Be it a result of out-right market manipulation, genuine Institutional interest, or an interesting mixture of both. One thing is certain. The FOMO (Fear Of Missing Out) phenomenon is a very real thing.
One could postulate that as being the reason why Anthony Pompliano, a popular Bitcoin and cryptocurrency pundit, gave an eternally relevant reminder to all crypto Investors. On the 7th of August, the co-founder and partner at Morgan Creek Digital, chose Twitter as his platform for sharing these words of easily overlooked wisdom.
According to the man sometimes referred to simply as Pomp, this is what every investor should always keep in mind.
For speculative investors, one of Bitcoin/cryptocurrency’s most appealing aspects is its volatility. When prices go up, they tend to gain altitude rather hastily when compared to traditional asset classes.
However, this volatility is a double edged sword that, if not wielded with care, could swiftly cut one’s portfolio down to demoralising size. The deeper in you go, the greater the risk (or reward). Alt-coins have been known to experience more dramatic value fluctuations.
Risk of Devastating Financial Loss
For an investor who is new to cryptocurrency, the associated risks may, in part, be mitigated by exposure to mostly well established coins and tokens. However the cryptocurrency market is still young and there’s no telling what could happen next.
The risks hidden in the shadow of the unknown future becomes greater as one exposes themselves to the wide variety of lesser known digital assets.
Investing What You Are Willing To Loose
As is the case with most speculative investing, any individual who chooses to invest in an asset/assets takes on a certain level of risk. Companies fail, economic sentiments may change, and sometimes markets crash. When this happens, people Loose money.
In other words, “going all in” is more of an impulsive gambler’s habit than it is a responsible investor’s.
“Twitter is not investment advice”
In the Twitter-sphere, like a lot of other online vehicles of opinionated self expression, “experts” on everything are not in short supply. This doesn’t mean trust nobody, because you will come across good bits of information. It means you have to learn to sift through the hype and bias.
Try to use social media platforms as fast paced news outlets rather than financial advisory instruments.
Buying Cryptocurrency With Credit Cards is ill advised
It is possible to get lucky in the short term, but staying lucky over the long term may not be as easy. The longer you stay in the more risk you will be exposed to. Taking the well documented volatility of crypto assets into account, a portfolio built on dept is an extremely risky deal.
If the markets were to tumble into a violent dip and significantly deplete the value of your investment. Or God forbid, you unwittingly fall victim to a pump and dump, or an exit scam. One could find themselves in a messy situation. This is just a nother-facet of investing only what is OK to loose
“Keep Low Time Preference”
Time preference refers to how strong one’s desire to immediately satisfy a want, over The possibility of future wants. In the context of cryptocurrency investing, a higher time preference (selling to satisfy an urge to make a quick buck) may miss out on part of a genuinely great product.
A good example of this is, the now celebrated, Bitcoin pizza day. On the 10th of May 2010, Laszlo Hanyecz made a purchase of 2 pizzas for 10000 Bitcoin. This might have been a fair price at the time, however, as time marched on, so did the value of Bitcoin. At the time of writing, a sum of 10,000 of what used to be nerd money coins would have been valued at approximately USD $116,000,000. If you can live with that, then this one isn’t for you.
Do Your Own Research
This one point connect be stressed enough. In order to make better investment decisions in this space, or any market for that matter, it would be wise to understand the products involved, how they affect the already existing markets, the viability of implementation strategies of individual projects etc.
Building up an understanding of the whole market, where it comes from, where it could go and the market leader’s trends could be a great help in determining whether or not a new project is worth investing in.