The Metaphysics of Emotional Analysis and Tips to Help You Survive the CryptoCoaster Without Getting Thrown Off Balance
Logic is super useful for investing and trading, and the fundamentals and trends are your friends, but your intuition can help you figure out if you are under-extended or over-extended.
Being over-extended or under-extended in crypto is an uncomfortable position that is likely to throw you off balance emotionally.
This has a nasty snowball effect of leading to bad choices. So avoiding that state and its effects is critical.
To avoid that state and to pull yourself back from the edge, try using your emotions as an indicator!
NOTE: Emotional analysis, if it isn’t a thing, it should be.
All logical factors related to fundamental analysis and technical analysis aside, it can help to trust your intuition when managing risk (bid size and where you set stops, buys, and sells) and allocating capital (what positions you are taking in what type of coins and how much cash you have on hand).
The right balance of cash and crypto (and that right balance of different cryptos and crypto related investments) is an individual matter; it is crucial to remain both emotionally and mentally balanced.
Balance is an amount that results in being able to check your blockfolio on a regular basis without be obsessed constantly. It’s best to avoid praying to the Whale or Cartel Gods (where those are current names given to those who push the market up – Whales, or those who push the market down – Cartel, by the crypto community). People like to personify things. For example, Spoofy currently appears to be a deity of spoofing to make the price go up.
Please remember that the above advice is my metaphysical tinged self-help view. It is a “this-works-for-me” view. The best position for me is the one where I can be excited about crypto, leave my house or walk away from my trading desk to eat, get a full nights sleep, be stoked when the market goes up, be stoked when the market goes down, and approach crypto from a detached perspective.
This state of balance and detachment is essential to me since I write about crypto and thus end up spreading my “vibe” on the internet. I want to remain mostly neutral with an expected bias toward crypto.
My balance changes depending on the market and the personal state I’m in, but the concept of seeking balance in my investment to ensure my stability doesn’t change.
I’ve found that when I take too much money out of the market, I start to get nervous and favor the bears (even if I time my exit perfectly and am sitting on profits in satoshis and cash). This throws me off balance and makes me somewhat irrational; it shapes my bias and results in my staring at charts and looking at details like 1m candles. I start getting confirmation bias, and I start seeing bear flags on every move down and failed breakouts on every move up. At worst, this leads to me passing up great buying opportunities (which can then lead to FOMO buying when the levee breaks). This is unhealthy and not useful to you or me.
Likewise, I’ve found that when I put too much in crypto, I start to get nervous and start favoring the bulls. This throws me off balance and makes me somewhat irrational. I start seeing bull flags everywhere. I start evangelizing crypto and thinking that it doesn’t matter if we all buy the top and HODL (because crypto is revolutionary and its going to $100k like the Zen master John McAfee says). This is a state that can lead me away from caution and into FOMO buying (in this case, pulling the trigger too soon or pulling the trigger too rapidly at any price). This is unhealthy and not useful to me or you. In a sense, it is worse because it risks capital more quickly and can result in you being trapped and having no liquidity to maneuver.
Both of these states produce a strange sort of nervous Stockholm syndrome.
Those over-extended in crypto, as I have been in the past, tend to defend the cryptos they are in like a fanboy defends an album by their favorite artist at the expense of logic. They might turn into Ver defending Bitcoin Cash or treat crypto like some holy relic. Crypto is not the mystic whalebone of Lambo. They might start justifying 3.50 cent XRP. (Of course the Ripple CEO is worth more than Mark Zuckerberg overnight; why not?! Surely this is sustainable; didn’t you see that one guy on TV say it was going to infinity!)
Those who are under-extended, for example, those who passed up all of 2017 – 2018 without once buying a Bitcoin and instead remained salty (like I am when I sell too much then see an uptrend), tend to have a glass is half full attitude and spam the like button every time the news gets negative about crypto.
Neither of these states is healthy, neither of those states is logical, and neither of those states is free from emotion.
Those are states full of commitment bias and imbalance.
One state has you missing out on cash, the other missing out on profits. When you miss profits, your immune system weakens, and you risk getting infected with FOMO. When you over-extend, you risk dollar bills. No one wants to lose dollar bills.
