Up, Down and Sideways - The Daily Gwei #456
Markets are a cruel mistress.
Obviously the crypto markets have been less-than-ideal over the last few months with many assets 90%+ off their all time highs and ETH currently sitting at around 47% off its all time high. Of course, there are plenty of people out there claiming to know what will happen next, but I think at this point we’re all well aware of the fact that no one really knows where the market is going.
One thing that I always find fascinating about people giving market predictions is that inevitably some of them will be “right” given the sample size. For example, if you have 1,000 people giving a prediction then just buy virtue of a large sample set at least a small percentage of these people will have guessed it correctly. Naturally some of these people then go on to use what little fame they gather from these “correct” predictions to sell trading courses or some other such nonsense - it’s something that I’ve seen play out time and time again and certain people do fall for it.
Of course, no one really knows where the price is going to go and everyone has their own thesis on why something will rise or fall. In my experience, the best course of action has just been to have your own view on things and be a long-term investor rather than trying to play the markets. Though, again, given how many people do try to play the markets through day-trading there are always at least some small percentage of winners that then give false hope to everyone else that they too can “make it”. This is just the game though and is consistent with many other forms of gambling - there are very few big winners with lots of losers - always has been and always will be.
I do think that this false hope is necessary for markets to function but I also don’t think that markets are a zero-sum game. Everyone can “win” over the long-term if they just invest in a reputable index fund (such as the S&P500) and sit on it for a couple of decades - but the big winners take much more risk and are few and far between. Crypto bull markets tend to give people a very false sense of security that they are going to make it big because everything seemingly goes up together during the peak manias. I mean, go look at all the most hyped-up things from the recent mania periods (especially in NFT land) - they’re all doing very poorly now.
All in all, this post isn’t meant to discourage you from taking more risk or going after those big wins - it’s more about being aware of the chances of success and navigating through them. I still believe that crypto will give outsized returns to people if they take a risk-balanced approach but this requires lots of discipline, the ability to actually take profits, and the foresight to know when its time to cut the losses.
Have a great day everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.