Opinions on How to Take Some Stress out of Your Life by Practicing the Zen Art of Capital Preservation
The current crypto market can be a little stressful if you say bought Dec 2017 – Jan 2018 and held. One way to remove some stress and to inject some fun into crypto is to be partly in cash. Clearly, this is an opinion, not gospel.
- When you have cash (or USDT), a dip is buying opportunity, and a correction or even crash is a fire-sale.
- When you have crypto, price increases are profits, and a bull run is an epic payday.
Why settle for one state when you have access to both states?
After all, if you have the cash to buy the dip, and you have a strategy that allows you room to take a little bit of profit, then you are in a position to enjoy the inevitable ups and downs of crypto. Meanwhile, if you choose one or the other (this is a choice everyone must necessarily make if they go all-in or out), then you are set-up to feel “not good” if things take a hard upward or downward turn (which they almost certainly will, and frequently).
Maybe you only use 1% of your total investable value to buy and only take 1% in profits from crypto (putting you in a position where you are, for example, only 2% in cash at any given time; or maybe 3% – 4% if things get crazy). Even that sort of strategy avoids a lot of stresses that come with being all-in crypto or cash.
Many crypto doubters want to always be in cash because they know when corrections come they can come hard, but then when crypto goes up they get all stressful and negative.
Many crypto fans want to be mostly in crypto because they know when profits come they can come very quickly. However, when the bear markets come, they get silent and stop posting lambo memes in their crypto groups. This may be nice for the rest of us in some ways but is also just a little depressing).
Both of these states can be avoided by 1. cash traders keeping some crypto long and 2. crypto heavy traders making a commitment to keep some cash on hand.
To our primary audience, the crypto holder (although, cash traders are welcome here as well), you must remember that being mostly in crypto means losing money on-paper every time the price goes down. And, you must remember, the price often goes down (like 25%, 50%, 80%, FML%, etc.; we have all been there if we have been here long enough). You will lose 80% at the worst of times, and it won’t feel good. You have to deal with this.
In markets such as those we’ve seen since early 2018, the price of most cryptos has just been down. Thus HODLers have been put to the test and it is logically wearing on them at this point.
I’d like to tell you it’ll get better soon, but this is crypto, and the reality is it could get bad before it gets worse. It will get better; we just can’t know when.
So, how do we make life fun again while we wait for better times? As noted, one way is finding an opportunity to get some cash out of the market. The second you have cash is the second you have some new doors open to you.
It takes no skill to do some light trading. One sells a bit of their crypto off either now or on the next little bull run (on that day when all of CoinMarketCap is in the green). Then one waits to buy again until everything is in the red (or even better, until the red breaks and begins to turn green again).
When you buy, don’t spend your last dime; always keep some cash on hand.
No need to trade every day here, you can aim to trade once or twice a week or month and get most of the full experience (in fact, trading frequently comes with its own woes, and I’m not sure I suggest it).
You can level up that strategy with some knowledge of TA and some shorter term trading, but even with none of that the basics still work.
If you are partly in cash, every downward movement is exciting, as you get a chance to buy lower. If you are partly in cash, every upward movement is still exciting (because you are in crypto), but also a little scary because you get that feeling of “oh no, what if I’m missing out.”
Nothing the market does is going to be a black or white; every movement will be mixed. This is better than weeks on end of depression or mania my many measures.
Honestly having 1% (or whatever) of your value in cash and getting FOMO is almost fun. Yet, somehow, that extra 1%, that being 100% in crypto, is not as fun. It opens the door for being filled with fear as the price keeps going down. That is psychologically difficult and can make you feel dejected.
There isn’t much of a practical difference between the two states, but there is a psychological one and your psychology is important. If you get emotional about prices, you are going to get distracted by white papers and your social life.
By moving to cash (even just a little). You are taking the feeling of sadness on the way down and replacing it with excitement, and you start looking at price increases a little differently. It takes a bit of the edge off holding crypto through uncertain times and mixes up emotional states.
There is something unhealthy about tying your psyche to the price of a volatile asset, and being partly in cash helps to curb that.
The moral: Overexposure to an asset, especially a volatile one, is risky business. Only the most stoic of humans can deal with this without it wearing on them. If you aren’t an emotional rock, and instead crypto is “stressing you the F out,” consider having a little less in crypto and a little more in cash (or vice versa if this is the case for you). It’s a simple trick with a little practical logic, but otherwise, you are left with only emotional logic.
A story: Specifics and perhaps some accuracy of this story aside, Steve Wozniak bought crypto in early 2017 and then sold it high, not because he didn’t like crypto or because he needed the profits, but because the price movement stressed him out (i.e., even the price going up had him stressed). He has more capital to lose than you and he still fell victim to the stress of crypto’s volatile 24-hour markets. It makes sense that you would also be stressed. If you push yourself to the breaking point you can find yourself selling all your crypto and waving a white flag. Better than to circumvent that early and move a little to cash. You’ll know you have the right balance when both upward and downward movement have the same effect on you, that is that mixed sort of “oh no, yay, er um; yay” feeling where you can’t tell if you want it to go lower so you can buy more or higher so you can take profits.
On being all in cash: If you go the opposite way and go all into cash, you sort of set yourself up for the opposite problem. Every positive movement produces FOMO and every drop becomes “what if it keeps going lower, I’ll wait to buy then” (at some point this person almost always misses out). So many people are permanently bearish or bullish but the market never is, so there is always a disappointment. If you step away from that and position yourself to keep a sound mind through either bull or bear markets, it can help add a dash of fun back into crypto even when things don’t go your way.
On taxes: The lame thing about “going to cash” and “trading” is that you have to account for it on your taxes. That means you need complex spreadsheets that no human is ready to deal with. It is almost impossible without software. Somehow all humans who trade must produce it. It is hellish and Kafkaesque, but that is one sadness a year vs. your mental health the rest of the year. Thus, despite the tax implications, there is a strong argument to be made for making it a goal to never be 100% in crypto. Even being mostly in crypto gives you that little bit of wiggle room to enjoy life when things don’t go your way and gives you a little bit of room to learn to trade.