Volatility Is Your Friend

I hold Bitcoin, yes I do, I hold Bitcoin, how about you? A summary of some of my conversations of late. As with many Bitcoiners when I found out about this magical internet money I shouted from the rooftops on how it would change the world, even when I didn’t know all I know now, I was still utterly convinced that “this Bitcoin thing” would become the thing in the new future.

My big mouth naturally got me burned and ridiculed and had social media faeces hurled ay my head and I forever am marked with the cryptographic Scarlett letter.

From No Che to Satoshi

Having the orange B hanging over my head without much of defence after 2017, I did what any Bitcoiner should; I shut the hell up, started doing research and stacking sats in silence.

Now that we’re back to nose bleed levels, or rather relative nose bleed levels. My idiot ass now looks like a genius, and suddenly people want to know about Bitcoin, of which I have plenty of information about, and that’s all you’re going to get from me.

Regardless of the price of Bitcoin, one of the major hang-ups about investing in it is the volatility. The price in fiat can go up down or in circles, and 30% of its value can be lost in a matter of minutes.

When you measure Bitcoin with a dying asset class as the measurement tool, it’s going to show you the truth, and people don’t like the truth, so they don’t like Bitcoin.

The fact is you still have the 0.01322341 satoshis you always had; the dollar is trying its best to find a price for it as market sentiment ACROSS THE WORLD changes.

A lot of people forget that this technology moves about 500 million USD in value a day and shits going to happen when you’re a tiny ass market cap.

Volatility shakes out weak hands

You get different kinds of investors in any space, some speculators, some scalpers, some market makers and some long term HODL’rs. As a trader, you may make a few good trades, but you’re not always going to be on the winning side, volitlity hits us all in the face, and eventually, the weak hands have their Bitcoin taken away by the strong hands.

As the allocation moves towards those with the strongest conviction, the price tends to rise and shows you the real market sentiment.

Volatility drives price discovery

Bitcoin is an internationally traded asset that is bought and sold 24 hours a day 365 and cannot be stopped. As humans react differently to macro events in their country, opposites rise, people sell off or buy-in because of those situations, this drives price discovery.

Bitcoin can quickly reveal if there are issues in a countries currency and so far, it’s not been wrong as a barometer of where your countries monetary policy stacks up next to Bitcoins.

Volatility drives better capital allocation

As I mentioned, earlier volatility shakes out the speculators over time, those trying to pick up pennies in front of a steamroller. As capital moves into weak hands, those who want to get their hands on Bitcoin have to render quality service, or people will not part with their capital.

The more effective deployment of capital, the more value is brought into the space.

Hold only as much as you can afford to lose

If you’re thinking about getting into Bitcoin, but you don’t like the price swings, then only own as much as you feel wouldn’t bother you or keep you up at night. Where I am at around 30% of my net worth in crypto, you can do 1–5%.

Sure you won’t get a massive nominal ROI because you have less skin in the game, but you are part of the journey, and you’re not freaking out every day.

Those crazy enough to risk large amounts of capital are those who have well, way too much conviction and are irresponsibly long and if they’re right, they’ll get a return for their astronomical bets.

Source: Leofinance

Co-founder of nichemarket, a South African Business Directory and digital marketing agency — https://www.nichemarket.co.za/