Today let’s talk about the possible impact of the global recession on crypto-currencies in your portfolio and avoiding the most popular mistakes of captainvalor.
Pre-summarizing the following: if you invested in something that does not solve important problems of humanity and has wide integration, you’re holding a risky asset that will depreciate in a recession. But this bad news does not end there. If the coin that you own, are shared between people without substantial savings, in a moment of crisis, its price will fall very quickly, which turns her into a ticking time bomb.
One of my friends asked how to avoid the negative consequences of the probable recession. She had experience in the ICO at their peak and all she wanted was to earn a lot of money and never have to strain.
Unfortunately, this was not to be. Most of the coins that she acquired in the period between 2017 and 2019 have lost the lion’s share of their value that well showed us analysts from The Block.
My friend was worried, she wanted her portfolio has ceased to melt in her eyes, but she didn’t know what to do. I gave her advice: take a loss, out of the assets in which she did not understand, and to create a safety cushion of cash, which should be enough for at least a year or better for five years. Jane obviously didn’t like it, because she was waiting for that I’ll show her the finger at profitable coin, which would have corrected the situation.
I believe that if you invested in the ICO, in a recession you will face problems. They still show unsatisfactory profitability, and the crisis will worsen. In a situation of my friend, the investment was made in a coin with virtually zero integration in the real world. This situation is now the vast majority of cryptocurrencies. The lack of real use in a crisis situation will put additional pressure on price and to accelerate its fall. She asked how I know about it.
The last 10 years, all I did was burned in the market. I came to him in 2010 and, since then, made all possible errors, thus realizing what not to do. However, it wasn’t that bad, considering that in 2011 with my friend we were lucky to raise investment in silicon valley. We want to study the history of investments in technology start-UPS. In the process, we realized that investors are overall quite similar: they have a strong skepticism, investing large amounts in a small number of companies that deeply understand.
Assessing the recession and bubbles in the market can come to the conclusion that they suffer from so-called “stupid money”. People who tend to invest in small simple things and very susceptible to hype. In the end, this leads to the fact that these investments succeed very few, but most remain with empty pockets.
People with some savings will be less prone to desire to liquidate their positions, as they have a safety cushion, on which it can rely in a difficult situation. People living from paycheck to paycheck, while wasiwasi in risky investments, would seek to dispose of his assets as quickly as possible, just to ensure their own basic needs. Thus, coins in the possession of the rich people will slowly lose value, than coins in the possession of poor people in a recession.
How to understand what cryptocurrencies are owned by the rich people? For that, you should pay attention to the Grayscale Foundation, which provides services to major investors and free publishes all reports on its website. Looking at these reports we can say that most of the institutions seeking to invest in cryptocurrencies, prefer BTC (over 75%) and, in the second stage, ETH. Only small remnants are then placed in other assets. Thus, we have a clear signal about the coins, which give preference to large investors. Thus, all other coins are owned by people without significant savings, which will compel them in a hurry to get rid of the cryptocurrency, with the recession just to survive.
You may think: “but my coin has a good integration, a lot of people use her and I will not get any problem.” However, the truth is that we are studying crypto market quite deep and we managed to find very few coins that offers any meaningful benefits. In other words, most of the coins that have been released since the start of the ICO mania, no one uses it. In most of the coins people with a certain idea, which cashed in on the naive investors.
As a result, we have the following picture:
- Prices of most scriptaction dispersed poor people
- When the recession starts to put pressure on poor people, they are the first sell your cryptocurrency
- There is a chain reaction and sales will increase
However, this is bad news for my friend is not over. On the exchanges you can place a limit order, and margin, which can cause so-called “flash crash”, when price falls very sharply. This phenomenon is present even on exchanges with a good reputation and large coins, such as ETH on Coinbase (once the price dropped to almost 0). Thus, the price of risky assets may fall faster than anyone can react to it.
After our conversation, my friend understood that completely unprepared for the arrival of the recession. What to do? I was advised the following:
Have savings to live at least one year. If not, reduce your own costs and sell part, or all of the assets. Personally, I would refrain from risky investment with no nest egg for the next five years.
Are you ready to get rid of their portfolio to ensure their own security in a recession?