Crypto market crash - a curse or a blessing?

This is for anyone who is either already invested in the crypto market, is thinking of getting into the crypto market or has never been or think they will never be invested in the crypto market.

One of my nephews living as an expat in Dubai and whose responsibility to his employer is within the United Arab Emirates, has been stable there for 10 years and asked me last week, at a time I was particularly busy with work commitments:

Hi Amo,
Wondered if you can advise me - is it a good time to buy Bitcoin? Can we talk now?

My response.

I got to go to bed now - I have to get up in 4 hours. Very tired. But my opinion may not match your objectives. If it is long term hold (more than five years) then I would definitely say it is a good thing to do, but I always say to anyone don’t invest in crypto an amount you are not prepared to lose. And in crypto I say it should not be more than 5% of your overall wealth either. Within that crypto about 50% of that should be in Bitcoins. We are a bit complicated about ours and hold 90% of our coins in about 4 cryptos, but our next favourite is Ethereum, and we now hold about 30% in that too. It is as far down as BTC is, and for the few months since they both started to crash, they have crashed by the same amount. Why do I track how many ETH you can get for one BTC? Because I think these are the safest two and if they make up about 80% of our crypto, these are the most likely to go up fast, and the rest may either go up slightly later or never recover and go to nothing. I use the fear and greed index. Please read the article I have discussed above, and if you still want to talk, then call tomorrow.

Anyone already holding crypto will be in one of two camps. Those who have been in crypto since before the beginning of 2021 and are likely to still be above water unless they have chosen a very risky path of using leverage in their crypto plans, and those who have entered the crypto market since about November 2021 and will most likely be below the water line.

I maintain that it matters little which camp you are in - it just matters that you have participated. What I mean by that is that if you were in earlier than Jan2021, you may be saying to yourself “they told me so - that there would be a 70% to 95% market retraction early 2022 and I should have listened to them”, and your POTENTIAL gains have been “wiped out”. C’mon, seriously? You are still above the water line, and the market could crash an awful lot more. You knew you were investing with capital you could afford to lose. If you didn’t - yeah they told you so and you were a mug. Unless of course you had also said "I am in for the long term, and it is the balancing of HODLing with trading that will determine my long term future success. Hence my reference to the Fear and Greed index. With hindsight it looks like a good indicator AFTER THE FACT. Of course, it could fall to zero. But the chances of that happening are very low. And the chances of that returning slowly (or very quickly) make this day, this week, this month a very good reward/risk ratio for buying into crypto, whether it was part of your past plans or not.

Now, what happens if you recently entered crypto. OMG - doom and gloom. You bought at the peak. So reel your neck back in and say to yourself “I only got in with as much capital as I was prepared to lose” or “I have read a great article on Babypips about a guy who has been doing dollar cost average investment for years, and you can’t fault his results”.

In my mind, despite our portfolio being about 60% down on its peak, it is by good luck, not good management that we are still above the water line. But that is the long term decision my wife and I took when we decided to enter early 2020. We didn’t sell the farm, we didn’t blow our brains out. We invested what we could afford to lose, and didn’t even get that far because just by luck we entered about 20% above the market bottom of 2020, and were rewarded by an immediate 5X performance, with an expected plan that MAY result in 25% per year growth. Now we still have that “uninvested” part of wealth that just sat where it was waiting for just such a time.

Personally, this is an opportunity that we should not pass up, so we have decided to dollar cost average up to the initial limit, and are satisfied with the market outcome so far.

Glass half full. Hip hip hurray.

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I think this is very sensible and recommend about the same to family and friends. I also add the caveat that although bitcoin has been around since 2008/2009, we’re still a bit in the wild wild west. Anything can happen. The market is absolutely volatile. Your invest could disappear tomorrow. That gets them to pay attention!

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This is probably the most important one. It’s tangible and actionable. No need to go all in or borrow many you don’t have.

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