What a month.
January was a pretty wild ride. It started with a rush of recovery after a late December dip and led to a bullrun which pushed us to new all time highs. New money funneling in was fueled by family conversations around Thanksgiving, Christmas, and New Years parties. Almost every family has that one “crypto guy” who made 100x in 2017 and wanted his family to become aware of this exciting new field.
Early 2018 saw some pretty crazy stuff happen, such as known Ponzi schemes (POWH coin) being funded with almost a thousand ETH, coins like Dentacoin with no product being valued at more than the entire industry they were hoping to disrupt, coins like TRON being valued at almost as much as SpaceX, etc. It didn’t take a genius to be able to hear train bells at the crossroads going…
DING DING DING DING DING DING DING!
When you see those signs, get off the track.
That’s all great in hindsight, but where are we today? I’m going to explain a bit about what’s happening, not in terms of price predictions for the future (although it’s somewhat interrelated), but more on how these dips impact the stability of the asset class of cryptocurrency.
The currency-related cryptos out there need stability if they are going to function in their desired capacity as a storage and exchange of wealth. The rest of the industry needs stability if it is going to attract more conservative investors. Tech coins who use ICO pre-mines to fund their company need stability to actually pay for the salaries and startup costs that will push forward and develop their foundation.
The market may have gone on a wild ride in January, but I’m going to explain why I’m extremely bullish on crypto going forward. The main reason for this is stability, and how this pull back has made us more stable.
Lets Take a Walk Back in Time.
It’s 2010 and this Bitcoin thing is starting to make some news. Nobody really understands what it is or how it has value. A few people might, but most don’t. People clearly didn’t understand the potential value Bitcoin held, because, in 2010, Florida programmer Laszlo Hanyecz talked someone into trading two pizzas for 10,000 Bitcoins. Bitcoin was generally considered a joke. People who dumped $100 real dollars on fake internet money were pretty much considered to be insane.
Cryptocurrency started making waves, and online poker players were some of the first major adopters, trading Bitcoin for online poker money, especially after the US government cracked down on poker websites on what poker circles refer to as “Black Friday”, April 15, 2011.
This move was important for cryptocurrency adoption in several ways: first, that it showed the world that this thing could actually be used as real money if it was assigned value; and second, it shows us (in the future) what happens when governments try to stick their hands in something they can’t control. Technology finds a way. We have pretty good history in watching the US Gov Poker fight, as well as something like, say, Prohibition from 1920 to 1933. If the people want something, the people will make it happen.
No, folks, there’s no stopping cryptocurrency. This genie is out of the bottle, and you can’t jam it back in.
Bitcoin HODL Mentality and Reality Start To Clash
HODL comes from an internet joke, stemming from a mistype of HOLD, but it has since come to be known as an acronym for “Hold for Dear Life”. It represents the mindset of many who own BTC and their fundamental ideals that this thing will disrupt the financial balance on the planet. Flip the tables from the Oligarchy to the Average Joe. Usher in a grassroots revolution.
In reality, a lot of early holders/adopters have been waiting to cash out and reap their rewards for backing this horse early. So where did HODL come from (and I’m not talking the meme, I’m talking the mentality)?
It is born in the dips following crashes. It is fused from the blood in the streets. And it builds the foundation that the future is built upon.
In December 2013, Bitcoin saw a giant spike and fall, which eerily resembles the past month, where prices skyrocketed to over $1,100 USD and crashed to below $600 in a few weeks. These numbers are small compared to those we’ve just seen… but remember that percentage-wise, the losses are very similar. In fact, there have been bigger crashes in the past, crashes exceeding 90%. What is important about these crashes is that they provide ways for people who want off to get off and take the profits.
For every sale of a coin in panic, there is a calm buyer on the other side of the table. Who is the buyer? It could be someone who already holds some of the asset and is looking to leverage into more. They believe in their asset long-term. It could also be someone watching from the outside who feels like they missed out, and they are finally getting their opportunity to join in. Either way, the buyer is buying because they believe this thing is going one way… up. Typically not today, not tomorrow, but in the long term. They believe. That’s why they are buying it.
For for the new buyer, this is their ground floor.
