Less trading; more education
Lots of ‘people’ say, “it’s a good time to invest in Bitcoin.” This financial frenzy of hopping on the Bitcoin “bandwagon,” is the hottest and latest thing to do as well as trading in many other crypto-currencies, cause of the break-neck speed at which Bitcoin has risen in price. But it doesn’t mean it’s a good time to enter the currency market.
While rising prices has made many a small fortune, rising prices alone is not a good reason to buy. Studying and educating yourself on the market before entering it, will determine if trading in crypto is a wise decision.
What makes cryptocurrencies a good buy?
Given that, I’m not surprised by James Altucher’s CNBB’s article that discusses Bitcoins and Crypto-currencies growing popularity. James is an entrepreneur who is a former software and website developer who teaches and trades Crypto.
As James states, “Bitcoin’s giant move upward is far from done. Society has made major changes to its currency a few times in history: Gold replaced barter as a transactional currency; paper money replaced gold as a store of value; and bitcoin and other cryptocurrencies are going to replace paper money as a transactional currency.”
So Altucher is very optimistic about the future of these hot to trot currencies.
These are his 10 predictions for cryptocurrencies:
- At least one country’s currency is likely to fail soon — likely Argentina or Venezuela. This will lead to mass adoption of bitcoin among that populace. That will in turn lead to bitcoin rising by more than $50,000 when it happens.
- Mainstream banks will accept bitcoin, and will start offering storage and software access. They will also create cryptocurrency derivatives — as the CME is about to start doing.
- Despite the optimism, there will be a massive wipeout, and 95 percent of the alt-coins out there will go away — just like the dot-com bust. The surviving coins will go up a ton. This will happen within next four-six months.
- The U.S. government will secretly start accumulating one of the smaller cryptocurrencies to make it easier for gray-area transactions with other countries. This has already started happening but will really start to ramp up in 2018.
- China will invest heavily in another cryptocurrency, but probably not bitcoin. China will want to have a cryptocurrency that is competitive with bitcoin, but under its centralized control. This will, in general, provide legitimacy to all cryptocurrencies.
- One big problem with cryptocurrencies now is their volatility. At least one — basecoin — will likely dramatically reduce that in 2018.
- More companies will pay freelancers with crypto, which will lead to calls for tax reform. There will need to be greater regressive sales taxes, which will ultimately require government cuts and eventually less power for national governments. This is a long-term prediction.
- In the same way the internet changed the monopolistic phone industry, crypto will change the monopolization of government-backed money.
- A new government organization will be created to analyze regulation on cryptocurrencies. This will, ironically, lead to a huge upswing in bitcoin and coins that provide actual utility.
- Thousands of crypto companies will be created and go public, but only a few will be massive successes.
Why most crypto currencies will get wiped-out
As enlightening as these are, what I found really enlightening about Altucher’s article was the reasons he gave for why 95% of these currencies will be wiped-out.
The number one reason for the wipeout, regardless of whether it’s a good or bad idea to trade, is because most potential traders don’t know what real money is. The first step potential traders should be highly motivated to take is understanding the difference between real money and fake money, in order to make an informed decision. There is a big difference. Crypto or paper money isn’t money, it’s currency, and all currencies are designed to go down in value over time. Building and protection of our wealth is critical, but the purpose is defeated if you are not well versed on the difference between money and a currency.
Next, most potential traders don’t understand the decision process of buying high and selling low. Buying high is the action or decision of being emotionally bullish, while selling is the action or decision of being emotionally bearish. Great traders look beyond those technical emotions by questioning the underlying fundamentals of, “How do I position myself to win either way?” Or, “How do I profit whether I buy or sell?”
Lastly, many new traders fail to understand how to financially position size themselves. By making sure they can afford to lose the bet they place. They get too caught up in the hype, often taking unaffordable positions and or poor timed one’s. If I could only afford to lose $1,000 on Bitcoin, I would only have that amount of money in there. So that if I lost it, it would knock me out the game.
Breakingdown James’s observations, it’s in line with what I emailed out to our AC Community members recently (yes, they get exclusive emails from me). In that email, I talked about the importance of financial freedom education, and how it acts like a filter that allows you to be able to filter out the good from the bad when it comes to financial advice. How it has saved me from many mistakes. As I wrote:
There have been many times when I was managing or driving an investment vehicle. And if I didn’t have the filter of financial freedom education to help me filter out the bad financial information or advice, I would have been in big trouble.
In fact. It causes people to lose out on great investments as well. Cause they don’t have the filter of financial freedom education to understand what a great investment looks like.
I understand that lesson didn’t come from doing. They come from study and simulation first, by playing the CASHFLOW 101 board-game. Those understandings keep one, “disciplined”.
At the end of the day, what I’ve learned, and what James writes about, are the priceless lessons that come from simply studying financial freedom. That’s the only way to be able to make informed intelligent tough decisions as your own financial leader.
Deciding to trade or not to trade
Even though I commend anyone who has the courage to put out money to trade, it takes more than money—nor does it take an academic education. Rather, it begins with study and practice, patience, and yes, lots of discipline that helps you to successfully trade. Giving you the best answers to trade or not to trade
I ‘m always blown away when I read facebook posts of inexperienced people saying, “Man, I need to buy some crypto.” Or “Ok I want in. How can I buy some? I can invest some money each month.” Few understand or respect the real history of money or skill it takes to successfully trade currencies. What it takes is managing emotions. The secret to personal financial leadership.
The #1 reason most new traders lose is simply because they lack emotional training, the they need to handle the upswings and downswings of being a trader. Some people call it fortitude. Others call it staying power. In the CASHLOW Clubs, it might be put this way: “Figure it out, think, don’t try to get rich quick, stop gambling, stop choosing the big deals, and start small. Your not getting out of the rat race—because your looking for short cuts.” I think you get te picture.
Another important reason why most beginning traders fail is because they are employees, not traders. The world of an employee is very different from the world of a trader. One big difference is the habit of earning a paycheck.
If you think about it, you’ll realize that earning a paycheck is straightforward. Do you think trading is straightforward? It might be, if you are emotionally tough enough.
If an employee does not get his or her “pay” they call their union leader or file for unemployment”. Most traders must be strong enough to handle, sometimes going for years, without “making money.”
It should go without saying, but in order to gain better control of your trading emotions, you have to let go of your employee minded emotions. Starting small is a good way to start trading, but you need to actually cut the cord at some point and go all in.
Who can be a trader?
So, does all this mean that beginners shouldn’t mess around with trading cryptocurrnecies? Not at all! Common people success stories is enough proof. But it does mean that simply having the money or calling yourself a trader isn’t enough.
You have to actually study beforehand.
The good news is anyone can be a currency trader—from the young to the old—if they’re willing to put invest the study time. The opportnity is there to win and the opportunity is there to lose.