The cryptocurrency market just took a huge hit over the last few weeks. Massive selloffs resulting in a complete capitulation of what was built up over the last 6 months in the crypto market.
Did you get rekt? Maybe you lost some or even all of your gains. Or maybe you bought into the market when Bitcoin was over 60k and just got completely rekt.
Here’s a metaphor that makes sense to me.
Think about an athlete getting injured…some of you just turned your ankle and you’re out 5-10 days…and then some people went full Sean Livingston (don’t click that link if you’re squeamish) and completely tore everything you possibly can that keeps your knee in tact.
Looking at it now, you’re thinking your career could be over. Good news though, Livingston somehow went on to play another 11 seasons in the NBA.
So if you just got rekt, you can still turn this thing around.
But anyways, anyone holding cryptocurrency has taken a hit unless you shifted all of your crypto into stable coins the last few months.
For perspective, here’s the 1 year Bitcoin chart
per CoinMarketCap
The entire crypo market follows Bitcoin so it looks pretty much the same.
The reason I want to talk about this is because so many “retail” investors are now getting pushed out of investing or are selling at a loss.
In other words, you weren’t selling when Bitcoin was sitting at 69k but now that it’s hovering around 35k you’re considering selling. Doesn’t make much sense does it?
But, the market sentiment has changed. And the honest truth is that Bitcoin could go even lower. Things could continue to get worse. We have no idea what will happen next.
Here’s what we need to take from this. If this recent drop hit you hard then look at it as a learning experience.
Now granted, I’d really like to stop learning things the hard way myself. But we can either sit and sulk at our losses, or we can focus on the current situation at hand and re calibrate our investing strategy with poise.
Real quick, I need to make clear that nothing said in this article is financial advice. This is simply my opinion on the matter, and really is what I’m telling myself after getting a bit overleveraged in crypto myself.
A Brief Background of My Story (I Just Got Rekt)
Not that you care, but I want to give some perspective here. I invest a form of savings. Basically I use a strategy of holding 3-6 months worth of savings as investments.
I’m a regular middle class paycheck to paychecker who didn’t recently get rich in crypto or anything like that. I started investing this year in crypto and went pretty heavy into the May-July dip before things took off.
Here’s the metaphor version…I had a clean double..for some reason thought I could make it to 3rd and the cut off man basically just softly threw it to 3rd base and it wasn’t even close…I turned around and tried to go back to 2nd…then just got caught in a run around until they tagged me out.
Anyways, the longer version is that it worked out pretty well initially and obviously looking at the chart I had things take off…and I sold very little in the 60s…and some in the 50s…but not nearly enough.
In fact, I didn’t even follow my own strategy which is simply that out of “6 months of savings”, no more than 2 months of this should be in crypto aka 1/3 of my investments.
The other 1/3 should be in stable coins or “safer stocks” and 1/3 middle ground investments. Well anyways, as my crypto took off this got a bit disproportionate, and I actually sold of most of my safe assets and very little of my crypto.
I actually did pretty well on selling my stock investments, but for some reason developed a bit of an emotional attachment to my crypto investments.
Bottom line. I got greedy. I didn’t want to just make some profits…I wanted to make a ton of money fast.
And here we are now, all of the crypto that I had massive gains on…well, that’s all over with. I’m mostly back to square one.
Ok, so now you get an idea where I’m standing. I mention this simply because I know a lot of the people who just took massive losses were retail investors like myself.
Retail Investors Just Got Hammered
And no I don’t mean in the good way…where you’re at your favorite concert having the time of your life…I’m talking about getting rekt in crypto.
Yeah. It sucks. But again, this is a learning experience.
However bad your situation is, it could always be worse. And, you now know what not to do.
In Hindsight
Let’s look at this real quick. It’s so stupidly obvious that something like this was going to happen (to some extent). The market was simply overheated when Bitcoin went back to an all time high (ATH).
Why? Because of the overall economy. Duh stupid. (That’s me telling myself in November to get out)
Anyways, at this point it looked like the Fed could be raising rates in 2022, stimulus checks are probably non existant and even the child monthly tax credit wasn’t going to be extended.
The market isn’t going to wait for these things to take place. The market’s going to act ahead of this.
And so many times I had this gloomy feeling about the market but just held on to this ridiculous hopium of Bitcoin going to 80-100k on this run (like many others).
But…once we start getting into these higher market caps it just didn’t make sense to expect the same blow off top ending as we saw over the previous 2 Bitcoin bull runs (2013, 2017).
Bitcoin is a hedge on inflation though!!!
Maybe so in the long run. But in the short term, now that we’re seeing institutional adoption and crypto going mainstream there was just so much manipulation going on. AKA “whales” controlling the market.
A retrace based on the overall economy made complete sense.
Buy the Dip?
I’ll tell you this. I’ve done some buying, but nothing like I was doing in May-July. And this is what I’m hearing from a lot of other retail investors as well (anecdotal).
I have no clue what could happen next.
So…to me that mostly means hold, have some money on the sidelines if it goes lower, and expect the unexpected.
However, many are expecting a bear market. Could we be in a bear market that lasts months…or years!?? This is when shit gets real.
It’s happened twice already and people who stacked in the several years where crypto was basically doing nothing or going down made out huge in the end.
They were the “early adopters” who are “lucky” to have gotten in that early.
It’s not so easy is it?
At the end of the day, if crypto sees ATHs in the future (I’m fairly certain it will) then it makes sense to stack over time with no short term expectations. Again, my opinion-not financial advice.
What about you? Did you just get rekt? Or did you see this coming and make the correct adjustments? Did you just learn some really valuable lessons? Let me know in the comments below!