Before I get into what I’m wanting to say, here are three things anyone investing or trading ought know. This is particularly true for cryptocurrencies:
- Nothing moves unidirectionally. Whatever one may say, as fundamentally strong a project may be, on the upside, corrections WILL come. On the downside, bounces WILL come.
- If you’re new in the field of trading, AVOID leveraging at all cost. Yes, it is enticing, the prospect of being able to build a position of $10000 with just a $1000 margin. But it is also way easier to get ruined because you clearly do not know what you’re doing and have only aped into the position. If the temptation is too strong, do it with am amount you’re willing to lose
- Do NOT get complacent. Got the last 9 out of 9 trades correct? Don’t let your guard down on the 10th. This is true for the best of traders.
Coming back to what I meant to say, the market’s been a mess the last few days. If you’ve been away from the crypto markets, you’ve probably been good. Let me ruin that for you. Here’s what’s happened:
Bitcoin has come down from a level of around $60000 on the 10th May to the current level of $40000. It even touched a level of around $29000. With it, the entire cryptocurrencies market fell like dominoes. It’s been BAD.
So is it Elon Musk’s tweet’s about how about Bitcoin and the energy drain in mining it, or is it China banning financial, payment institutions from cryptocurrency business, that caused the dip? Well it is none of those.
It is GREED and purely GREED that’s triggered this dip.
Irrespective of either of those events – Musk’s tweet or China’s announcement – a correction would come. The froth in the market was overtly evident. I realize I’m saying this in hindsight and it is always easy to do so. But maybe this case is a lesson to some for the future.
In fact, I did mention the front in a tweet last month:
How then do you keep a check on that froth?
- The easiest barometer is to keep a tab on the SHIT COINS
Coinmarketcap made this easy by creating a page on meme tokens. Shiba last week touched a market cap of nearly $14 billion. There’s a coin called Cum Rocket crypto. Touched a market cap of almost $400 million on the 5th May. Loser coin touched a market cap of $140 million. It’s currently at $16 million. Unless you know what you’re doing, these coins are a sure-shot way of burning up your money. The froth in these coins was insane a few days ago. There were calls of how projects are changing the world, how every new listing was the next billion dollar project. Many of these “world changing projects” have little more than a single-page website. Most often than not, their teams are anonymous. Go check this tweet from an influencer with nearly 180K followers recommending one of these. He went back on the recommendation soon after, acknowledging his “mistake” in pushing it. But this is what I mean, the froth was just too much. Without singling out any one project, I certainly believe most of the coins on that page put out by Coinmarketcap (the one linked above) will eventually go down to zero. It always happens.
- Keep a check on the Greed and Fear index
You can track that here. This is how it looks,
Here’s a look at the longer term chart on this:
Again there’s no exact science to this. But see how, when it reaches those 70-80+ levels, there’s a dip that follows. Use this along with the charts of specific projects. If you’ve got a chart that looks like this (below) and the overall sentiment in the market veers towards greed, it’s time to reconsider your position. Maybe, book some profits!
Ultimately, whatever be the coin, or the position you have, remember,
- To book profits along the way. There will be calls “If you’re booking profits after just a 10x, you’re a moron. Wait for 100x.” There will be many of them. Profit booking is extremely difficult, and if you’re on social media or telegram groups, it will be even more challenging. Just remember, profit booking has never harmed anyone. Protect your capital.
- Do your own research. Do not just ape into another trade
- Keep learning. Your portfolio is probably messed up over the last few days, and this isn’t something you did not imagine, especially amid all the “Altseason is coming” screams. Spend some time recognizing what you did wrong. Did you not book profits? Should you have done it when you were considering it? If you considered it, that is. Did you overexpose yourself to one particular coin? Whatever the case may may be, remember it can be prevented going ahead. One thing that always makes money in investing is staying disciplined. It is even the hardest thing to do. I struggle with it.
Good luck. Drop in a comment or email on what you think of the post.