Crypto Prices Are Falling! Should I Sell?
We’ve all heard it, whether you are the one asking the question or like me having to deal with a bombardment of messages from crypto investors looking for guidance. Each one panicking as they watch the money they risked that should have been for their mortgage trickle away before their very eyes. Here’s a video you may find amusing…
The veteran crypto community has become used to the huge spikes in price, both upwards and downwards and no matter how many times prices fall and the media start reading out their crypto obituary claiming crypto is dead and the crypto era over, they are cut short by the price regaining it’s original place followed by a rocket like price increase taking crypto to new highs.
There is a reason for prices decreasing, sometimes for good reasons such as Litecoin’s founder Charlie Lee selling all of his Litecoin(LTC) holdings back in December 2017. Of course, if the founder himself is selling then that would indicate to any invested in Litecoin that there is some sort of problem, otherwise why would the founder who supposedly believes in his project be selling. That would explain why the majority who had invested in Litecoin decided to sell, which took the price from a $375 high down to $145, more than half it’s value. But sometimes prices fall somewhat unexpectedly and for ‘no good reason’ creating a domino effect of falling prices…. but here’s why.
First here is a look at a screenshot of the latest price fall that happened
When this price crash happened, the general sentiment from ‘crypto noobs’ was to panic. So what caused the price crash, and for that matter, previous similar price crashes?
Well firstly, you have cryptocurrency traders who have open buy orders hitting their take profit levels. What this means is that traders set a level called a ‘take profit’, that when price reaches that point, their open orders close and that trader takes any profit they have made up to that point. When everyone is buying, the price goes up as the demand is higher, but once the buy orders have closed, what is left is the sellers. This causes price to retrace, meaning price falls slightly due to more traders selling than buying.
This is normal in trading financial markets and is the cause of price fluctuations, other than news, which professional traders know…but that’s the problem, the vast majority of crypto investors are not professional traders, and have very little knowledge of financial markets and how they work. The majority are people who have heard of others making money in a new popular trend called ‘Cryptocurrency’ and decided to throw their money at it because everyone else is and they were afraid to miss out. Their knowledge in crypto and blockchain is limited and most of what they do know comes from the media…So what happens next.
The media start reporting on the price fall, using over exaggerated words like ‘Crypto Prices Plummet!’ or ‘The Fall Of Crypto!’. Whilst ‘cypto veterans’ who understand how financial markets work, what cryptocurrency and blockchain technology is and what it’s goal is and role in the world of the future, the crypto noobs do not.
Their source of info, other than their friends, the media is shouting about prices are falling and it’s the death of crypto currency, mainly because those headlines contain the keywords to bring in the masses to read their articles, but also because a lot of the mainstream media writers aren’t actually part of the blockchain revolution and crypto community themselves so report on the top layer whilst neglecting and some even being unaware of the under-layers that make up the whole industry that aren’t so easily destroyed.
So the media add to the fire that crypto is burning and that all should abandon the building, causing crypto investors to panic and sell at a loss with the mind frame that they are making a loss but not losing all their money. This causes prices to fall further adding to the overall sentiment of crypto noobs that crypto is dying and it’s time to abandon ship.
So crypto prices fall, but how do they recover. Well firstly, here is a screenshot of what happened after 16th January 2018.
Bitcoins price recovered to $12,825 just four days after falling to a low of $10,528 on 16th January and Ethereum rose back over $1,000 to $1,151 three days after falling to a low of $798 on the 17th January 2018. Prices recover as the ‘veteran’ community, who are both knowledgeable about what cryptocurrency and blockchain is and how it is going to impact the future, take advantage of the new low prices, along with crypto traders for the same reason. You can usually hear these people (myself included) posting their excitement to buy amongst the voices of chaos screaming in panic to sell, as during these price crashes is the best time to buy cryptocurrency at a much lower price than the market price has reached.
So what follows after prices recover, the media start shouting about crypto prices stabalizing, about how crypto is not dead, which attracts the crypto noobs back, causing prices to rise even more due to the new demand. This is when you usually hear people say things such as “if only I bought during the crash! I’d of made X amount of money…”.
This process happens multiple times across a year. Here’s an image posted by Phillip Nunn on my LinkedIn feed that shows this price fall and rise happened four times across 2016.
So, to the question “Prices are Falling, Should I Sell?!”, my answer is no! Hold, swallow your fear, blockchain technology is not going to be destroyed anytime soon, and as long as the crypto you invested in is based on the factors I spoke about in my ‘Crypto: Don’t Believe The Hype’ post — https://medium.com/agentnotneeded/crypto-dont-believe-the-hype-f6c241b2eadb then you should have nothing to worry about.
The overall crypto trend is up!
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