Why Most People are Bad Investors
The other day, I was doing some research on $MATIC, a token that helps crypto investors interact with different blockchains, and saw something that I thought was really interesting.
For the first year of its existence, the altcoin barely moved in price at all. Check it out:
But then I looked closer at the chart.
A period of time that on today’s graph looks flat was actually incredibly tumultuous.
And that’s not to say that these dips and pumps are meaningless — no, just the opposite. The difference between buying $1000 of $MATIC at two cents and buying $1000 of $MATIC at four cents is 25000 $MATIC tokens.
That $1000 investment at the December 19th peak of 4 cents per coin would have felt like a disaster just two weeks later, with your investment diving down to $0.012 cents per token, losing $700 on your initial investment.
But if you would’ve held on until today, you’d now have about $33,000. Not bad for 1.5 years of waiting.
With your $MATIC at $165, you would’ve felt like a complete failure. And if you didn’t sell at the all time high of $2.88, today you’d probably feel like a complete failure too, now that $MATIC is down over 50% from its all time high.
I think a lot of cryptocurrency investors get really carried away with ‘HODL’ and ‘DIAMOND HANDS’ and all kinds of memes, but if you pick a good project, the gradual compounding will make early 5%, 10%, and 30% pumps and slides look flat.
Most projects look similar on a large enough timescale. Even ethereum and Bitcoin follow the trend.
Look back far enough, and even slow-moving indexes like the S&P 500 follow this idea of perspective-it’s really just exponential growth, slowed down. But those ups and downs, they sure as hell feel emotional.
Now, as we sit at an intermediate point in cryptocurrency prices, it’s easy to think you’re too late, or that you should’ve sold already, or that there’s too much volatility.
It’s easy to get psyched out on the dips, sell when it goes ballistic. And whether you’re a HODLer or a dollar-cost-averager or you invest based on rainbow-regression bands, a little bit of patience and a look at a longer timeframe can always help smooth out the bumps.
It might seem obvious, but a broadened and patient perspective always helps us become better investors.
Jack Niewold
Founder, Crypto Pragmatist
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