The other night, while on my terrace, sheltered under a flimsy tarp, I had one of those ‘moments of insight’ (it seemed meaningful at the time).
Rain poured from the sky in volumes exchanges can only dream of with the local weather observatory classifying the storm as ‘black rain’. Waiting it out, I stumbled upon a YouTube video which showed some astronauts floating around while doing repair work at the International Space Station. Stretched out behind them, I saw Earth.
Dense clouds loomed ominously over this part of Asia, but unlike the chaotic reality on the ground, from up above, the world seemed unalarmed, calm and serene. Indeed, from this vantage point in space, literally and figuratively, all things weigh differently.
Gauging the mind of investors in crypto
The same perspectives co-exist in the crypto space as well.
Those capitalizing on volatility and short-lived opportunities engage in day trading and scalping. They are perturbed by sudden dumps and euphoric during rallies. Aided by technical analysis, this style is largely intuitive and, especially on highly leveraged derivatives markets, presents considerable risk. This includes arbitrage trading, where savvy opportunists look for price discrepancies across jurisdictions and pairs. This is also the mode of engagement where whales are able to exert a disproportionate amount of influence. Especially since after the market crash in March, there have been quite a few (some would say fishy) instances of sudden techtonic price-quakes, followed by prolonged periods of indecisiveness.
At the other end of the spectrum, long term technical traders and HODLers are more focused on the fundamental principles underlying crypto assets. Considered from a macro socio-economic perspective, these investors pay attention to larger cycles of growth and decline, risk of inflation, encroaching surveillance, and other factors that pertain to privacy, liberty, and trust.
In my view, both perspectives are heavily influenced by the 2013 and 2017 rallies, where prices rapidly rose by 7,976% and 2,866%, respectively – giving birth to a new class of Bitcoin millionaires. Of course, there is nothing wrong with the bullish expectations this has introduced into the space, and there is no denying that Bitcoin has been an exceptionally successful asset in terms of returns over the past decade (+9,000%). But with an asset that relies so heavily on sentiment (perhaps more so than real-world utility at this stage), I believe the space would benefit greatly from a more disciplined and measured approach to things.
For this reason, with AAX, we’ve been very committed to developing educational materials and driving a critical discourse to aid our community in developing a stronger and more sophisticated trading culture.
Seeking higher grounds
FOMO and FUD are powerful drivers of price action, but allowing ourselves to be led by these emotions puts…