Investing is all about fighting against yourself.
By Javier Calvo, Data Scientist at Tutellus
Having a look at the now mostly deserted chats on crypto you will see the same thought expressed over and over again: in a bearish market lasting for nearly six months, with a weekly bloodbath hitting the news, how can we even speak about buying into a new project?
Yet this is something we keep hearing as soon as we start researching how to invest: buy when the market is down, sell when the market is up. Looking at the markets right now should trigger a buy-mode in your brain, searching for a good project to get your fiat into. Fiat that, in theory, you should have gotten by selling when the market was high. Sure it can sink even lower, but it is still a good time to consider going in.
Why it is so difficult?
Investing is not about reading charts or picking good projects as much as it is about fighting against yourself. A fight against fear. A fight against the need of external validation. Reasoning and calculations may say one thing, but what are The Others doing? How can it be a good moment to buy when everyone else is selling like crazy?
And the same goes for bull markets. Did you miss the perfect moment to sell at the end of 2017? Did you keep your assets, while seeing them bleeding in your portfolio, week after week? You sell when the market is up. You sell when even your hairdresser asks you about Ripple. You sell when everyone calls you crazy for selling.
The way to survive in this market is not to improve your TA skills or to follow more news channels, it is to change your mindset. It is to keep track of your own thoughts, and force yourself to follow the rules you already know control this market.
Here are some tips that I find useful; I hope they may be of help to you too:
- Identify your enemy. This one is easy: it is called fear. It lives inside you, it is a part of you. It is fear that makes you buy when everyone is buying and sell when everyone is selling.
- Identify the culprit of your mistakes. It is not the fake news, the scammers, the regulations, or the hacks. You are the one making the decisions.
- Move on. Mistakes made in the past are something to be understood and analyzed, so you don’t make them again. But do not dwell in your thoughts about what has already happened.
- Find a set of rules, write it down, and follow them to the letter. What will happen when the market goes up again? When will you sell? If you are into TA you have countless indicators to base your decisions. Pick a set of rules that makes sense now and stick to them. Do not make decisions on the go.
- Do your own research. I am not talking about the fundamentals of any project, even if this is also needed. I am talking about how psychological biases distort your view of the market, and push you towards bad decisions. Read about the bandwagon effect, herd behavior, confirmation bias, and many other subtle ways your own mind fools you.
Finally, it may be helpful to change your ultimate goals. Ask yourself: what is the purpose of Bitcoin? I think there are two possible answers to this question:
A- It is a potential good investment. You buy it now because later it will have a higher price. Then you sell. Perhaps buy something shiny.
B- It is a ground-breaking project that uses cutting-edge technology to, if successful, disrupt the lives of every one of us, and create a better world.
If the answer is A, then we are talking about a pyramid scheme. It has no future. It only works while the money added by people dumber than you buying into it surpases the money people smarter than you get by getting out of the bubble before it bursts.
If the answer is B, however, it is here to stay. And it is a good thing to get into it.
Investing in projects which vision you share really helps you ease your mind. Remember that at the beginning ICOs were mostly crowdfundings. Tokens are not supposed to be securities, you are not buying something that gives you rights about anything. You are helping people bring to life projects you like, with final products that will make a significant difference in your life and the lives of others.
Your past decisions are more palatable if something beyond greed is behind them. Research the projects, many of them are trying to change the world.
But ultimately this does not matter. Both approaches to the market result in the same decision when everything is red.
This is the time to buy.