The Disciplined Investor

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Crypto has been crashing all around. Oddly enough, the safest altcoin to be in was the one that is being subpoenaed by US Trading Commission, Tether (USDT).

For the past several days, a general pattern emerged where coins would drop 20% then recover slightly up 5%, then drop another 20-ish% and so on.

Anyone can invest when the markets are surging, but only the disciplined investor can make it through the downturns. A few thoughts from the past week.

With the huge drops come huge discounts. Coins are essentially at 60 to 80% off from their all-time highs making it a good time to buy in, especially if you think that the prices will eventually go back up. But the question is when to buy in? If I buy now, maybe the prices will keep going down. People ideally want to buy at the absolute bottom, But since no one knows, the best way is to dollar cost average. If you have $500 that you want to invest, split it up into 2 or 3 buys spread over the course of several days or weeks.

Dollar cost averaging takes discipline. Inevitably, there are some spikes. When you see the prices spike, there is an urge to have to get all your money in because of FOMO. Don’t do it. There is usually a slight pull back after a large spike, so you end up buying high. This is basically just chasing trends and is the reason why day trading fails for a majority of people. Stick to your game plan. If you plan to put in $250 today and $250 next week, just wait until next week. It does feel like every time, I try to perfectly time a buy, the price immediately drops when I buy, to the point where I feel like I can actually make the market crash by just buying in.

Take the news with a grain of salt. It seems that every other article has a theory as to why the crypto markets are crashing. Facebook ad bans, India expressing concerns, stock market correction, the SEC hearing (which actually went well for crypto), Tether scams, North Korea, and of course, there’s always China. It’s probably a bit of all of the above, in addition to a possible regular market correction. Given the huge run up throughout 2017, this could all just be much ado about nothing. But it does seem like the media is just jumping on every little reason to cast doubt on crypto.

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Have an exit strategy. I still believe that buy and hold is the best way to go. But that doesn’t mean you never sell. When a coin is dropping, ask yourself, has anything changed about the fundamentals of the coin? Do I think the coin will rebound? Is there a better place to put this money? Or sometimes it’s ok to just think “No matter how great this coin is, I’m not going to lose more than 50%”. On the other side of the coin (pun intended), don’t be afraid to take profits. If you’ve doubled your initial investment, take sell a portion of your holdings that you can even use to buy back in when the market decides to dip.

Of course, this is all easier said than done. Will I buy when prices spike? Yes. Will I panic sell when prices have bottomed out? Undoubtedly. Will I hold on to coins too long? Yes Yes and Yes. But I think it all comes down to being a disciplined investor and taking the emotion out of the picture.

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