Do you know what happens in the crypto market? Well, the same as in all markets: dumb money finances smart money. Yes, yes, you read correctly. Those who arrive late, those who get carried away by the hype, those who buy high and sell low, are the ones who fill the pockets of those who know what they are doing, those who have a strategy, those who buy low and sell high. But of course, in the crypto market this happens a little more…
Because? Because in the crypto market there are more novice retailers. It is a very young and inexperienced market, which grows with the money of newcomers. And that happens because it is a market that has grown mainly thanks to social networks (Reddit, Twitter, YouTube, TikTok). That is where FOMO, FUD, shilling and trolling are generated.
The leaders of this industry are no angels fallen from heaven. They are sharks that use promotion and grand narratives to capture the capital of others. Initially, the target audience was libertarians, anarcho-capitalists, and conservatives. Politics were used to create excitement and monetize anti-establishment sentiments.
LThen speculators and robinhood traders arrived. And a digital tribe dedicated to speculation was created depending on what they say and promote in the Reddit forums, in the Telegram, Twitter and YouTube groups. In fact, there are tweets that function as signals for schemes pump and dump Like Elon Musk’s tweets. Musk launches the tweet and the army of retailers is activated by the signal. In other words, the movement is activated. People start buying and the price goes up. is created the hype. And then greed invades the general public. Who starts buying for the simple fact that the price went up. This is the last group that finances the promoters of the movement.
It is no longer a secret to anyone that we live in a fragmented world. Almost no one feels like a part of the whole anymore… We are not part of the same planet, humanity or country. Now we are part of a small tribe. Almost no one feels represented by their government, the press, corporations, universities or experts anymore… This has fostered a chaos of identity and belonging.. For many, the solution has been polarization, radicalism, sectarianism, cancel culture, and confrontation. So now the world is divided into them and us. We are the victims, the oppressed, the good guys. They are the victimizers, the oppressors, the bad guys. We are always innocent. They are always guilty. We live in times of war. The fight of the good against the bad. The good ones are those who are equal to us. The bad guys are different. After the final victory, the earthly paradise will arrive…
Does this story ring a bell? One day you hear about a magical coin that has turned many people into millionaires overnight. And that obviously arouses your interest. So you go to Google, you check Twitter and YouTube. You start watching documentaries about the magic coin and soon… The epiphany! The narrative is engaging: it’s a rebellious narrative with a certain coherence that has it all. In other words, it explains the world. The good, the bad, the solution and the promise. And the most important: gives you the opportunity to become a hero from the comfort of your home. You have discovered Bitcoin.
Apparently, Bitcoin is the magic currency that promises to free you from the clutches of the corrupt and oppressive financial system. Bitcoin is the magic currency that allows you to be your own bank and control your money without intermediaries. Bitcoin is the magic currency that makes you feel part of a community of enlightened people who know more about economics, politics and technology than anyone else.
Suddenly, you feel enlightened. You change your Twitter profile for one where lights come out of your eyes. You are already part of the enlightened community. From the sofa in your house, after watching a couple of documentaries on YouTube, you know more than all the economists in the world, including the Nobel laureates. You know that the government, private banking and central banks are the enemy. You know that Bitcoin is the solution.
Would you like to invest in Bitcoin and get rich overnight? Do you think it is a unique opportunity that you cannot miss? Do you think that the price of Bitcoin can only go up and up? If you answered yes to these questions, congratulations: you are the perfect candidate to make the most common mistakes that novice Bitcoin investors make.
The first mistake is to buy expensive motivated by the hype. That is, getting carried away by the collective euphoria and entering the market when Bitcoin is at its highest point, thinking that it will continue to rise indefinitely.
The second mistake is having false expectations and not managing risk. That is, believing that Bitcoin is the future, that the only risk is not investing, that the price does not matter, that you have to be a hodler (that is, keep investing no matter what) and that Bitcoin will reach the moon (ie, to an astronomical value).
The third mistake is to fall for the misleading advertising and propaganda of the heavyweights of the industry. That is, listen to those who have an interest in keeping the enthusiasm alive and that people continue to give their capital to the market.
These errors are very frequent and have dire consequences. The data obtained by the block chain tells us that on average Bitcoin investors do not have much of a tendency to be hodlers. On Twitter, they’re very assertive, but there’s a big difference between what they say and what they do. Many buy very expensive and then see how their coins lose more than half of their value, but they are reluctant to sell. Until one day they get tired and do it just when they shouldn’t. This story is repeated in all markets. But in the crypto market we see it a little more, because it is a market dominated by retail and inexperienced investors.
How not to fall into these errors? First, don’t believe in tall tales. There are no saviors of the world here. Here everything is done for money. Second, manage your risk. Third, buy low and sell high. Fourth, be skeptical and watch your pocket.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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