Well, that was heavy.
Nothing like the feeling of having your guts ripped out by the market. I was going to write earlier today, but I wanted to let the adrenaline leave my system first. There’s definitely still a bit sloshing around, but I’m much more clear-headed now.
I’ll start out by saying that I didn’t sell any of the digital assets that I own. I surely thought about selling some of them, but I didn’t because we didn’t hit price levels that would have indicated to me that we were headed into a bear market. If you sold, please know that I am surely not here to say that you should have had “diamond hands” or that you should have “held no matter what happened.” The reason that I won’t say these things is because I have made it a point not to be prescriptive in this newsletter. I also just generally don’t like the type of people who say these things or things like “Have fun staying poor” to people who don’t choose to purchase/can’t afford to purchase digital assets. All of these statements are driven by ego, and I do all that can to check mine at the door when I write about/discuss money. Holding during severe downturns is a decision that you have to make for yourself. I’ve been through big downturns in these markets. When I first experienced them, I didn’t always hold. And sometimes I lost out on profits from a subsequent upturn in price as a result, while other times I ended up protecting myself from further losses. I don’t look back with regret on any of the decisions that I have made in these markets, because they were all part of a broader learning experience for me.
Some of the lessons that I have learned over the three and a half years in which I have had money in these markets are the following:
Do not invest/trade with more money than you are willing to lose
Do not invest/trade with leverage (AKA Do not trade options or financial derivatives of these assets)
Take profits when you’ve made some money
Do not gamble by placing bets on coins like Doge, Shiba Inu, SafeMoon. Scammers/hustlers - including Elon Musk - love bull markets and they will try to sell you anything
Understand what you are investing in and what your timeline for that investment is
I share in this newsletter my perspective, and, essentially, my portfolio, which is predominantly composed of Bitcoin and Ethereum, because investing in these assets has changed my life for the better on a number of levels, and I would like for others to reap the same benefits. But I have also stressed in this newsletter how essential it is for people to develop a thesis for their investments. If you don’t have one, you will likely be shaken out by this type of volatility. And there will be more volatility like this to come if history is any indicator. If this bull market continues from here, you will see sizable dips like the one we just experienced again. And they will be just as difficult to stomach.
Let me state plainly here that I have struggled to stomach what happened in the past 24 hours and that I didn’t enjoy losing a big percentage of my net worth as these markets plunged. As I said in the first edition of this newsletter, though, I am not an oracle, nor am I a guru. I do know, though, that 1.) This is how the game is played in this space and 2.) I am (mostly) at peace with losing everything that I put into the market (Nobody is ever totally at peace with losing any amount of money). I also still believe wholeheartedly in the fundamentals of the digital assets that I own, and I believe that some of the brightest minds in the world are currently focused on the development of these assets. I don’t think that this changes because of the extreme volatility in price action in the last 24 hours.
What you are witnessing is what should actually happen in traditional markets, but we no longer let it happen because we prop markets up by printing more money to “remedy” any corrections that the market experiences. This will ultimately lead to a much, much bigger correction that, one day, money printing won’t be able to fix. This is part of the reason that I believe in Bitcoin.
The fear that digital asset investors/traders now feel is exactly the type of fear that traditional asset investors/traders should feel when the market dips, but no one feels this fear any more because the Fed comes along to make everything better, radically increasing the “moral hazard” in the process. We’ve begun to see some semblance of stability in the digital asset markets as of this evening, and we’ve done so without the help of the Fed. This is something worth noting, as we have no idea what an unmitigated correction in traditional markets would look like at this point, which is why I largely no longer invest in them.
What really gets to me about pullbacks like this is that it’s always the new money that gets shaken out. The whales and institutions come in, stoke fear in the market, get the newbies to fork over their coins, and paralyze the market for a bit. Things like this bum me out and make me lose a bit of faith in the space each time they happen, because I believe in the decentralized nature of Bitcoin and other digital assets, and I want the wealth of these assets to spread. I don’t want it concentrated in the hands of the very few, yet on-chain analysis shows that this happens each time one of these major corrections takes place. Maybe this experiment doesn’t really work out in the end. It’s still too early to tell.
Some analysts are saying that we bounce hard in an upward direction from here, and that prices will catapult to new highs within weeks. I don’t really have an opinion. It doesn’t really feel like the right time for forecasting. Instead, it feels like a good time to learn whatever lessons this correction is trying to teach you and to adjust your risk tolerance accordingly. I have no intentions to sell any of my holdings, as I think this bull market is far from over, but that shouldn’t matter all that much to you. Whether you hold or sell is ultimately your decision. I already know where I stand in this space, and some of my perspective was developed as a result of feeling the pain of losing money in it. I have learned that pain can cause you to run away, or it can be your best teacher. This is one of those moments in which you have to decide for yourself which role you want it to play in your life.
I’ll likely follow-up in a day or two. Thank you, as always, for reading. I deeply value your attention, and will continue to share my thoughts on where we go from here.
Big Love,
Frank
Twitter: @frankcorva
Nice one, Frank. Generally speaking, all trading is a form of gambling - though, in my opinion, spot trading anything is about the best gamble one can make as the house takes so little - $1 in, $.9975 out I’d guess in aggregate. Emotion is great for horse races, because we don’t gamble to make money there - we gamble there for fun. If people came to crypto for fun, then they are having a great time now. Though, for those who have come to make money, crypto should be viewed like all other spot trades - dull. I find trading and making money the least exciting but most essential thing I have to do now. It’s a big yawn, but it’s really important because the risk to return opportunity is fantastic. Essentially, I have to capitalize on those who feel emotion and ride with the whales. This sounds appalling, but that would be emotion speaking.