Since the recent correction in the crypto market, a fairly consistent slew of negative news has come out about the space.
We’re seeing a lot of people say, “I told you so!”
We’re also seeing the usual round of, “bitcoin’s finished, the crypto market’s dead,” and so on and so forth.
A few years ago, crypto hedge funds were all the rage. As cryptocurrencies rose in value, hundreds of hedge funds specializing in digital assets launched to try and capitalize on investor demand. Some of these funds recorded double-digit gains in 2020 and 2021 as cryptocurrencies surged in value. However, this year, cryptocurrencies have been under Read More
Now, if you’re relatively new to this space and this is your first experience with a substantial crypto drawdown, then you might be alarmed.
But don’t panic
As I’ve been saying for a while, this was expected.
December and early January were just crazy in terms of the ramp ups.
Between the end of November and early January, the overall crypto market rose at an unsustainable pace, from around US$240 billion to over US$800 billion in total market value in a matter of weeks.
So while the correction has been painful, it was what the market needed.
And it’s important to understand that this is not the first correction in crypto.
If you’ve been around in this space for a while, you’ll have seen big pullbacks of 30 percent, 40 percent, 50 percent and higher. It happens pretty consistently, and it’s to be expected in a market which, as I’ve continued to say, is the most volatile asset class on Earth.
But every single time we see big corrections, the bears come out of hibernation.
I won’t say to ignore them completely – I’m always looking for reasoned and rational bearish voices on crypto – but make sure you really parse what people say for the finer details because everyone in this space has their own agenda.
Everyone, and especially the people who have drawn a line in the sand early on and have been very negative on the crypto space all the way back from when it was US$1,000, will still be harking on the same perma-bearish news.
So keep your head and stay calm. (And if you’re still worried, make sure you attend this complimentary Emergency Bitcoin Briefing.)
And as always, never invest more than you can afford to lose
That means never borrow money to buy bitcoin… or mortgage your house… or take out debt… or other insanities like that.
If you’re a beginner, you shouldn’t be investing any more than 1 percent of your investible portfolio into cryptos.
If you’re more advanced, more bullish and more familiar with this space, up to 5 percent is acceptable.
Anything beyond that, and I think you might be wrestling with a few sleepless nights from time to time.