Throughout history, countries have had to decide between feeding the people or protecting them. But there’s another war being waged in the background. A hidden war. A financial war. And not one in 100,000 realises it’s happening.
A perfect storm. The stage is set for the introduction of new technology. It’s called Distributed Ledger. You know it by its other name.
Central Bank Killer
Disruption. Central Banks worldwide react as Bitcoin hits $10,000 US dollars a coin. Governments and financial institutions, normally calm, steadfast, and non-reactionary, suddenly change channels.
“Everyone has a plan ‘till they get punched in the mouth.” - Mike Tyson
As the price of Bitcoin and cryptocurrencies continue to go down think about this…
When you are bailing out and selling, who is the counterparty? Who’s on the other side doing the buying?
As Bitcoin prices continue to fall, is this the end of the line for Bitcoin? And as (almost) all the other coins and tokens are highly positively correlated to Bitcoin if this is the end of Bitcoin, is this the end of cryptocurrencies?
It’s in our nature to follow the crowd, and it’s also in our nature to look to “experts” for guidance. We want to know it’s safe before we act. This behaviour is one of a group of biases that causes herding.
And there are people out there who not only know all about this collection of biases, they regularly exploit them…
Prices can go up on less turnover because there are more willing buyers than willing sellers and not because there’s thousands or millions of buyers. It’s a ratio, not an absolute number.
And when prices start trending more and more people start watching. The more they wait, they become more emotionally engaged and play vivid images in their heads seeing pictures of what could have been.
It’s electronic cocaine for your mind.
We all have a potent concoction of biases influencing our behaviour.
The antidote is to be aware they exist.
Excitement, anticipation, awe. The thrill of seeing something new for the first time releases powerful chemicals in your brain. Swimming in a cocktail of dopamine you see the potential of your discovery. At last, you have the key to the life you are destined for. The life you’ve always wanted.
On the 23rd of May 1995, three well-dressed twenty-somethings walked into a casino in Monte Carlo.
It was nothing to do with luck.
It’s fabulous, it’s glamorous, and it’s true.
But our heroes had a secret.
“What separates the consistent winners from everyone else?”
The consistent winners, the five percent, profit consistently from the other ninety-five percent. They’re systematic and ruthless.
If you sit down in front of your computer, fund an account and begin trading in cryptocurrencies (or any other financial market) without an understanding of edge, position size and money management, the odds are high you are going to become a fully paid-up member of the 95% club.
You might as well take your seat at the slots in your local casino.
Perhaps you’re thinking, you’d never play the slots because it’s a mug's game.
If you start trading cryptocurrencies without an understanding of your biases, (and how they affect you), and without understanding your edge, you might as well be sitting in front of the video game reels pressing the bet button.
Going against the crowd is hard because acting alone and answering only to yourself goes against your inbuilt biases and years of experiential life conditioning. We are trained to recognise authority and respond to an authority figure.
We think we’re in control. But studies in behavioural economics has shown we are not. We use a personal collection of subconscious biases and behaviour patterns to help us get through the day.
It could be a perceived expert from your bank or brokerage. It could be a TV talking head, or it could be an article in a newspaper. If you’ve taken a position and you read, see, or hear something that goes against your authority, it will be difficult for you to resist second-guessing yourself.
If you aren’t clear about exactly why you should take a position, you’ll find many catalysts waiting to either stop you from getting in or spook you into getting out too early.
It’s all over the internet; it’s all over the news. It’s the next big thing, and it’s going up without you. FOMO, regret, and thoughts of what could have been.
You can’t take it anymore. It’s up again — ten days in a row. But today you’ve made a stand, you’ve funded your account, and you’re just about to hit the buy button.
This is why most people lose. A cacophony of bias in your head, it’s almost like you’re hypnotised, and not in control of your senses.
There’s a way to save yourself. A way to snap you out of the trance you’re in, a way back to the rational you.
Pushing the envelope, and on the edge of out of control. This is “Chuck” Yeager describing what it felt like as he broke the sound barrier.
And so it is with trading. Trading and investing in cryptocurrency markets is like traversing a fine line between success and failure. You’ve got to take the best information available to you and make a decision. It’s impossible to know the outcome. There are no guarantees. None.
How do you know when to push it? How do you know when to punch through?
It’s all about trust.