We have seen quite a buzz and hype in the recent surge of cryptocurrencies, and several statements on the not so infamous Bitcoin, where is has been several times called as the best performing asset ever! Bitcoin is still new, despite the fact that it was founded way back in 2008 by an 'anonymous' person named Satoshi Nakamoto. The popularity of Bitcoin in the cryptocurrency world has made it dominant with a market cap of almost $100 Billion!
*We have seen that Bitcoin gained almost 5 times since the start of the year!*
Now if we look at the volatility, we see Bitcoin is much more volatile then other stocks that are being traded on stock markets. There is a much greater risk of losing than stocks, and already people claim stock trading is risky, but anyway, I hope all steemians reading this article are already aware of these facts, so I wont dig further!
If we look at other altcoins with much less market caps, we would see that they are more than 10 times volatile than Bitcoin!! So you can imagine the level of swings that happen!!
These altcoins often give back more than 150-200% ROI, but has 10x more risk associated!
Let's have a look at the life of a frustrating altcoin trader!First I will consider a chart of an altcoin first! This chart is still pretty readable, with clear ups and highs over a specified period of time.
First consider the deep down surge when the coin first gets listed! pretty strange huh? The chart on the first day shows an opening position at 15k satoshis, going all the way up to 85k satoshis, and then crashing down to sun 10k levels.
Look at the color coding I have done along with the numbering!
*Ideally,, going with the trend, we should Buy at lows and sell at highs right? So we should buy at all the lows, or the red regions, and sell at the green highs right?*
Let me tell you what happens, the entirely opposite happens with many traders!!
Ask me how and I will tell you several factors like Fear of Missing out, Greed, Hopelessness, Hopelessly hopefulness :P, wrongly analyzing and so on!
Lets analyse what happens at every step!
- The coin gets listed on the market... People have great expectations that the coin will go up! They start buying... Prices shoot up... Experienced professional whales having huge portfolios jump in... Prices shoot up even more...! More people start investing.... Panic Buying sets in... People start placing buy orders like crazy, since the coin will soon be going beyond reach!
Aaaannnnd then! Whales step out with their share of profit... We see a 20% dip!!
Some hopelessly hopeful people start buying again at the dip, thinking that it was just a correction, and prices will again shoot up! so prices rise up by some 5%.
Now experienced Traders Pull out their share of profit!!
Prices dip by a further 20%....
Those people who bought at the first -20% dip are now in a 20% loss actually!
Some ultra smart novice traders think of averaging out the costs, an buy again in the 'dip'.
Then the real panic happens! they see that the chart is going all red... What will happen?
Now some more 'smart' novice traders pull out money in the loss, just to buy more at dip!
and lol, that thing never happens! All people start selling off at loss and yes, they all end up in loss...!
Some brave people hold the coins to make profit in future 'pumps'
These brave people make the so called 'support' of the coin!
Some professional and amateur traders Buy at the dip at no 2 (refer chart)
some hopeless and impatient traders sell of at that dip only, since they think they have already missed the train, and the train got derailed! :P
Okay now comes the second part.Whales pump up again. Some overtly hopeful people suddenly see a sudden surge! They fear that the coin will pump even more, so they buy at the high! Whales dump again, going away with the profit!
Those people who faced loss go into deep shit, neck deep shit! They become frustrated!
Some quit trading, some stay hopeful that a third pump would come and they will then sell at the profit!In the dip, they buy some more coins!
Look at the next surge! Even people who bought at the all time high during the second surge could actually sell in profit. But is that the case?
NO! Because most of the traders wish the coins will surge even more! Then the coin gets dumped again, and they are back to square one!!
After the third surge, we see the coin has fallen flaaaaaaaaaaat!!! (Marked by the yellow line! :P )
Some people having patience ever since will be or might be waiting forever until a surge comes again!
Lets now categorize what different groups of traders did!
Novice traders : some bought at all time highs, and are into deep frustration! Some tried buying in even the slightest of dip, hoping to make some profit but ended up in even more loss!! They have learnt the hard way not to be greedy, and to fear at the right time, especially when the market goes up! Novice traders fear when there is a dip, and p**anic sell off everything by being hopeless.
Amateur traders : Some see a surge is coming, they put in more, sell at minimal profit (5-10%) and just wait for another dip....
Pro Traders : Keep on investing in dips, and sell off at highs! (Damn, they are so lucky!!)
Lucky Traders : Quite unknowingly, there exists another breed of traders, who knows nothing about trading, invest on a dip and forget... Suddenly, one fine morning, they wake up to see a 300% surge, they pinch themselves twice or thrice to see if they are actually dreaming or not, and sell off everything!! lol (We need to rob them! :P)
Whales : They pump the market once, rob the small fish in the market with their powerful tactics! so cruel huh!
I have never been a lucky trader so far... Dont know if I ever would be... there is a 1/10k probability of becoming a lucky trader....
Now that most of the traders have been experienced, they are all waiting for even more dip! I would rather buy at this dip after analysing the coin, and then invest some amount, and wait for another surge! :P
What would you do!? :P
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