A look at some of the social media sites will show that many people are worried that they have lost money in cryptocurrencies. This is usually the case when uninformed investors rush into “the hottest investment” at a time when prices are already too high and ready for a retracement. The fact is that these situations will always arise as long as there are retail investors who do not have a sound understanding of market cycles.
To many of these investors, only one advice can suffice. If you have not sold your cryptos, you have not lost anything. Markets operate in cycles. First, there are the early-bird investors. These are smart money investors who recognize opportunity before anyone else, and put in money into an investment market when prices are dirt cheap. They will ride on the waves of the bullish run. Most other unsophisticated investors only come in when the move is fully underway, and will usually enter when prices are about to peak. The smart money investors end up taking profit by selling off their positions to the flood of new market entrants, with the results that prices start to retreat.
“Smart money” investors -> Buy low, sell high -> Make a profit.
“Dumb money” investors -> (a) Buy high, sell low -> Lose Money
-> (b) Buy high, HODL (hold on for dear life) -> ???
If you are a retail money investor and you are in the HODL category, wondering whether to sell and cut your losses, we have some news for you. The crypto markets will rise again. So you ideally should hold on for dear life and wait for prices to recover and possibly exceed the levels at which you bought your crypto coins. For your benefit, we provide three historical examples to show how cryptos rose from the ashes, and why they will rise again if they follow time-tested and proven market cycle principles.
- Bitcoin (post-2014)
Between 2011 and 2013, Bitcoin saw some real interest as it peeled away from the days of being priced in pennies to the start commanding solid price movements. From a price of $1.85 per BTC in November 2011, Bitcoin soared to a price of $1110 in November 2013. At that time, Mt.Gox was the exchange on which 95% of Bitcoin transactions were handled. In 2014, the exchange was hacked and was forced to shutter its services. The ripple effect was massive as Bitcoin prices crashed to $163 per BTC, representing a nearly 90% drop in value.
Many sold off their remaining coins and left. A few held on to dear life. Some smart investors sensed opportunity and bought into the asset. In a space of 3 years, Bitcoin prices went all the way up to $19,800, even though there were price hiccups along the way.
So the question is: did Bitcoin rise from the ashes in 2014 when it was down in the dumps? The answer is a resounding yes. Today, Bitcoin is at $7,500 per BTC (as at the time of writing). This means that even in the face of a depressed market, Bitcoin prices have still not fallen to its 5 year lows. So what is to say that Bitcoin prices will not recover?
Everyone has been crying about how poorly cryptos have done in 2018. But do you know that if you have invested money in Ether on April 6, 2018, you would have doubled your money in exactly one month? Even Bitcoin has not been able to manage such a feat in 2018.
You would be surprised to know that in the midst of the crypto bear market, such opportunities actually exist among the hundreds of altcoins being traded.
- Betting Against Bitcoin
Majority of cryptocurrency exchanges do not accept fiat currency deposits, and do not trade pairings of cryptos against fiat currencies. They feature the listing of deposit cryptos such as Bitcoin and Ethereum against other altcoins. So with Bitcoin prices heading downwards in the medium term, it is possible to pick an altcoin with some positive news, and trade it in a long position against a Bitcoin short. We see an example of this with the pairing of TRON against Bitcoin (TRX/BTC). TRON has had a string of positive news since March 2018, which has served to triple its price against BTC as shown below:
TRX/BTC Price Chart: March – May 2018 Showing 300% Gain
With each exchange featuring scores of these asset pairings, you can use technical indicators to pick out occasions when prices of altcoins are likely to move against the deposit cryptos of BTC or ETH. You may just strike pay dirt while everyone else is lamenting.
This example goes to show that even the micro-priced altcoins can enable you pull off some staggering gains if you know how to play them right.
These three examples have clearly shown that despite the price depression being seen in the crypto market, there is every hint that there will be price recoveries that you can profit from. It does not matter whether these recoveries are short term (a few weeks) or long term (months). What is important is that cryptos will definitely rise again from the ashes.