There are very few people in this space who can afford to show “concern” in such uncertain times. In many ways, every salesperson is a master of denial. Investment funds, exchanges, crypto companies, the press and influencers make a living selling the “Bitcoin” dream. What is that dream? Well, the dream of “unlimited riches.” In many cases, this dream is double. The dream of “unlimited wealth” is being sold and, at the same time, the dream of the future “libertarian utopia” is being sold. Of course, those dreams should be sold very safely. In other words, they should seem like a safe bet. In this way, obtain the untainted faith of the parishioners. The ship may be sinking. Nevertheless, the musicians must continue playing until the end with a serene and unperturbed expression.
Imagine for a moment that we want to buy a bakery. Suddenly, we find a bakery for sale and the adventure begins. The sales agent surely presents the business to us as a great opportunity. The bakery owner probably also joins this optimistic campaign. The wheat seller applauds the business with great enthusiasm. The old baker who sells his bakery may be interviewed by the press so that he can spend more time with his grandchildren. And the influencer, a lover of good bread, makes a video that goes viral. The Bakers Guild sends out a press release talking about the great future of bread as the food of the future. Celebrities, businessmen and the general public are infected by this enthusiasm. Obviously they want our money. Why? Because it is very convenient for them and their sector to capture our investment. The big question: Is the investment suitable for us?
The young wit joins a tribe and automatically feels part of a family. He leaves his isolation to join the powerful group. He is one of the enlightened ones. He puts lights in his eyes on his Twitter profile to shout to the world that he is one of the chosen ones. The tribe gives him a family, some enemies and a narrative. His unquestioning faith is the faithful proof of his commitment. Is Herbalife good for me? Does Amway have great products? Is Avon a recognized brand? How tasty is the bread from your bakery? Is Bitcoin a good investment? It’s never easy to get an objective response from a fan. How to identify a fanatic? Criticize him. ANDl moderate listens, reflects and argues. The fan is offended, upset and usually lashes out at the “attacker”.
Timing the market is no easy task. In general, the markets are unpredictable. Nobody knows the future. However, it is not very difficult to come to believe that we do have the gift of prophecy. True, investors create expectations. And expectations, in many cases, become self-fulfilling prophecies. Optimism, for example, drives purchases. Consequently, the price rises due to those purchases. The reverse occurs with pessimism. The lousy generates sales. Suddenly, our expectations are met, thus confirming our possible “clairvoyance.” We think of ourselves as “geniuses” and we think that the future is easy to predict. False. However, it is very important when carrying out our price analysis to take into account our biases and our cognitive vulnerabilities.
As far as the price of Bitcoin is concerned, we can declare a minino at the moment that the sellers are exhausted and the possible buyers have a lot of money in their pockets. During the March 2020 slump, many sold out of concern about the pandemic. Nevertheless, the price recovered shortly after due to the great availability of liquidity in circulation. Thanks Dad Fed! At that time, it was not very difficult to be optimistic, because the future held promises that I could keep. When this happens, we can say that the worst is over.
Today the situation is a little more complicated. It is true that the market does give the impression of being oversold. And one might be tempted to go into “Buy The Dip” mode. Nevertheless, buyers right now are sheltering in more stable assets waiting for signs that inflation is slowing down, that we won’t have a recession, that supply chains are meeting demand and that the war in Ukraine will soon come to an end. final. With a light at the end of the tunnel, one could begin to say that the worst may already be over.. Unfortunately, we still don’t have that light at the end of the tunnel. And without that, it is very difficult to declare a minimum for Bitcoin. Which implies that there is still the risk of further price declines for our future.
Of course not everything is negative. While it is true that we have signs of an economic slowdown, the labor market is still quite strong. Corporate earnings are still in the green. And the indebtedness on the part of the citizens is very high, but it is not in its worst moments. Which implies that the possibility of a credit crisis is, for now, debatable. The “soft landing” is still possible. True, the situation is worrying, but we are not that bad. We could be much worse.
In such complex and unpredictable circumstances, the best thing an investor can do is protect himself for the different scenarios. That usually means not putting all your eggs in one basket. Additionally, It would not be unwise to add more stability to our portfolio, despite the fact that this could mean a loss of opportunities in the event that the most positive scenarios become a reality.
What happened to the long-term buy strategy? It is still perfectly valid. However, it is pertinent to make several remarks in this regard. The strategy is valid for those who bought cheap, for those who are debt-free and for those who have enough funds to meet their commitments in the next 5-10 years. This is not the case in El Salvador or Microstrategy, for example. Suppose the price of Bitcoin crashes and drops to the $15K level. And the price takes a couple of years to recover. What happens to fiat debt when your average purchase has been $30K or more? What about your creditors who expect their payments in a few months?
When Bitcoin was very close to its all-time high, Michael Saylor, CEO of Microstrategy, was still making videos recommending people mortgage their houses to buy Bitcoin for $50K. This reminds us that fanatical optimism is extremely dangerous and irresponsible. The worst is over? It is very difficult to know. The best thing, however, is to take all the necessary precautions.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
It may interest you:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.