Please Stop Trusting Your Gut on Cryptocurrencies

I know it’s tempting…

Especially now — as virtually every cryptocurrency is crashing and the relatively low prices are exceedingly attractive… but hear me out.

I’m not telling you not to trade.

On the contrary, I encourage you to! The volatility of cryptocurrencies is exactly what makes this such a profitable endeavor.

However, cryptocurrencies are just like any other market and you must realize that before you even think about getting into it.

The only major difference between cryptocurrencies and stocks, FOREX, bonds, etc. is the wide-spread hype and hysteria. The excessive news and accessibility of the various cryptocurrencies has opened a door to millions of people who would — otherwise — never have got into trading.

As such, there are millions of new traders that really have no understanding of how markets work, how to analyze market shifts, or recognize the difference between bull & bear markets.

Many of these “traders” have never even heard of a MACD or a Bollinger Band. The idea of on-balance volume or accumulation/distribution lines is completely foreign to them.

Yet they buy and sell anyways.

They then proceed to make some quick money and immediately assume they’re the next Wolf of Wall Street. However, just like many “wolves” before them, what they fail to realize is that they’re simply riding the wave of a very bullish market.

When everything inevitably comes crashing down, that crushing reality is often responded to with “WTF?”s and other various incredulous expletives and these “traders” — in denial — are convinced there is just a problem with the market.

This country passed such-and-such legislation.

or

A vulnerability was discovered in that new coin.

No, my friends.

The problem is that you began trading willy-nilly without any real understanding of how markets work. If any of those bolded terms I mentioned a few paragraphs up was new to you — I hate to break it to you, but you are one of these people and I encourage you to spend some time studying and obsessively learning how to read and understand two absolutely essential concepts:

1. Market Sentiment
2. Technical Indicators

Unfortunately for the willy-nilly traders reading this article, I am not here to teach you how to trade. I am here to rant about the reckless investing that is serving as just another avenue for the knowledgeable, experienced, and often wealthy traders to siphon even more money off of the low-to-middle economic classes that fall for these traps.

If you haven’t already wrongfully assumed I’m just here to be condescending and tell you that you’re stupid, I’m going to take this time to enumerate some of my thoughts on cryptocurrency trading.

Some of these are relevant to the above and some are simply the thoughts I share with friends and family when they ask for my technical advice on which cryptocurrency to invest in.

I sincerely hope you will extract some value from these ideas rather than flame me for being a contrarian.

Technical Trading & Volatility

Cryptocurrency markets — as many of you are actively witnessing — are exceedingly volatile. For the gut-driven trader or investor, this can be terrifying.

It shouldn’t be!

Technical trading was borne out of a desire to profit off of volatility, irrespective of market trends. Being able to accurately asses when to buy & sell can give you a serious edge over every foolish, gut-driven trader.

Take advantage of this disparity and learn yourself some technical trading before you drop even a penny into any cryptocurrency.

This is absolutely the way to go if you have a low-tolerance for risk.

Aside from re-enforcing the point I made above about knowing your shit before you dive into cryptocurrencies, you may be asking what the major takeaway is from this point:

Well, with solid technical trading, short-term investments in cryptocurrency markets can easily be the most profitable. With the incredible amount of volatility these markets regularly experience, long-term is just far too risky for my taste.

Stop banking on Bitcoin doubling in value and make your money off the 5–10% fluctuations that are happenin_g_ so much more frequently!

Of course, I also emphatically encourage you to take a step back and really assess what your level of risk-tolerance is before determining your ideal trading frequency.

Bitcoin & The Pokemon Paradigm

To my friends and family, I frequently compare the explosion of cryptocurrencies to Pokemon.

I grew up in the #1-151 era and I absolutely refuse to accept or acknowledge the 651 new Pokemon that have been added since I was a child. Call me stubborn; call me a purist; call me whatever you like; but cryptocurrencies are just the same to me.

