We always hear the saying “time is money” in the investing world, but for some of the smartest minds in the business, it’s “patience is money.” Take Jim Chanos, for example. Known as the “King of Short Selling,” Chanos didn’t earn that title by jumping on every market volatility.
In 2020, Chanos spent months analyzing Wirecard, a German payment processing company. While everyone was praising the company, Chanos smelled something was off. He waited patiently and observed, and when the time was right, he executed his plan. The result? Wirecard collapsed in a stunning accounting scandal, and Chanos made a fortune thanks to his patience.
Take also the legendary Julian Robertson of Tiger Management. Robertson would sometimes spend years—yes, years—researching before making a big decision. His meticulous approach led to an average annual return of 32% over two decades. That’s not just impressive, it’s astounding.
Quality over quantity:
Most traders think that the more trades they have or the more active they are, the more profitable they will be!! Let’s take a look at some proven facts. A study conducted by the University of California found that the most active individual investors underperform the market by 6.5% per year. That’s painful.
According to the DALBAR report, the average equity fund investor underperformed the S&P 500 by 4.35% annually over 20 years. The main reason? Bad decisions in timing of buying and selling.
Surprisingly, a study by finance professors Brad Barber and Terrence Odean found that the most active traders were the worst performers. The top 20% of active traders underperformed the market by 5.5% per year. That’s like paying a hefty fee for losing money!
The Cryptocurrency Dilemma: Wait or Make a Move?
Now let’s talk about the elephant in the room – the current crypto market. I talked about setting a bottom for Bitcoin at $16K and Solana at $14 in January 2023. That was a good call, but what about now? The truth is we’re in a bit of a dark place. The bull run hasn’t officially started yet, but there are some interesting signs.
Bitcoin halving in April 2024, which has historically been a catalyst for bullish waves.
Institutional interest is growing, with major companies like BlackRock applying to create Bitcoin exchange-traded funds.
Global economic uncertainty may push more people towards cryptocurrencies as a hedge.
But here’s the question: timing the market perfectly is nearly impossible, even for professionals. Remember, as Warren Buffett, the “Oracle of Omaha” himself, says: “We don’t need to be smarter than others; we just need to be more disciplined than them.”
So, what's the plan? Here's my take:
Dollar-Cost Averaging (DCA): Instead of trying to time the market, consider investing a fixed amount on a regular basis. This strategy has been shown to outperform all-in-one investments 68% of the time in bear markets.
Set clear entry points: Decide on specific price levels or market conditions that will trigger your entry. This will remove emotions from the equation.
Keep some cash: Don’t invest everything. Keep some cash reserves to take advantage of potential downturns or unexpected opportunities.
Focus on the fundamentals: Use this time to dig deeper into projects. The next bull run may not lift all investments equally.
Avoid common mistakes:
Let's focus on some common mistakes to avoid, especially in a volatile market like the cryptocurrency market:
Overtrading: Remember that every trade has costs. A study by Barber and Odean found that portfolios with high turnover underperformed portfolios with low turnover by about 7% per year. Stick to your strategy, and avoid constantly fiddling with your portfolio.
Emotional Trading: The volatility of the cryptocurrency market can be a rollercoaster ride. But remember, emotions are bad investment advisors. A study by Dalbar showed that the average investor underperformed the S&P 500 by 5.19% annually over 30 years, largely due to emotional decision-making.
Ignoring security: This cannot be stressed enough. Chainalysis’ 2022 Cryptocurrency Crime Report showed that crypto thefts increased 516% in 2021, to $3.2 billion. Use cold wallets, enable two-factor authentication, and treat your private keys like treasure.
Over-leveraging: In 2021, when Bitcoin dropped from $47,000 to $30,000 in a matter of days, over $8 billion in leveraged positions were liquidated. This is a harsh lesson in the dangers of excessive leverage.
I know the temptation to act and do anything can be strong, but sometimes the most powerful move is to stand still. As the great Jesse Livermore said, “It wasn’t my thinking that made me make the big bucks; it was always my waiting.”
This doesn’t mean sitting back, it means being prepared, researching and waiting for the right moment. Set your strategy, stick to it and don’t let the market noise distract you.
Remember, we are playing a long game here. The cryptocurrency market is still young and has tremendous potential. Whether you decide to start accumulating now through a dollar-cost averaging strategy or wait for clearer signs of a bullish wave, the key is to approach the market with a clear mindset, extensive research, and strict discipline.
Ultimately, your success in this market will not be determined by how actively you trade, but by how well you stick to your strategy and manage your risk. So take a deep breath, do your homework, and be prepared. Whether the bull run starts tomorrow or next year, you’ll be ready to make the most of it.
#BinanceBlockchainWeek #Binance #write2earn
