We are already very used to hearing from Bitcoin promoters that investing in this new asset is a golden opportunity that we cannot miss. In the midst of so much passion, these promoters too often forget to mention the risks. Often, Utopia is sold, but the fine print is not discussed. The most naive fall into the traps of a false sense of security. Of course it is a mistake to enter something with false expectations. If we idealize an asset, we can become blind. But, in the world of finance, these mistakes cost money.
In this article, we are going to assume that the investor is only looking to make money. That is, he does not care about anything other than increasing his capital. To achieve this, the simplest strategy is to buy when the price is low and sell when it is high. Thus, the investor benefits from price changes over time. This, of course, forces us to forecast the future. Optimists buy. Pessimists sell. Investing, in other words, is a game of expectations. What is the problem? Well, the problem is that the future is not written. Nobody can predict it.
Here’s a JP Morgan anecdote I read about in a book on business adventures. JP Morgan was an American banker and investor who dominated the financial sector in the late 19th and early 20th centuries.. He founded the company JP Morgan & Co. and participated in the creation of large industrial corporations. He was also involved in solving various financial crises, lending money to the government and other banks.
Morgan was reserved and discreet. He did not like to talk to the press or reveal his plans or strategies. Once, a reporter asked him what the stock market was going to do. Morgan responded with a single word: “It will fluctuate.”
With this response, Morgan expressed a self-evident truth: the market is always on the move, going up or down depending on the conditions of the moment. No one can predict with certainty what will happen tomorrow or the day after tomorrow. Morgan’s response became a famous phrase summarizing the volatile and uncertain nature of the stock markets.
Indeed, many investors dream of predicting the future and knowing when to buy or sell their assets. However, this is almost impossible. Markets are very complex and depend on many factors that we cannot control or anticipate. For example, the news, political events, social trends, the emotions of the participants, etc. All this influences the behavior of prices. And it generates uncertainty and volatility.
For that reason, we should not trust the predictions that some gurus or analysts sell us. Many times they are wrong or have hidden interests. Nor should we let ourselves be carried away by fear or euphoria caused by market movements. The best thing is to have a clear and coherent strategy with our objectives and our risk profile. Thus, we will be able to make more rational decisions and avoid unpleasant surprises. In the world of finance, not acknowledging risk is one of the costliest forms of denial.
One of the problems in this space is fanaticism. People are so dedicated to the Bitcoin cause that in many cases objectivity is lost. The ability to doubt is lost. Because the fan does not doubt. And he begins to secure things with a militant and dogmatic certainty because he romanticizes the project too much. ANDRisk is accepted when it is recognized that uncertainty is part of our lives.
Life and the market are uncertain. We cannot know or control everything that will happen. Uncertainty can cause us fear or curiosity, depending on how we deal with it. To live with it and take advantage of it, we need to have a positive, flexible and sensible attitude. We also need to be clear about our goals, values, and purpose, and be willing to adapt. Investors must be prepared for the risks and opportunities offered by the market, and make informed and rational decisions. Uncertainty is not good or bad in itself. It is a condition of life and of the market. As Voltaire said: “Doubt is not a pleasant condition, but certainty is absurd.” Let’s accept this: The future of Bitcoin is not written.
How to reduce risk in times of high uncertainty? The cryptocurrency investor must become an expert in risk management. Many people prefer to believe false certainties than accept uncertainties. However, uncertainty is inevitable. Our knowledge, our information, and our understanding are limited and imperfect. Therefore, our ability to predict the future is very low. This goes for everyone from Elon Musk to Warren Buffett to everyone else.
Investing is not a matter of buying wildly for the sake of being optimistic. It requires a strategy, a plan and risk management. Do you manage your risks? Don’t be fooled by the catchy phrases: Educate your financial mind.
Indeed, cryptocurrencies are an investment opportunity that attracts many for its potential for growth and profitability. But it is important to remember that it is not enough to be optimistic and buy with high expectations. I repeat: you need a strategy, a plan and risk management.
Leaders in this industry know full well that promotion is key to keeping excitement alive and they use short, simple and catchy phrases to promote their interests. They use narratives, propaganda and ideology to raise spirits. The objective is to capture capital from investors in order to grow. But, in this context, financial education is neglected. Very few care to educate the novice investor. Therefore, I invite you to educate yourself and not eat Chinese tales. Manage your risk and make informed decisions. First of all, take care of your pocket. Second, watch your pocket. Third, watch your pocket.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here 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.
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