Whether you’re debating investing in ETH, BCH, XRP, or any of the other 1,504 cryptocurrencies in existence today, you need to understand one thing:

Bitcoin drives every single one of these markets.

It is the proverbial 800-pound gorilla and it will remain as such for the foreseeable future.

It is Pokemon Red & Blue.

And while each and every other cryptocurrency may seem attractive from time to time as the markets shift, their values are all relative to the success of Bitcoin. The fluctuations you see in each market are completely negligible in comparison to the effect Bitcoin has on market sentiment towards cryptocurrencies.

If you were paying attention above, market sentiment is one of the two essential principles I encouraged you to understand before investing in cryptocurrencies.

Understanding Bitcoin’s significance here is paramount.

Ripple, Shmipple

I absolutely detest the very idea of Ripple and you should too! It is completely contrary to the entire motivation behind cryptocurrencies.

For starters, it is “pre-mined”, which entirely eliminates the possibility of getting into the market without up-front investment.

Further and more importantly, it is being heavily invested in and adopted by banks. In my brutally honest opinion, this is not what cryptocurrencies are about. PLEASE, DO NOT SUPPORT THIS!

It is a treacherous path to traverse.

It has the very real potential to obliterate the wonderful, distributed, and human-centric nature of cryptocurrencies by dropping economic control right back into the hands of the same conglomerate entities that have — in the last 100 years — completely dominated the entire global economy and now have absolute control and influence over fiscal markets.

*cough* Federal Reserve…

Market Makers & The Ignorant Flock

This may be the most offensive point I make in this entire piece and I apologize in advance, but it is a harsh reality that you all must understand before you think for a second that you have any clue how all of this works.

Disclaimer: I don’t… I only pretend to.

Nevertheless, I do know one thing:

Every economic & fiscal market in existence today is susceptible to the whims of market makers.

These are the folks buying & selling in these markets that actually have money, unlike you.

Let’s be honest, you wouldn’t be reading this if you did.

I’m talking about the folks that can drop a million bucks into a cryptocurrency without flinching, tricking the entire ignorant flock into thinking they’re entering a bullish trend.

I’m talking about the folks that can afford the risk of dumping all of their investments 10% or 20% below market value, causing massive hysteria, triggering a bearish trend, and sitting back, waiting to fulfill everyone’s frantic sale offers at even lower prices than what they originally sold their’s for.

Knowing how to trade with solid technical indicators can provide you with a very valuable defense against these faux-trends.

Be very wary and skeptical of massive shifts in the market. They do not last quite as long as real market shifts, but if you can get in and out fast enough and at the right time, you can easily piggy-back on the shoulders of these millionaire market makers.

Four Things to Remember (and/or TL;DR)

1. Do not be a sheep; be a wolf in sheep’s clothing.
2. Do not fear bulls or bears; more often than not, they’re an illusion.
3. You are human; top of the food chain.
4. You have tools, fire, and weapons; use them!

Conclusion

Cryptocurrencies are arguably the most economically significant innovation of the modern era. However, we are quite possibly at the most pivotal time right now, with billionaires, banks, and even nations finally buying into them.

Do not be fooled into recklessly bolstering the already wealthy investors that are taking over these markets.

Do your research and trade smartly.

This is not a new paradigm. Use the wealth of knowledge already acquired from (literally) centuries worth of market trading and stop letting the hype and/or hysteria steer your investments.

Disclaimer: I am not a full-time trader, just a passionate, but skeptical futurist with an exceedingly frequent knack for predicting trends and outcomes. I’ve also been closely following, studying, and researching market trading & cryptocurrencies for over five years in addition to developing market analyzing auto-traders in my spare time.

My name is Jonny Asmar and I want to sincerely thank you for taking the time to read my post!

I started writing code in Notepad over 15 years ago and never stopped. While I mostly work in React/Redux & Node, I have a passion for technology that goes far beyond UI development — this has been my effort to share that passion with you.

You can learn more about me at JonnyAsmar.com, see some of my code on GitHub, or reach out to me at [email protected].