@PalmBeachGroup Update
Overcoming the Five Stages of Grief in the Crypto Market As the price of crypto assets plummet, many of the new “investors” in the space are getting badly hurt.
I put “investors” in quotes because much of the new money that came in since November 2017 appears very uninformed.
Instead of studying each project in detail, I’m reading stories about people who rushed in on what “sounded cool.”
Instead of taking a measured approach on position size, reports suggest they borrowed against credit cards and took massive bets.
These poor folks are going through what famed psychiatrist Elizabeth Kübler-Ross called “The Five Stages of Grief.”
They are: denial, anger, bargaining, depression, and acceptance.
I’ll go over each…
The Five StagesStage 1: Denial. Market starts tanking: “This is not happening. Everything is fine.”Stage 2: Anger. Market drops even more: “How can this be happening to me?” “Why is everyone else so stupid?” “Blockchain is the future.”Stage 3: Bargaining. “Just let me get one more rally so I can get out at even, and I promise I’ll never speculate this big again.”Stage 4: Depression. “Oh my god, my wife/husband/boyfriend/girlfriend is going to kill me.” “I’m a failure as a human being.” “I wish I were dead.” “My life is over.”Stage 5: Acceptance. “Let me at least salvage something from this market.”Stage five ends with them selling their investments at depressed valuations and swearing off cryptos for good.
How to Deal With the StagesIf the above example rings true for you, then please pay close attention. You’re not an idiot. You just got swept up in the euphoria of the market.
Yes, the blockchain and crypto assets are the future. But as with any new game-changing leap forward—whether it was the railroad, automobile, or the internet—it will always go through boom and bust cycles.
The good news is we are still very early in the blockchain boom cycle. What’s great about being early is the market will bail you out of having bad timing.
Here’s what I mean by that…
If you look at the tech boom that spanned 1990–2000, even if you had the worst timing and bought every market peak from 1990 to 1998, you would have still made money.
Since I started recommending crypto assets in April 2016, I have always warned my subscribers that crypto assets are more volatile than any asset class they’ve ever traded.
Down 94% -
June–November 2011 from $32 to $2Down 43% -
June 2012 from $7 to $4Down 80% -
April 2013 from $266 to $54Down 85% -
November 2013–January 2015 from $1,166 to $170Down 40% - September 2017 from $5,000 to $2,972Down 68% - January 2018 from $19,206 to $6,000To combat this volatility, I’ve always instructed my subscribers to use small, uniform position sizes.
Our rule of thumb is if you’re a small investor, place no more than $200–400 per position. If you’re a big investor, then you can bump that up to $500–1,000 per position.
The key rule is never risk more money than you would be comfortable losing. Another big rule is NEVER BORROW MONEY TO FUND A CRYPTO INVESTMENT. Having so little money at risk gives you the staying power to navigate the massive volatility inherent in this exciting new asset class.
As you can see from the chart below, bitcoin has been volatile, but making money in it has been quite easy.
All you’ve ever had to do is put on a position, be patient, and ignore the volatility.
For the last two years, many of my subscribers have done just that and have become millionaires in the process.
