Panic is everywhere! Everything is down – stocks, bonds, oil, cryptos, even gold – the ultimate safe haven and store of value! The question is why?!
Well, there are multiple factors, all converging at once:
- The overvalued and over-leveraged stock market
- The over-indebted corporations
- The “war” to control the oil market
- The “sell everything and go into cash” panic mentality (remember, ALL markets are inevitably tied to humans and their emotions, despite the proliferation of robotic algorithms that control much of trading nowadays)
- Bitcoin and cryptos are still an immature, volatile asset class that is responding to a global panic like all the other asset classes
- Many people and trading firms are over-leveraged in stocks (and cryptos), and either panic sell, have margin calls, or get stopped out of their positions, all of which create a domino effect that greatly magnifies losses. There is no logic or reasoning behind these flash crashes, and not much to stop them when they occur.
- And, of course, the coronavirus – the pin that pricked the bubble
This is a “black swan” event, which by definition is totally unpredictable in its onset, magnitude, duration, and outcome.
We will survive this! We humans, and ALL the markets, will return to normal in the not-too-distant future. Always have, always will.
All businesses, all markets, and all asset classes go through cycles. Again, always have, always will.
Just realize that with panic crashes, the elevator is in free fall, but the recovery will be a gradual slog back up, with many fits and starts.
Bitcoin, however, was made for this!
It may not seem so now, but it was created specifically in 2008 as a response to the last major financial crisis – the “Great Recession”. It is an asset class that is unique in its structure – outside of traditional financial and commodity markets. As it matures, it will show itself to be a totally non-correlated asset class, which is perfect for these global panics and “black swan” events.
Just realize that NOTHING has changed with Bitcoin and blockchain technology as a revolutionary, disruptive technology, except for the prices. It is all still being built out, built upon, and strengthening due to the network effect. The prices will fluctuate based on human emotions and supply/demand, but the underlying value and usefulness will continue to grow. Always keep that in mind!
For those just getting into Bitcoin and cryptos as a long-term investment, these are the BEST of times – to accumulate more when everyone else is panicking! You’ve been handed a gift, a truly rare opportunity! People always talk about wishing they could buy a certain asset at a great price, but seldom do so when given the opportunity – all because of human emotions and being afraid to go against the majority sentiment.
I personally continue to try to average down my purchase prices when given the chance. I will let the dust settle a bit and buy more at that time. I don’t want to try to catch a falling knife, and I know I won’t be buying at the bottom. I will be just accumulating for the long haul.
When the market recovers and turns upward, I will not be the one regretting that I didn’t take advantage of this tremendous opportunity!
Onwards and upwards,
Dr. Henry Haley
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