Why Is Bitcoin Crashing? (The Emotional Cycles Of A Market)
What goes up, must always come down. Even in this lifetime where rockets don’t come down in a million pieces of ash anymore, but intact, in a beautifully elegant fall. Regardless, it still had to come down after being shot up towards the moon and after it comes down, it will be reused to be shot up again towards the moon.
I’m not saying all cryptocurrencies will always come down and go back up, but I am saying Bitcoin and many of the top alt-coins have, and continue to do so. More importantly, so do our emotions.
“Emotions are a rollercoaster.” What is FOMO and FUD?
how-to-beat-fomo
We’ve all heard of this. In cryptocurrencies, this same life experience applies and does so in what is known as FOMO and FUD.
Examples of FOMO: Fear of missing out
A coin’s price is going up! You don’t want to miss out on the perception of making money and buy in.
A coin’s price is going down! You don’t want to miss out on the perception on making money and sell out.
Wow! So many people have opinions on this Facebook group or subreddit that this coin is going to “shoot to the moon!” You buy in.
Wow! So many people have opinions on this Facebook group or subreddit tell you this coin is going to go down. You sell out.
Beyond cryptocurrencies? Think of those crazy Black Friday doorbusters. The FOMO is real, and most of us are either unaware of it, or aware and still subject to it.
Examples of FUD: Fear, uncertainty, doubt
You read on Reddit, Facebook, or Twitter that something terrible is going to happen to one of your coins, you get anxious and sell it.
The value of a coin you’re holding just cut in half, you’re starting to doubt it and sell.
Beyond cryptocurrencies? You’re anxious and very nervous about a job interview. It inhibits you from even having the awareness to prepare yourself for it, so you continue to be nervous up until the time it is scheduled until the end of the interview when you leave and after when you’re waiting for the good news that will (most likely) not come.
The Emotional Cycle of Cryptocurrency Markets
“Emotional rollercoasters” are an actual concept studied in behavioral economics. This is what it looks like in terms of all its stages. In an uptrend or bullish market, most feel thrilled and confident. In a bearish or downtrend market, most feel anxious, fear, and panic.
This is what emotional cycles in bear markets actually look like online:
Realize though, every opinion you read on the internet also has an opposing view:
My personal experience with market emotions
If you read about my journey, I mentioned I first bought Bitcoin in August. It was around $4000 USD at this time. In a few weeks, the price already went up! “Wow, this is awesome!”
Fast forward another few weeks later. I was traveling and checked my phone. Everything was red. I already lost the money I invested, all within 2 weeks of being in the market. Not only that, I bought some more, and it went down. I repeated, and it went down again.
What would have happened if I panicked, got anxious, and sold? Well, that’s where I would have actually lost money. You don’t realize gains and losses until you sell it back into fiat currency.
The graph below shows a green circle where I started. Had I sold out, I wouldn’t have seen the market cycles over the last few months to where we are today. Bitcoin is $13,700 as I write this.
14 stages of emotions? The only states you need to be in, in cryptocurrencies: Aware. Present. Focused.
No one knows what will actually happen. Doing your due diligence and researching the technology and history to create your own opinion will help you solidify emotional resilience. You’ll feel less of a need to seek or depend on other’s opinions to influence your investment decisions. Ask questions, and take the information in objectively. Research takes time.
If you don’t take the time to do your research, however, spending time in the market potentially shorting (selling) Bitcoin and losing money over its volatile market cycles will still take time. So spend your time wisely. Spend your time learning rather than allowing yourself to be the losing victim of the market cycles.
When life is out of your control, the one thing always in your control is your reaction to it. This does not mean numbing yourself and rejecting the emotional cycles of the market, but being aware and present in it, understanding it is there and you are in a market where other’s are also subject to it.
How to be present in the market:
Start with being aware of your reactions: if losses affect you more intensely than the joy of gains, then adjust your investment habits. An example would be to invest less at a time, or spread out your investment over time so you can experience the market cycles yourself
Be aware of the market’s reactions: if you’ve felt subject to FUD or FOMO, others absolutely do too. Expanding your awareness to the market puts you a step ahead. You look at what others call “crashes” as “dips,” or buying opportunities
Awareness gives you the focus to make the best decisions: Instead of panicking, you are being objective and have the capacity to make sound decisions and find areas of opportunity
Takeaways:
What comes up, always comes down. You might not know when, but be aware.
Even though the market appears to be numbers and charts, a majority of people in it affect these charts with their emotions.
For every opinion you come across, there is an opposing view. Develop your own through research and experience.
Instead of panicking, allow awareness of the emotional market cycles to change your perspective. Is Bitcoin crashing, or is it on sale?
Breathe. Money is just money. Don’t forget to see the beauty in the world all around you, spend time with friends and family, and ensure you sleep comfortably. If crypto is impacting you adversely, shut down your computer and go take a walk. Look at some trees, listen to the birds, practice mindfulness. Charts are out of your control, but your reaction isn’t. Remind a friend to be aware when they are FOMO or FUD-ing.
Below are some of my favourite resources other cryptocurrency traders or enthusiasts may enjoy:
Binance: a secure exchange with low fees, a mobile app, and many coins to trade
Join >>> https://www.binance.com/?ref=15387621
CoinBase: the easiest way to buy and sell Bitcoin, Ethereum, and Litecoin with fiat money
Join >>> https://www.coinbase.com/join/5a3731ecd4d48506a868527c
CoinMarketCal: stay on top of the upcoming events that affect the market swings
The whole market is based on speculation. The Korea news came out yesterday causing big dips.