Something that’s been on my mind lately are the key macro drivers of volatility for crypto. Though there are many, it is really interesting to note the correlations between the 2017 bitcoin cycle to what we’ve seen so far in the current cycle when we compare some of the largest drivers of anticipation and price appreciation borne of a desire for the crypto space to reach “mass adoption” by way of entering traditional financial systems.
Now whether that is a good thing or not - that’s for the crypto maxies to debate - from a crypto market cap etc and individual protocol prices, tradfi on-ramps, market assets that directly buy crypto will be required to make crypto investments grow and become ensconced into golbal financial markets as a whole.
At the end of the 2017, bitcoin futures were hotly anticipated which created a lot of fomo prior to their release. Many in the community cautioned that the event would likely cause a “sell the news” event with silver futures are a guide/corollary. The silver comparisons were proven correct.
This summer talk of bitcoin ETFs became one of the most (if not the biggest) driver of anticipation with bitcoin peaking when the proshares ETF released. Since that week of November, bitcoin has trended down to where we are now. Whether the cycle plays out the same as 2017 remains to be seen. Could we revisit the weekly 100 ema like in 2018 summer and 2019 fall markets.. well I think, “We mostly don’t know shit about fuck” applies here.
So why do big tradfi-crypto happenings which crypto communities celebrate consistently seem to trigger “sell the news” events?
Big news and upcoming events in the traditional-crypto finance space (as signals to broader mainstream acceptance) create huge anticipation within crypto, fomo rips through communities, emotions run rampant resulting in large speculative volatility spikes. Everybody is riding the high until the tradfi-crypto products go live. Seasoned private and institutional investors, position their funds in crypto assets to capture the unsustainable ride up, then likely sell to create downward pressure as they have now taken short bets in these new tradfi products. Rinse and repeat.
We have to remember that traditional finance as a whole still very much view crypto as highly volatile and speculative assets. This was certainly true in 2017 and to be honest not much has changed in 2021. As we move forward however, money talks, and tradfi is allocating a lot of their funds to crypto investments, something that just wasn’t prominent in 2017. This will warp crypto markets more and more, more money in/out means that cycles will likely extend as it just takes more time to enter or unwind positions etc (so the cycle extension hypothesis makes sense to me). I think directly comparing to previous crypto cycles will loose relevance as I’ve not seen to many account the growing competition for funds and eroding market dominance realities of bitcoin relative to smart contracts protocols and everything else happening in the space.
Regardless, the one constant in all market old or new is human emotion. Our ape brains don’t handle investing to well, (its ok to admit it to yourself I wont tell anybody) and cryptos being of a very speculative nature exasperates that reality. Emotional exuberance - or plainly - buying/ selling on emotion and being part of communities that overwhelmingly reward emotional excess, will contribute to warped investing strategies and more often than not, making you loose sight of the forest from the trees. This should be a great concern, for you as you build your investing strategy over time but also its should be a concern for this and other communities as echo chambers tend more often than not to broadly warp expectations.
Specifically for this sub, Moons likely exasperate the situation as emotional posts and comments get more votes/more eyeballs, especially those proclaiming incoming windfalls (and likewise are rampant on youtube), with promises of riches and emotional pleas to buy at any prices as crypto “is the only way out or your current situation” or more disturbing “is your only hope for a future”. Perhaps to counter this, future moon proposals/vote could readjust rewards to heavily favour/reward solid informational post, research, tech breakdowns in an effort to bring balance to this sub I feel has been lost.
I was once told that if you get emotional about your investments, you’ve already lost the money, you just don’t know it yet. This is a good reminder for anyone still reading this that longterm success is born of patience and careful dyor into the projects/companies etc you put you’re money into. Whether its to play volatility or dca for longterm goals. The approach to short/med/long investment strategies will be different for each but the common thread is that those that are successful do so by building strategies and approaches that limit the effect of emotions on their actions.
fuck I wrote a book instead of fiat mining. oh well, until next time. cheers.
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