The point is that, when I have the right balance of cash and crypto (an external factor), I have a more balanced internal state.
This balanced state is one leaves me stoked if the market goes up, stoked if we go down, and not caring if we float in a range. I tend to keep my emotional balance. By remaining rational, I can do my job, which is presenting an unbiased a view on what is happening in crypto today, explaining the tech behind crypto, and discussing new coins and forks.
I like to be in a balanced frame of mind where I can write an article that says “crypto went to the moon, awesome; but be cautious” or “crypto looks DEAD, sad; but don’t count it out.” This is better than “Soros will destroy crypto because media says it is Ponzi” or “McAfee says the moon, have you put your life savings in yet? Just HODL bro.” How about “Crypto is a wild ride, proceed with caution, remember to have fun, take profits, but know you probably won’t get a lambo, or smart contracts are cool, do you want to learn about that?” or “if you wanted stable crypto, you should have bought Tether.”
The reality is that cryptocurrency is like a 24/7 global casino in which instead of slot machines we have high stakes poker, and instead of poker, we have a boxing match, and instead of boxing gloves we have brass knuckles. [This isn’t salt; this is true]
It is too easy to get off balance in crypto land, easy to lose money, and exceptionally easy to get FOMO.
If you start losing money (or missing out on gains) and thus get emotional, then you are likely to make bad choices and carry a sort of negative crypto cloud over your head and into your life.
Considering the average person doesn’t make money in crypto, it can get pretty darn absurd to let it destroy your life and your wallet while telling yourself “I’m in it for the tech.”
I’m in crypto for lots of things. I got into because it was cool, I stuck around partly because of the insane gains I saw from 2015 to 2017. Now I’m still in it despite the extreme losses of 2018 (derp).
We are on a rollercoaster, with brass knuckles, and high stakes. The cryptocurrency market might suffer from bipolar disorder, but you don’t need to.
If you want to keep your sanity, you can’t behave like a gambler who has lost everything. We all have a lot to lose in terms of dollars and our mental states.
Only unusually stoic people and people who practice disciplined capital preservation and capital management can remain emotionally and financially balanced. I am not particularly stoic, so I go with option B. When I’m not sure what the right allocation is, I use my initiation.
I can’t say if this is right for you or not. I am sharing the metaphysics of my capital preservation strategy.
Mental exercise: Sit relaxed. Close your eyes and try to clear your mind. Imagine you own X cryptos at Y price and have Z cash on hand. Now change those variables around until you find a spread that feels comfortable. Your intuition may be trying to tell you a good balance to aim for. On the other hand, you have been overcome by the dark side of the force, and you need to meditate a little longer. If you feel off balance, you probably have the wrong spread. Once you think you have found the right answer, work on a strategy for easing into that position over time; if you feel over-extended, try seeing how selling a small amount feels. Also, do remember to check the MACD and RSI and consider, for example, the trend of transactions and the cost of mining coins (i.e., TA and FA). Your intuition doesn’t likely know if the RSI is oversold or overbought, you need your logic for that one.
Bottom line: This is what has worked for me; I don’t know what will work for you. I am most balanced staying partly in crypto and partly in cash, aiming to buy a low average price, taking some profits here and there when it makes sense, taking small bets on the uptrend, buying dips I think will be worth it, and otherwise using a strategy based on FA and TA. I try to practicing capital management at all times. It has worked for me. Otherwise, I let my intuition guide me. If I am off balance, I take it as a hint that I might be over- or under- extended in one direction or the other. To test that theory, I’ll buy or sell a bit of crypto and see how that affects my mood. The Whale Gods and Cartel Gods might exist and save us, but if so, it is a temporary aside. We are plebs; they are like deities. They may not even see us out of the corner of their eyes as they step over us. We are on a brass knuckles roller coaster, not on a straight line trajectory to the abyss or the moon. You’ll need your sanity and zen to get out of this alive and not fall into any pit traps. Your emotions, as much as they work against you at times, are also a useful indicator. EA – Emotional analysis is another tool for your tool belt.
NOTE: See “the mood of the market” for another article on EA and its relation to the crypto blood sport.