Crypto Currency: Either Buy or Sell but don’t do both.

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The Setup

A friend of mine in the financial world told me a story the other day and I thought I would share his view on the world of investing.  He started receiving texts from a friend of his (we’ll call him Joe), who was in full panic mode, firing off texts left and right.  As Joe’s fear increased so did the rate of his texts.  Like so many others, Joe had invested in bitcoin.  As most of us are aware, it underwent heavy swings the other day causing a serious ripple in the world of crypto currency investing.

The Panic

First there was a massive sell off dropping it almost 30%.  This caused his Joe’s initial panic.  His fear of losing money caused him to sell.  However, shortly after that bitcoin began to rebound and what do think Joe did?  You guessed it, he wanted back in the action and bought back in.  Later it tanked again and his hysteria got the best of him and he repeated this whole cycle (selling then later re-buying).

At the end of the day when the market settled he ended up being down bit based on his transactions of the day but if he would have just held his ground to begin with he would have been better of.  Granted the market was still down but based on his initial investment (which he made several weeks ago), he was still overall up.  However he broke one of the cardinal rules: never sell low and buy high!  In his panic, that’s exactly what he did.

Have a Plan

One of the biggest problems if your investing in crypto currency is the swings.  You’re playing in a stock market on steroids and you never know if you’re going to get Bruce Banner or the Hulk!  When dealing with this sort of crazy and volatile world, there is one solid piece of piece of advice:  Have a plan!  The plan should be made by you or your financial advisor (who will probably tell you not to invest in bitcoin – because it’s not a safe investment, however it is fun).  In either case having a plan means you don’t react based on emotion you only react to a logical thought out series of steps or guidelines.  By having a plan you keep your head in the game and emotions on the sidelines.

Your plans should be based on the same methodology you execute on the stock market.  Here are few examples:

  • Plan to sell if it drops X%
  • Plan to buy more every X% the price dips
  • Plan to by or sell every X% interval, regardless of the price

In a nutshell, you should either buy and hold for the long term.  This means ride out the peaks and valleys for the bigger score (which could be a year or more away).  Or if your goal is to make a short term gain, buy and wait for the magic X% gain.  This still could be weeks or months, but you never know it could be a day.  Anyway you look at it, have a plan and don’t go off the market fear and panic.


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