Everyone is concerned about the falling prices of cryptocurrencies these days, which is causing panic selling and resisting new investors from entering the market. I have chosen this time to share my findings around crypto and will explain very basic things that most of us talk about but don’t follow while investing in the crypto market. This article will clarify the bigger picture in layman’s term and help an individual investor to understand the dos and don’ts.
The not so recent downfall
I am monitoring the crypto market since last three years and the price hikes in early 2018 really surprised me. If you look at the entire price graph history of any cryptocurrency, there was a slow but gradual upward or downward movement. Spikes in between are often led by either news or by a significant investment. Early 2018 showed a similar price spike initiated by a few significant investments in one of the major cryptocurrencies. This led more retail investors to follow the footprints of others and jump into the crypto market, pushing the charts higher to the sky in a very short duration. Soon the picture started changing once some of the early investors started to exit with huge profit in their pockets, resulting in a market crash.
What went wrong?
So what went wrong? Was it one of those so-called price manipulation or pump and dump strategy, no one really knows. But at the end of the day, retail investors suffered huge losses as they invested at a high time. Non-professional investors got into FUD (Fear, Uncertainty, Doubt) and FOMO (Fear Of Missing Out). Events like this occurred in the past, but back then it was not easy for a non-tech person to invest in crypto. Especially Asian countries have dominated the graph, means a lot of non-professional investors joined the wave this time.
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” -Warren Buffett.
If we follow this simple rule then isn’t it the right time to invest in crypto? No, it isn’t. It is never the right time to invest unless you know in what you are investing and what are the fundamentals of that asset class. Some of my friends are late but they are learning the right things. During this blood-shedding battle between bull and bear, a lot of us have never focused on the big picture. Yes, crypto isn’t the big picture here, the underlying technology is, Blockchain.
There is no secret ingredient!
While investing in the stock market, we analyze stock fundamentals and multiple factors to assume the growth potential. Similarly, each and every cryptocurrency is not a money generating machine. Instead, every single one is related to an individual platform or a whitepaper which solves or will solve some problem with the help of blockchain. One should focus on the problem that a platform is trying to solve. I am not talking about investing in an ICO, that’s a different story. My approach is to choose something for long-term and stay invested if you believe in an idea. A risk is associated with everything and nothing guarantees you a positive return, but chances are higher when you know fundamentals, at least then you know what you are doing.
In my future articles I will describe major cryptocurrencies and underlying technologies in laymans term. Do follow my blog for further update! Follow me on twitter @AnjanduttaC
This article describes my personal view. I am not suggesting anyone directly or indirectly to invest in cryptocurrencies through this article.