Op-Ed: Know when to fold 'em, know when to hodl

Joshua Waddles
Staff Writer

Anyone who happened to drive by the Malvern Daily Record office this week might be wondering why they saw me drop to my knees on the sidewalk screaming “NOOOOoooooooo!”

Well, it’s because the value of Bitcoin dropped like a rock. Actually, that’s not a very accurate assessment. What happened to my portfolio is more like a story I heard years ago: there was a fellow in the bottom floor of his house who arranged a pulley to get a barrel full of bricks off of his second floor balcony. He removed the rail and after he managed to get the barrel of bricks over the edge, the barrel dropped because it weighed much more than him, yanking him up on the rope. The barrel hit him as he fell, then he kept going up and his fingers got smashed in the pulley. After the barrel hit the ground, the bottom fell out, releasing all of those bricks, so then the man fell and hit the barrel on the way down again, landing on that pile of bricks. He then let go of that rope and the barrel fell on top of him.

This all happened because officials in South Korea and China caused chaos in the crypto currency market when they made announcements that the countries were considering a total ban on Bitcoin. This resulted in a drop in value in the Bitcoin market (and by extension, a drop in value in almost all crypto currencies), which resulted in panic selling, which resulted in bigger drops. Now headlines are reading “End of crypto currency” or “Bitcoin melts: GET OUT NOW!”

But the people who’ve been investing in crypto currencies for years are trading jokes, making memes, buying more crypto currencies and refusing to sell, no matter how low the market drops. They don’t hate money, they’re doing this because the people who’ve invested in crypto currencies for years have seen this happen before. Several times, in fact.

The stock market has seen several dips in its time. People who bought stock at its lowest price during the Housing Bubble crash are seeing some pretty nice returns on investment right now, assuming they’ve still got their stocks. Journalists at the time of these stock market dips told people to buy, these are the times that make millionaires.

But now these same journalists are telling people “Get out of Bitcoin NOW! Not in a minute, NOW!” Why is that?

There’s just something about the human psyche. Whenever there’s something new and unusual, many people react with fear. The internet rots your brain, video games rot your brain, TV rots your brain, and according to a historical article I read several years ago, people in the early Victorian Era actually used to say that books rot your brain. It’s pretty much the same thing in this situation, but in the case of crypto currency, there’s an additional problem: crypto currency competes with the stock market and government-issued legal tender.

Most crypto investors are pretty sure that this dip is temporary, whether it recovers in a week or a year (more likely a year). In fact, many say even worse corrections are coming and they’re still not worried. They “Keep calm and hodl on.” This means they hold and don’t sell during these dips. It started from a typo in Reddit during another such dip: “I’m hodling, you guys!” Traders liked the sound of it and it became a meme.

The idea behind “hodl” is that they can hold strong and stop the value of crypto currency from reaching zero simply by presenting a united front and refusing to sell. This philosophy has worked very well in the past, when values dropped from almost $700 or $600 to the $300 range and stayed that way for a couple of years. Some of those who bought at $700 refused to sell during those two years and earned a massive ROE in 2017.

But that’s not to say they advise people to spend their life savings on crypto currency. There are stories of people who’ve refinanced their mortgages or spent their tuition money on crypto currency before this dip. Any veteran investor, of crypto currency or any sort, gives the same advice: “Never gamble with more than you’re willing to lose.” This is doubly true in the infamously volatile crypto currency market, which may or may not be banned in China soon.

And just an important FYI, they would also advise a lot of caution and research. There are over 1,384 different crypto currencies, all with different markets, inventors and designs. Some are great, but some are garbage that will not survive this dip. Some are even scams. Veteran traders have warned for months that Bitconnect, which shut down its exchange on Tuesday, was a Ponzi scheme.

But as for China possibly shutting down, veteran investors still aren’t that worried. China and South Korea are big markets, but if they actually decide to ban crypto currency rather than tax it, they’ll just wait for every other market to grow. This includes Russia, which operates government-own Bitcoin mining operations, and Goldman Sachs which is planning to start its own crypto currency trading desk by June. Crypto currency veterans are no fans of Russia, nor especially of Goldman Sachs, but they won’t say no to the upswing in the markets that will (hopefully) happen in June.

As of December, it’s pretty clear that crypto currency has already reached the tipping point. Governments and fear mongering news outlets can cause massive dips in the market, probably even lower than it is now, but they can’t kill it. As more and more companies and exchanges adopt crypto currency, it’ll be come more and more mainstream. Those governments and institutions who adapt and incorporate crypto currency will enter an expanding market, and those who try to ban it will simply be left behind.

(Joshua Waddles is a staff writer for the Malvern Daily Record. Contact him at (501) 337-7523 or email him at mdrreporter@sbcglobal.net)



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