When markets go vertical it’s a glorious moment, the aftermath not so much.
The cryptocurrency market has been growing at an exponential rate with a large amount of capital driven by young investors. And bitcoin as a pioneer in digital currency, that emerged after the financial crisis and is not backed up or supported by a central bank, allows people to bypass banks and traditional payment methods for goods and services. It was an idea that has evidently caught the attention of some investors because its price has surged by more than 900% in 2017. This is much more than a bubble, we are witnessing the beginning of a new digital economy.
Taking the first step earlier than the masses will give you an edge, both in terms of potential gains and experience. I won’t try to sugarcoat it, it will be a steep learning curve but it will be worth it. Don’t wait for the heard and be a pioneer, learn and invest in digital currencies now and reap the rewards.
Crypto Like Bubbles in Past
Economists have compared bitcoin’s dramatic rise with past bubbles, such as the dotcom bubble that began in the late 90s with the Nasdaq index in New York and burst in 2000. This example foreshadow a painful collapse for a currency that has no intrinsic value to those who hold it. Back then it wasn’t obvious at all or, if it was, fear and greed would be enough to blinker the investor in what to do.
Bubbles are driven by sentiment and stories, and bitcoin has a great story with a lot of mystery and spectacle to it, Is bitcoin at $40,000 by the middle of next year unthinkable? It’s not – but is there a logical and rational explanation for why it should be, I don’t think so.Ajit Tripathi, Accountant @ PWC
We have just seen that with bitcoin, and I was referring back to the dotcom crash to see if bitcoin’s crash had departed from the dotcom trajectory, which it now has, but what I see is the Nasdaq mid.
Some Dos and Don’ts for Investors
First of all, this is not always buy and hold game. But here are some options:
- Carry on investing like a sensible person. Don’t play like a gambler.
- Break off a chunk of money to specifically play a bubble with, and a plan to be early to the exit.
- While not going all in, look out for a specific outbreak of investment madness and “buy all the things” in this segment but dump them as soon as you have a fat profit. Just imagine its 1999 all over again but this time you have a map.
- Buy the crash once it’s over.
And then there are some Don’ts:
- Believe that this time it’s different. If it goes up like a rocket, it falls like a rock.
- Don’t “buy and hold” bubble stocks.
- Once the market has gone vertical and then slumped, do not buy the dip, only buy rises.
- Do not hold when it crashes.
- Do not tie your ego to markets rises. You are riding a clown car, don’t put on a red nose.