when the end times come and its all over, those who hold will hold into the ground and be doomed. However, if the end times don’t come, and if instead next week brings another wave of buying and excitement, then you are going to have an even worse feeling on your hands selling at a loss.
That feeling is the feeling you get when you buy high, then sell low, and then watch as others make bank when the profits return quickly.
During that time the person you told about your bitcoin investment will text or call and congratulate you. They will say “hey, you were so smart to buy Bitcoin, you must have done well, how do you buy Bitcoin?” And, you will be holding back the tears as you explain to them your situation. You’ll say, “the guy on TV said it was over, it went down $2k – $6k!” Well look though, it just went up $8k in a week… what is it that you expect? You are on a rollercoaster, it has been since day 1, this isn’t cross country skiing.
Bitcoin explodes and implodes on a weekly basis and everyone freaks out in each instance. At every turn someone sets a million dollar price projection and another sets a zero dollar one.
Ask yourself, who is closer to being right so far? There you’ll find your answer.
Sometimes the peaks and valleys are closer together, sometimes the spikes are bigger and the corrections harder, but its always the same story. An epic rise filled with excitement, followed by cold feet and a miniature bear market… often followed by another epic run.
If you want to be on the ride, if you want to be part of the epic run, you have to put aside the drama and hold.
I’m not saying you should lose your shirt over Bitcoin. Instead, I am saying only this: it isn’t a bad move to invest only a small portion of your investable income, average in over time (especially on the dips), and set some incremental stops to ensure against an epic downturn… otherwise, the best Bitcoin bet is to hold through the day-to-day drama.
When Jamie Dimon says its going to zero, laugh and set a low ball buy order. If enough people freak out, you’ll get yourself some cheap Bitcoin.
Remember, the world was ending in September with Jamie Dimon and the China “ban,” then next it was all over when Bitcoin Cash was declared “the real Bitcoin” in early November. Now the vibe is a little iffy again for a minute, and there is word South Korea might ban exchanges.
Ok, maybe it all goes south from here… but if history is any indicator, $25k and absurd amounts of mania are way more likely for the near future then everyone packing up and going home.
This is to say, if you are invested with only a moderate amount of your investable funds, and you are sitting on the fence not sure if you should take a loss or not… then consider holding.
Every person who sells simply sells their coin to someone who, if this ends up being the start of something even bigger, will do well. Every person who sells in a panic only helps push down the price.
The bottom line being, if you can afford to take the risk (which we will assume you can since you already bought Bitcoin), don’t go selling your Bitcoin low to someone else. Hold. You’ll either go down with the ship, or end up with $20k+ bitcoins. You want $20k plus Bitcoins if they are going to be a thing. That is why you took the risk in the first place, right?Don’t be impulsive! Buy and Hold Bitcoin until 2020! – Adam Meister Interview. The title of the video sums it up.
NOTE: To be super clear, Bitcoin and crypto in general has been known to correct by 20% – 80% and to enter a long bear market (the long bear market only happened once, in 2014 – 2015, but still). The fact is you could most certainly take heavy losses in crypto. It really could go to near zero! However, if you have made the decision to be in, if you’ve already taken the risk, then consider holding through whatever gets thrown at you. Taking some profits when Bitcoin is on a run makes sense, but you’ll never make it to the end goal if you sell every time there is a correction (as Bitcoin goes on runs and then corrects often). I can’t give you investing advice, you have to make your own choices, I’m only relaying the idea that historically, the right move is to hold.