Now, many people are asking me for investment opinions on the current cryptocurrency market…This is a fast-changing and slightly embarrassing topic.
First, let us consider a question: What caused the cryptocurrency industry to rise sharply since October 2020? There are three main reasons:
First, low interest rates/low dollar prices-even though there is a lot of inflation data in the market, the interest rate and price of the dollar still have not shown much response, and they still behave very moderately. This seems to be very beneficial to risky assets.
Second, fast money is beginning to enter the market-despite price changes, the speed of fast money entering the market does not seem to be faster or slower. Those who try to deploy a fast investment plan will still operate as planned-they have actually begun to do so . Although Grayscale Bitcoin Trust Fund and Coinbase stock may be the leading indicators, because downward px fluctuations indicate that Kuaiqian funds have begun to slow down.
Thirdly, Elon Musk/Institution-for now, society and ESG (just a narrative) are unlikely to disappear. Just like religion, it is almost impossible to rely on science to change people’s thinking about religion, so from this perspective, the celebrity effect seems to be more political than substantive.
Therefore, in the current market environment, among the above three factors, you already have 1.5 very bullish risk asset factors (weighted by probability).
But even so, you still need to wait and see. The question now is when and how we need to deploy investment funds.
Next, let’s take a look at the situation in 2008…
During 2008, even though every securities transaction was terrible, wealthy and savvy buyers continued to buy stocks. I personally sold Carl Icahn MGM bonds for 80, 70, 60, 50, 40, 30 and 20 cents, and-these transactions were all completed in the same week. This type of investment requires firm belief, but it usually seems to be basically correct.
The same thing will happen in the cryptocurrency market. If you hold enough cash now, you don’t have to worry about the price level, you just need to continue to deploy to the assets you trust. In fact, as long as you make a second purchase, in essence, it is actually a “negation” of the last purchase, but if your overall valuation direction is correct, then it’s okay. You only need to pay for each price. Buy a little without thinking too much about the time of purchase.
Unfortunately, some factors prevent the application of the above investment strategies in the field of digital assets, including:
Few people have had distressed experiences in the cryptocurrency field in the past;
Few people can manage cash/leverage well, so even if they really want to do this, most people simply can’t do it;
Few people have enough faith to do this.
In addition, there are three behaviors that always cause trouble for investors (especially hedge funds):
Leverage (no doubt);
Non-current positions-many traders suddenly become early stage venture capitalists, because there are many “hot deals” this year… But now, many crypto projects have become less popular;
Shorting (seems useful now when the market is down, but it doesn’t always work).
Even if you have effectively avoided the above three problems, you may still lose a lot of money, but this can ensure that you can afford it. But as long as they have good investment ideas, most investors will use two to three times the leverage to sell their margin positions-when the dust settles, you will know what they bought, because you can see those Investment targets will rise at the fastest rate.
Those assets that cannot be valued (i.e. Bitcoin and most one-level agreements) are the most difficult to determine the price of assets. Those assets that have their own assets or have real cash flow, theoretically speaking, from a limited value point of view, will not be affected, such as decentralized finance, centralized finance, and some NFT platforms and sports /gaming platform.
In March 2020, the share prices of PTON Peloton Interactive and Zoom both fell sharply in the three weeks before the outbreak of the new crown virus, but the market soon realized that when people had to stay at home, such companies would take it Benefit. The results are self-evident. In the next nine months, the stocks of these two companies have risen sharply.
So, when there are government/regulatory agencies taking action against miners/exchanges, which areas can bring us better benefits? These areas mainly include:
Decentralized finance, especially decentralized exchanges
Miners in other jurisdictions
Censorship resistant storage/archiving (e.g. Arweave)
Of course there is Bitcoin
Just like in 2008, in the past two weeks, you may have seen some “crypto celebrities” have suffered a lot of losses, such as Michael Burry, John Paulsen, Kyle Bass, etc. This situation is not surprising, because most of them are people who have made a lot of money in a transaction in the past. If you look at their subsequent investment performance, they are actually not very good. .
So for ordinary crypto investors, what needs to be done now?
In fact, you need to continue to maintain courage, choose a position that suits you, trust your own analysis, and then control your investment sentiment. Digital assets will not disappear. Although there are sometimes plummets, you have to understand and adapt to the existence of this situation. After all, it is like cancer cannot be cured. However, as long as the market sentiment rises again, then your chance to gain wealth will come!
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.