Crypto prices down… But the pillars remain
Many people are saying fundamentals don't matter. Here's why I think they are wrong.
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Fundamentals matter
Let me start with a little story that might convey my message.
Imagine that you are looking to buy a new house as an investment opportunity.
You already have your own house and are very happy with it. But you had this extra cash and decided to give a chance to a real estate investment.
After performing tons of research you decide to buy a new house, in a beautiful neighborhood that has an enormous potential.
The local government is doing great things to develop the area… they are building more schools, more parks, even a new hospital.
You see that the house is a tremendous opportunity to invest in because it’s clearly undervalued compared to some neighborhoods with the same perks.
So after talking with your partner or some friends (who happen to be great investors), you decide to buy it.
Your plan is to rent it for a few years and, when the house hits the price that you think it’s worth, you’ll sell it.
First few months things go great. You are renting the house, making some passive income, and the house is growing in value.
But suddenly, a financial crisis hits. Tons of people are left without jobs. All assets go down.
Including the price of the house you bought. Now it’s worth way less than what you bought it for.
However, and luckily, you are not hit directly by the crisis.
You still have your job and you are financially healthy. You are still receiving that rental income.
Also, the local government is still building those schools, parks and hospitals. Even better, to reactivate the economy, they are making more!
What would you do? Would you sell your house because of the crisis? Or would you realize that the reasons why you bought the house haven’t changed and be patient about it?
Well… Same thing goes with cryptos, and actually, any investment.
If you had some extra money, did your own research, talked to your partner or friends who know about this stuff, and decided to invest in cryptos… Would you sell after some volatility in the market?
If you know WHY you invested (fundamentals), and these reasons haven’t changed, is it logical to sell in a loss?
We panic. Little investors like you and me don’t have that much to risk and lose.
You cut the loss. And that’s when institutions and whales take advantage of us. That’s when they buy.
So next time the market goes through a little crash like the one you might’ve suffered last few weeks, ask yourself… Has something really changed? Am I going to be the person recked by the whales?
Or am I going to trust my thought process and my research?
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Twitter: @JuampiAranovich
Did I miss something? Any feedback is also welcome, both positive and negative.