Way back in the old days it took the stock market 30 years to go from 1000 points on the Dow Jones Industrial Average to 3000 points. Sounds like a long time when we think about it now a days. They didn’t have all of the hedge funds, high frequency trading, and government manipulation back then though. This is when chartists honed their craft and economists actually made sense. The laws of cause and effect actually mean something.
We’ve seen a precipitous drop in the values of cryptos throughout 2018 with a large upwards spike happen about a week or two ago that renewed all the crypto bulls. The thing is, was this a dead cat bounce or was there an newly emerged catalyst that will support these recent gains? I saw that Bitcoin rose from the high 6000s to push above 8000 in a matter of hours while Steem even rose some 40+ percent. What has changed in these cryptos that could reinforce this uptick in value?
I think that a lot of us have gotten spoiled with these massive increases in values in cryptos and the market space and expect this sort of thing to continue (upwards of course). We expect this instant gratification in our perceived valuations to happen immediately and the good times to roll on. Can’t say I blame anyone, it’s the new norm. The good times have been rolling on for the last decade.
What I think people should take away from this article is that volatility is not a sign of health. If your vital signs are volatile and all over the place you may just end up having a heart attack. The same way is with respect to the markets. The more violent the swing (in either direction) the more violent the opposite action can occur. These sorts of movements can wipe people out. This is especially the case in the realm of high risk assets like crypto currencies.
We need to pay attention to values objectively and rationally. Don’t invest more than you are prepared to lose. And, just because you are up 1000 points doesn’t mean you can’t me down 2000 points tomorrow. Volatility can be your friend but it can also be your worst enemy. Let’s not let our emotions get in the way of our judgment and live to invest another day!
Image source: bigthink.com
