Why Bitcoin will not make everyone financially free
So you heard of this asset called Bitcoin and think you can make a lot of money off of it, right? Well, guess what? You’ll most likely lose money. See, in markets like Bitcoin and traditional markets, when a new asset arises(something with hype), it goes through a market cycle, specifically a hype cycle. Many people on crypto Twitter (CT) think this asset will make everyone financially free like magic, which is pretty stupid, and I will tell you why. Now there are a plethora of cryptocurrencies out there; this applies to every single one of them except for stable coins. Every couple of years, the entire cryptocurrency market goes through a hype cycle; as stated previously, this means an asset goes through a wave of demand. It dies down over time as the market reaches inflated expectations. Everything comes crashing down when least expected. Now, where do you lie in all of this as a retail investor? Your psychology is what works against you in this entire market cycle. It burns your stack of cash because your emotions overtake the whole process of being a sound investor or trader. So what do you do? There are two things; you hold it out long term over many years with the mindset that Bitcoin will continue to perform based on whatever investment philosophy you may have, or you trade it using a form of technical or quantitative approach. Without getting into the details of which is better over the other, let’s talk about how you will likely get burned in your journey of being a retail investor. So you make a Coinbase or Gemini account and max out your credit or debit card buying a shitcoin of choice. You then wait for the price of the asset to go up higher than your entry. Great, now what? The majority of people go into markets without a plan, and you will always fall for the FOMO and euphoric psychology of this market. So what does that mean for you? You go through the classic wall street market cycle over and over again. Now this allows for the transfer of wealth between dumb money and smart money. Now remember this and repeat to yourself, “there have always been, and they’re always will be the same percentage of winners and losers”. Do not forget this, and make sure to watch the movie clip hyperlinked to the quote. What should you do then? DO NOT INVEST. As someone who sold the peak in Jan 2018, it has become relatively easy to find what specific things to look out for to determine when I should collect a profit. I think Bitcoin and many assets like it will continue to burn retail investors for coming years as they do not have any competitive edge. All in all, if you have a spare couple grand lying around and you have an average or above-average job, you should not be investing in these markets. Unless you plan on holding for years on end and are okay with losing 70% from your initial buy-in, so save your money as an emergency fund.