So the December 2013 crash did a few things… first, it showed people that the general consensus had instantly become “this thing is overvalued”, and second, it shook those people out of the tree, and it replaced them with firm and strong holders.
Fast Forward a Few Years
A few years have gone by and not much has changed, to be quite honest. A few murmurs here, some rumblings there. Overall though, people who bought the dip started to feel like they maybe bought a pig wearing some lipstick.
New cryptos started popping up and getting attention. In December 2013 there were roughly 60 cryptocurrencies. That number swelled to 500 by the same time the following year, but at the same time, Bitcoin’s price just bled out as people in it for the money were slowly replaced by people who were holding for the long-term.
Then crypto started to see a nice, steady, sustained growth, then a somewhat rapid growth in 2016… and then 2017 happened.
2017 saw some absolutely insane rises, and frenzy started to build. People were seeing returns of 10,000% and more in a single year. True die-hard HODLers will hold, but increasingly a lot of people who call themselves HODLers were quietly looking to jump ship. They were going to ride this wave as much as they could, but their hands were on the sell button.
These are people who were in this game and have strong positions after buying in at pennies, dollars, hundreds of dollars. Eventually, these people want to start taking some profits, and they should be allowed to, because they were backing crypto before even those of us who joined in 2016/2017 were afraid to. This is their reward for making a good, almost prophetic call.
December 2017 took this crazy rise from early 2017 and pushed it to the limit. People with piles of crypto start frothing at the mount, waiting for an opportunity to cash out, timing an exit position. Many were slowly pulling money off the table, but the pullback just prior to Christmas 2017 was the first warning of a larger incoming exit of old money.
DING DING DING DING DING… the train bells are ringing.
Spikes like we see in December and early January allow early adopters to offload some or all of their position and not crash the entire market. New people buying in are “hiding” the people going out. If buying activity slows down and stops, the sellers wanting to leave start being noticeable and a dip happens.
Small dips are sustainable, but bigger dips cause these long-term holders (who are itching to cash out) to panic and try to beat each other out – the first to leave will make the most profit. If the pullback is hard enough, then you induce panic selling, not only in long-term holders, but also in newcomers who think they just bought air.
However, if these early adopters do not exit their positions, then we are at an increasingly greater risk of having a giant full crash as they all panic sell to beat each other out of the market. We may have just experienced this exact thing in the last few weeks. This overall hidden whispers in the background of old money wanting to cash out, coupled with a relentless storm of doom and gloom articles on the internet about countries banning crypto, Wall Street and banks calling it gambling, etc. All this triggered a panic sell, causing the market to tank. Some of this was new weak hand money, and some of it was old holders that silently wanted to cash out their profits while they had them still.
So why is this overall healthy for the crypto market in terms of stability long-term?
As this old money exits, it is being replaced with new money. Each time people offload their profits, the amount of money anxiously wanting to leave the market decreases, and the whole market becomes more stable.
Anyone holding crypto after a 60% drop is probably here for the long haul, or at least the next decade or so. They haven’t sold because they believe that the price is going to be higher in the future, and they don’t want to miss the rebound. We didn’t know it would fall 60%; it could have dropped 20% then gone back to all time highs.
Even if you totally messed up and bought BTC at $1,100 in 2013, how bad does that purchase look today? That’s how I feel about all my January buys, whether it’s $750 or $1,300 for Ethereum.
The last few weeks have shaken all the weak hands out. Just about anyone who wanted to take out their 2017 profits have done so. If you have bought in, it’s because you think this is the ground floor. If you are still holding crypto, it’s because you believe in your asset long-term.
I’m holding, because I’m pretty confident that 2020-me will be just fine with 2018-me buying $1,300 Ethereum. Sure, I could have had a crystal ball and doubled my position if I timed both peak and dip perfectly, but I don’t have that crystal ball. I can’t even tell you for sure that it will go up from here; nobody can. I believe it will, so I’m holding, and I will continue to buy in more.
Rock Solid Ground Floor
Today, my opinion is that we are at a rock solid ground floor.
We bled out this last month, and it was scary. But rest assured that we are 100 times more stable going forward for the pain we went through. These price corrections are 100% necessary for crypto to eventually stabilize completely, because each person taking money off the table is replaced by someone who is holding long-term.
