If you have been keeping an eye on the cryptocurrency markets of late you will have observed a quite pronounced downward trend in the price of all currencies.
The percentage decrease in price will no doubt cause some concern for those new to investing in cryptocurrency ... and will understandably almost definitely cause a lot of alarm for those new totally new to investing altogether, but should you be selling now to limit your losses?
Let me explain why you should learn to block out the n
oise of market sentiment and nurture a steady nerve that seasoned investors develop over time.
History repeats in its own special ways
The rally of digital currencies over the last half a year is in many ways similar to the Bitcoin spike of final quarter 2013 when the prices increased quickly from over USD$100 to a little past USD$1100 before slowly falling again
In a similar way since the recent reaching of new highs, the total market capitalisation of currencies has dropped more than 30% from an all time high of USD$113Bn down to under USD$80Bn.
But why has this occurred a second time?
Well as anyone who invests in cryptocurrency should be forewarned, it is a speculative market. The price fluctuates wildly based mostly on sentiment and emotion. In a bull market this is largely driven by the fear of missing out on profits. In a bear market this is a panic sell to avoid the total worth of held assets being less than what was started with.
Unseasoned investors panic when they see figures like this
With the most recent highs being reached many investors have now understandably cashed in on some stellar profits. When a large number of people start to do this; the strong sell signals will often start a cascade which eventuates with inexperienced investors panic selling as they see prices start to go down. Altcoin values tend to follow the price patterns of bitcoin and also start to slide making the market change figures red across the board.
Another reason for bearish sentiment at this stage is that there is still a lot of uncertainty in the market due to the announced August 1 bitcoin User Activated Soft Fork (UASF). The outcome of which may create two separate blockchains and a possible branding issue for the well known Bitcoin. With the uncertainty surrounding this investors are wary of what it will do to the price of cryptocurrency.
Should you buy or sell?
Well that is a question you really need to answer yourself. We do not want to be seen as giving investment advice but what we can give you is what we will be doing ourselves.
As we have faith in crypto being a disruptive technology with so many uses that are only just beginning to be harnessed we are of the opinion that the world cannot possibly move backwards from here. With more adoption of blockchain technology markets can only trend upwards even if they do correct from time to time. History shows this is true for standard stock markets, just like history shows there a stock market crashes at intervals. Unless the human race is wiped out markets will recover and grow and go through the cycles again.
With this in mind we hold our crypto when the market falls. If it falls far enough and we believe a particular currency has merit we will buy even more of it at a bargain and wait for the eventual rise.
Just like stocks you haven't lost any money till you sell, you just need to develop the nerve to hold tight while the graphs are showing in the red - till you come out the other side.
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