Making the Case for Weathering the Storm as Crypto Markets Drop Billions

Well folks, it’s happening again. Cryptocurrency is “dying”; expect lots of snide remarks and “I-told-you-sos” from those family members and coworkers that told you time and time again that this was a bubble and why would you ever put your money into something so ridiculous, you big dummy.

Within the last three days, Bitcoin has lost nearly 10%. Ethereum is down a whopping 24%; plenty of altcoins are in free fall. New investors are jumping ship, and onlookers are shaking their heads. 

Yet, seasoned crypto community members are getting out their wallets. People who treat investing as an “affair of the heart” tend to want to buy assets when they are increasing in value, and sell them when they are losing their value: they buy high, and sell low. Of course, is a masterful strategy for wasting money.

Crypto users who have “been around the block”, however, know how important it is to invest without emotion: buy low, and sell high. When your portfolio takes a dip; don’t panic–hold tight. Having a thick skin and a “this too shall pass” attitude can save you from suffering major losses. This is important in any kind of investing, but critical in the world of cryptocurrency, where gains and drops in value happen with hyperbolic gusto and lightning speed.

After all, you did your research and chose coins that you “believe in”, right? (Read: side eye.) If this is indeed your “first rodeo”, and you invested in a coin because you heard it would bring you high returns without doing any actual research into its software or business model, use this as a learning opportunity.

Think of the big picture, and only invest in coins that you are willing to hold onto for several months, or even years. Choose coins that you believe will continue to grow and succeed in the long-term. Investors who carefully choose their coins for long-term growth don’t even break a sweat at the sharpest of market plunges.

When deciding to make an investment, it’s helpful to think of Warren Buffet’s philosophy: buy assets like you buy groceries. Let’s say you want to buy some apples–you wouldn’t buy them when they go up in price. If you were trying to get a better deal, you would wait until they went on sale. A smart investor thinks of a dip in the market like a sale–time to “stock up” (no pun intended).

Market Manipulation 101: What is a “Bear Trap”?

Ronnie Moas, founder of Standpoint Research, echoes the “buy low, sell high” sentiments. Moas also believes that there is a method to the madness, and that these cliff-diving drops are no accident.

Moas believes that what we are currently experiencing is a “bear trap”. As much as we would like to believe that coins like Bitcoin are completely decentralized, there are entities that control large portions of the market. These are commonly referred to as “whales”. To make the value of a coin drop significantly, all a whale needs to do is “dump” their coins onto an exchange.

Once the value starts to drop, smaller investors start to panic and start selling their coins en masse, causing further drops. What happens then? The whale scoops up even more coins, now at a nice low price. “They are trying to shake people out of the trade – so that they can get their hands on more bitcoin at lower prices,” said Moas.

Other Factors, China’s Recent Ban on ICOs Could be Contributing

Moas also argues that even if this isn’t actually a bear trap, buyers need to “keep this 11% correction in perspective”. Just one month ago, a single Bitcoin was worth ~US$1800. Even after the recent fall, it’s still trading over US$4000.

Many crypto traders speculate that the recent fall could be due in part to the news that China has recently decided to ban ICOs amidst a broader plan to tighten regulations on cryptocurrency. While nothing is certain at this point, it seems likely that China will at least partially lift the ban in the future once government officials understand more about the technology.

In the meantime, we can expect to see more of the same–massive drops, and giant gains. Steady the course, and keep your eyes on the horizon.