The market will recover. There is SO much money that is coming into this space. I don’t spend a day anymore without hearing people talking about crypto. Even if they are saying it’s a bubble, they are talking about it. When they look back in 6 months and it still hasn’t burst, that’s another person FOMOing to buy into crypto, and another converted to the new world order.
You guys think people are FOMOing to follow shitcoins on their pump and dumps? The real FOMO is the everyday person who is watching on the sidelines while 30-year-olds in their company make more than they made in 35 years of service and retire earlier than them. This person says “bubble” to make themselves feel better about the fact that they are backing the wrong horse.
Eventually, this person says enough is enough and throws $100 into the game. And I don’t mean that as “we’ve scammed him to join this pyramid scheme”. I mean “he’s finally woken up that crypto isn’t a scheme, and this thing isn’t going away”.
Get Used to It
The next 4-5 years will have this going on nonstop as the entire world wakes up and starts holding a little bit of crypto. If this happens slowly, with mini-dips exchanging portions of early adopter money for new money, then there is increasingly less early adopter money in the game that is waiting to jump ship.
If it happens more swiftly, the market bleeds, but it’s a tribal bloodletting that strengthens the ground floor so that we can build a taller building on a new foundation.
Each correction causes more and more stability, and it should be welcomed. Enjoy the pullbacks, buy into them, and reap the rewards in the future.
If you are holding, you shouldn’t care about the price today. In fact, if you think about two scenarios, one where the market rises 5% a year for 10 years, and one where crashes like this happen, you’re absolutely better for having more time to buy in at lower prices. You only lose money and seal in those losses when you sell. If you believe this technology wins out in the end, then in 10 years this technology will reach its equilibrium price regardless of weak hands fearing out, and newbie investors FOMOing in.
The good news is you didn’t miss the boat. These people who are leaving are taking some profits, yes, but they are also giving you their ground floor position. You are gaining the ability to go back in time and buy at prices last seen in October before that crazy hype rise.
I believe the hype still exists. If the market rose to almost 1T in a month, then you bet your ass that I think it has the legs to get there in 10 years. I personally believe it will hit 1T by this summer alone. Just today, Christopher Giancarlo spoke in front of members of the US Senate, speaking very bullishly on crypto, and it was extremely well received. The sentiment was “how do we protect investors?” and blockchain having “enormous potential”, not fear and doom and gloom, trying to kill crypto, etc. Market caps of 20T by 2020 were speculated on, and while you have to be cautious hearing these things because they aren’t based on any concrete data (hint, there isn’t any), they are extremely optimistic numbers.
In 10 years will you be more upset that you went on a ride up and down but stayed on the roller coaster, and even solidified your foundation/position on the way down? Or would you be more upset that a downward swing made you panic sell and abandon a position that could have made you a millionaire, all because you were afraid to lose some vegas money? Don’t let this pullback scare you out of your future!
This pullback hurts, that’s for sure, **but only if you sell**. If you hold long, this pullback will actually MAKE YOU MORE MONEY because you will be increasing your buying power for the next X weeks/months, however long this takes to recover. Once it does, you will be where you were last week, holding long, with ZERO LOSSES REALIZED if you didn’t sell, and the only effect will be magnified buying power this whole time from now until recovery.
Why Am I So Calm? And Hell, Why Am I Actually Happy?
I wasn’t planning on selling this shit for a decade at least anyways, so the only thing that matters is the price point THEN. The price NOW only impacts my buying power, and for that, LOWER IS BETTER. You can’t say HODL HODL HODL and then panic sell. You either believe in this or you don’t. If you don’t, you will give people like me your early-adopter position.
Now all we need to do is start buying real tech and stop pumping shitcoins looking for instant profits, and we will go a long ways towards being in a sustainable investment position, rather than unsustainable gambling.
Enjoy the corrections – they’re a good thing. Long-term stability of crypto is a GOOD THING, and this pullback has accomplished it. Buy this pullback, and hold for your future.
The weak hands have been shaken out. Anyone holding crypto today is holding it for a LONG time. The ground floor is fucking solid right now. Lets build a skyscraper on top of it.
Until next time,