Pulling newfags back from the ledge

The current drop in the crypto market has many on this board worried and considering dropping their bags. While it is certainly understandable and no one likes to see the value of their investments drop, there are several reasons why your plan to sell low is a bad one. Namely, you only recently bought in, are only trying to make a quick buck, and/or do not understand the implications of the technology and economics.

If you just recently bought in, you are certainly feeling the drop the most because you are actually down on your initial investment. For example, if you bought bitcoin as recently as November, the fiat value of the investment would be roughly at a 0% change. If you bought last January you would still be up roughly 700%, and on and on. Even still, this dip is not unique in this market. There are many comparable ones by percentage in 2017 alone. Most of them were fueled by bad news like a hack, regulations/bans, general uncertainty, or some combination like this one is. Fortunately, they are generally misunderstood by those without an understanding of the technology and economics.

While hacks like Mt Gox are terrible for the ones who have their coins stolen, they only serve to prove the value of decentralization and lead to a more secure environment as people retroactively fix the flaws in their system and proactively seek out unknown ones.

And while regulations/bans appear to be the death knell of cryptocurrency, it is actually the complete opposite—it would ensure the eternal backwardness of any nations that implement the policies. This is because it is a classic prisoner’s dilemma. Consider the industrial revolution. If a group of nations tried to ban or heavily regulate the steam engine, the first one that broke ranks would profit massively from the growth in industry at the expense of the others. Since they would consider it unlikely that all of them would follow the agreement, each would choose to break it so they do not get taken advantage of.

As it pertains to cryptocurrencies, even if every single nation completely banned the technology outright, the first one that allowed its development and use would experience massive growth at the expense of the rest of the world combined because it is impossible for traditional finance to compete with it—there is too much overhead in banking that is completely obsolete with cryptocurrency.

But perhaps you did not recently buy in but are only in the market to make a quick buck. Stop doing this. Cryptocurrency is volatile enough without adding swing trading and day trading to the mix. For comparison, the Dow is down ~6% at the time of writing, while bitcoin is down roughly 70% from its all time high. In each respective market, both are considered exceptionally bad, but to realize the same drop by percentage it would be as if trading stocks on ~10x leverage. Swing/day trading on leverage is either incredibly stupid or genius depending on the outcome, but the odds are that neither you or I are a genius. Therefore, the best thing to do is research a few projects you believe to be undervalued relative to their potential, buy, delete blockfolio, and hold until you hear about the price on CNN

But since you are going to try to do it anyway, here’s how you should actually do it: abandon day trading. Day to day price movements in any market are usually meaningless. Instead, follow a dozen or so projects that you believe have long term staying power/legitimate use case and only trade between them as they fluctuate in price. For example:
> coin A is up 20% because of good announcement
> coin B is down 20% because of sell off
>sell coin A
>buy coin B
>rinse and repeat
Since it is imnpossible to time the market, this is entirely contingent on you believing in both projects so you can weather a further dip in fiat value. However, another thing to consider is pricing in terms of other coins rather than fiat. This allows you to make a profit when everything is crashing relative to dollars. Consider the following:
>you hold 1 coin A
>price of coin A = price of coin B in fiat
>both fall in fiat value but coin B falls twice as much
If you were to sell coin A for coin B in this scenario you would make a profit in terms of coin B because you doubled the amount you have of it. When the price recovers in fiat you will then multiply the recovery relative to how many more of the other coin you picked up, in this case by a factor of two.

However, make sure to err on the side of missing a potential moon when you pick your projects to follow rather than risk getting justed if you if you have any doubts about its validity or don’t really understand it. You should be able to strip down concept to the core and be able to explain it to a skeptical boomer relative in a way that could convince them to buy in or at least admit its potential.

Now, even if you decide to heed the advice to simply buy and hold, the previous statement is still valid and must be expanded further since the last reason you are considering selling at a loss is that you do not understand the implications of the technology and a couple specific economic concepts. I already mentioned the prisoner’s dilemma in relation to regulation, but there is more to consider at the cross section of technology an economics. If you take nothing else away from this post, understand that Cryptocurrencies are the future of global finance. It is more efficient because it cuts out middlemen in every industry and has all the benefits of gold with the ease of fiat. Further still it is entirely unregulatable/bannable. If the previous example has not convinced you, consider that the government cannot even keep drugs out of prisons where they have 100% control over entry and exit. The idea of them trying to ban digital cocoa beans and succeeding is ridiculous. And while regulation is more likely because it is easier to enforce, it is impossible for legislation keep up with the technology. For example, should anonymous exchanges be banned, decentralized exchanges would explode in popularity for those wishing to stay anonymous.

The only thing that can take down a cryptocurrency is the technology failing. But notice that I said ‘a cryptocurrency’, not all. E.g. if bitcoin is physically impossible to scale for any number of reasons or the underlying blockchain is found to be fatally flawed, bitcoin will fail as a consequence but not all cryptocurrencies. Certainly in this instance its death would be guaranteed, but solving the problem will ensure incredible riches to the developer who releases a coin with his solution. This means that the brightest programmers will constantly be on the lookout for ways in which they could improve the underlying technology and since all reputable projects have open source code, the entire market will benefit as a consequence. In essence, the only reason to sell during a dip is if the underlying technology is found to be unfixably flawed or is a scam a la bitconnect.