Do you think in Satoshis?
It's easy to get caught up in comparing cryptocurrencies to fiat, but you might be missing the point...
As I check my Blockfolio, I quickly glance at the value of my portfolio...in USD.
Can you really blame me? It's the way we have been conditioned to think - compare the value of the coin to the fiat dollar. It just feels natural. After all, talking about a few thousand satoshis just sounds a little foreign. And it is exciting to see how much crypto has gained on the dollar over the last few months.
But you can get yourself into trouble thinking this way - especially if you delve into coins beside Bitcoin. Yes, it's true, if you only trade Bitcoin for fiat, then it makes sense to compare it to fiat. But, it's very problematic if you compare any of your other crypto-investments directly with fiat.
Here's why. If you decide to invest in coins other than Bitcoin, you are setting a sort of race: your alternative choice versus Bitcoin. If you choose another coin and it improves against fiat, that's all well and good, but if it is losing against Bitcoin, you should have invested in Bitcoin instead. You can fool yourself into extreme FOMO situations if you strictly observe comparisons to fiat, and can actually bleed out possible profits chasing gains that would have been better just left in Bitcoin instead of traded away into lower-performing coins.
On the other hand, if you watch coins that are performing strongly against Bitcoin, you know you have a strong contending coin. You might even trade your gains back into Bitcoin once the peak is reached. This often happens after an altcoin surge - Bitcoin suddenly spikes against the entire market as savvy traders sell their gains back into Bitcoin. In the end, the smart trader will have a larger net Bitcoin value than they started with.
I'll admit, I usually analyse values in USD as well, simply because it is a comparison we can all relate to. And that's fine. But, before buying or selling, analyse a coin's performance against Bitcoin, not only against fiat.
*This is not professional advice - just my opinion!
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BTC: 1FadQUp6PxQcbt1sicLRDE3f7v2kQPpVBq
BCH: 13Gb1p2m9evD6jaR2ZEs1dyVPRWojKFEfY
image source:
https://coinsutra.com/what-is-satoshi-btc-usd-converters/
I agree with this if you're swing trading or have a more short term mindset. At this point in time BTC is dominating the market, but once more fiat pairs come around then thinking in satoshi's may not be the best way to think.
For example, look at LTC. It's up twice as much as BTC in the past year in fiat, but before its big run it was down significantly against BTC.
Exactly - if you examine Litecoin compared to BTC, it was lagging for quite a while - months. It made huge gains in fiat the last couple days, but relative to where it stood against BTC before, it is not as huge of a gain as it seems to be. Many coins have consistently lost ground to Bitcoin over the last year, yet appear to be a great investment, when, in reality, the admittedly less exciting standard Bitcoin would have made better gains over time. Litecoin is a rare exception, mostly because of its recent run-up against BTC.
Value your wealth in Bitcoin. Not in dollars.
Good article, so true! You need to be carefull how you analyse the market and your protfolio. :)