Bitcoin, the barometer of the crypto industry, has had an incredible run in 2019, posting >100% gains*. In fact, it has outperformed almost all other asset classes, including the NASDAQ, S&P 500, Gold and Oil!
Watching prices soar over the past 2 months has brought some new feelings and thoughts for me. Instead of the Fear, Uncertainty and Doubt (FUD) before my first investment, I found myself confronting a new opponent. The Fear of Missing Out, or FOMO for short. There are probably many veterans of previous bull runs who have already met and (hopefully) vanquished this foe, but for me it was a very new experience.
If only I …
The returns I’ve enjoyed from every other investment/savings vehicle pale in comparison to Bitcoin. I’ve never seen anything else soar so high, so fast. After the initial excitement subsided, I decided to calculate the earnings I had forgone by not investing more. Bad mistake. Looking at those numbers only amplified my greed and guilt. I felt like I had to do something to make up for past non-decisions.
Quick, get more now!
What was the next best move? To buy more now. Definitely don’t want to feel the same way when prices double again. I logged into the exchange and used the little funds remaining to buy some BTC. Then, I initiated a deposit to bring in fresh funds for more buying. Even though it wasn’t much, some action always assuages the guilty feeling of inaction.
Thankfully, the fresh funds took a few days to arrive, saving me a costly mistake. Almost immediately after my small purchase, BTC corrected downwards by almost $1,000 USD. It was a warning well-heeded. Crypto markets are volatile: gains are big and fast, but so are losses. 100% gains sounds tempting, but can I take 90% losses with the capital I was putting in? Maybe not.
3 things I learnt
- Greed doesn’t pay. Instead of celebrating my gains, I wished I had the foresight to invest more initially. Of course, it is easy to have foresight with the benefit of hindsight. In hindsight, everyone could be a trillionaire. If I had capitalised on my greed, I would have been badly burnt if prices collapsed. Always take care of your downside by investing only what you can afford to lose, and focus on #2.
- Nothing beats DCA. If you bought $1,000 of BTC every month, you would be sitting on respectable gains regardless of the year you started. None of us are whales who can influence prices, so focus on buying in a disciplined manner through dollar cost averaging.
- There is always another chance. Perhaps the wise veterans of the crypto winter put it best: There will always be new opportunities in crypto. You miss one boat; you can always wait for another. Don’t rush after a boat that is already moving, or you might fall into the sea.
*As at time of writing in mid-May