Bitcoin and Bitcoin Cash last night illustrated a perfect example of one of Bitcoin’s greatest threats: The herd-like mentality of many investors in this market. In other words, fear.
Given the younger demographic and low experience with investing, many investors in this market follow the money due to FOMO and FUD. Many emotions run rampant, but especially fear (on both sides of the equation). Even the pastebin (https://pastebin.com/n0aGBMQr) that is making rounds just adds more fear to the equation. On that subject, I want to say that there are thousands of conspiracy theories out there – Don’t blindly accept them as truth.
How many of you bought Bitcoin Cash to ride it up a little bit and make some money? How many of you hedged against the Cashening by buying Bitcoin Cash? Sometimes, moments like these convince me that cryptocurrencies are a bubble despite their phenomenal potential as people invest to make money quickly or out of fear.
For those of you who bought Bitcoin Cash as a hedge for the Cashening last night, please reconsider that strategy. Given their near perfect negative correlation last night, hedging through buying Bitcoin Cash just reduces your net long position in Bitcoin (just sell Bitcoin & reduce position size instead). The opposite is true as well. Note that this is only true as the negative correlation was so high (smaller negative correlations are good). The main reason to do it would be because you want to avoid realizing capital gains on Bitcoin. If you do it because you suspect Bitcoin Cash will have better gains, then realize that is an oxymoron. Just buy Bitcoin Cash in that event.
The point is, scale your positions based on confidence rather than buying both of them. When you buy both, you tie up way more capital for little benefit. That capital could be either deployed elsewhere or left as dry powder on sidelines. If it is all tied up in BTC & BCH, you leave yourself little wiggle room.
Lastly, take a step back and breath. Think about what you feel will be the future of Bitcoin and invest accordingly. Don’t go chasing performance just for the sake of chasing it – that’s a sure-fire way to get burned.
I’d love to hear your thoughts as always, thank you.
If you like my content, you can support me through using ANY of the affiliate links below (I receive small compensation). The beauty of affiliate links is that I can pick and choose what I like rather than have companies approach me – everything I linked below (with the exception of Trezor since I like Ledger), I use myself frequently.
My Recommended Hardware Wallets:
If you want to store your cryptocurrencies safely, the best way is through a hardware wallet. Seriously – look it up and you’ll find plenty of information supporting this claim. There are alternatives such as paper wallets, but these are convenient and my choice for cold storage (offline):
Ledger Nano S: http://amzn.to/2hZPj0q
Ledger Blue (expensive): http://amzn.to/2hk7xst
I personally prefer the Ledger Nano S, but the Trezor is such a close second that it really doesn’t matter which one you go with. Ledger Blue is premium and convenient, but not necessary.
My Favorite Book for Investing in Crypto:
This book is, bar none, my favorite book for investing in cryptocurrencies. It doesn’t bog you down with technical jargon, but instead focuses on all the elements you should understand before you invest.
It’s a comprehensive book for both beginners and experts. Beginners will find information about major cryptocurrencies (not just Bitcoin) as well as details on historical market events (that you can draw on for future) and events to watch for moving into the future. Experts will find the chapters on valuation particularly useful. For those of you involved in traditional investing, this book is even more of a godsend as finance info is explored (correlations with other asset classes, ETFs, etc).
My Recommended Exchanges: Coinbase / GDAX / Bittrex
If you sign up to Coinbase using link above, you and I will both receive $10 each after you buy your first $100 of Bitcoin using Coinbase. Coinbase is much less intimidating for beginners. Once ready, move up to GDAX for cheaper or zero fees. For altcoins, I recommend Bittrex.
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None of what I provide in my videos is investment advice. Please do your own due diligence.
Seeking Alpha: https://seekingalpha.com/author/truth-investor/articles