I don’t care what the crowd thinks, but the market does.
It’s unfortunate, but it’s something we have to deal with, especially in cryptocurrency: idiots with money who can make a difference.
The good news is that their effects are mainly short-term. To deal with the idiots messing with your money and still be able to sleep at night, you need to understand something basic about how financial markets work.
Take inflation, for example. The feds are calling it “transitory,” and I’m calling it a load of crap.
When talking about inflation, “transitory” means the inflation that was caused by a particular event at a specific time. Like a global pandemic knocking the world economy on to it’s behind, for example.
Everything we’re seeing now are the aftershocks of COVID-19 shut downs and disruptions.
In most markets, the ups and downs of every day commerce are insanely complicated and effects like these aren’t felt immediately, but later on. That’s what we’re seeing now.
It’s like a really long runaway train. It takes a long time to get it rolling since it has so many heavy cars attached, and once it’s moving, it takes a while to slow down and stop all of that weight…
But cryptocurrency is different…
It took us 18 months for the worst economic effects of COVID to filter all the way through from supply to consumers who are now grappling with higher prices everywhere.
The economy took 18 months to unravel, and is going to take at least that long to glue itself back together. That doesn’t mean inflation isn’t real, it just means there’s no way the Fed can really reverse it.
Most people in the market see this and don’t understand what they’re looking at. They mostly see a chart with some bad trendlines on it and panic.
They assume there’s something fundamentally wrong with their assets and sell off, or they demand the Fed do something about a problem that is totally out of their control.
That’s why it’s so important to keep in mind that short term trends don’t matter. And in cryptocurrency, they really don’t matter. Because in the long term, cryptocurrency has more potential than any other stock out there right now.
Factors like usability start to make a difference. The efficiencies that crypto can offer to the entire economy, and potentially every user on the planet, start to have bigger appeal.
Adoption will be driven by whatever is easiest, with the least onboarding barriers, and since crypto is still so new, adoption will overpower any macroeconomics affecting the market.
In the meantime, the same people who misjudge the markets constantly and sell in blind panic will exit cryptocurrency, too, sending prices in a downward spiral.
We can’t get away from them. We can only understand the limits on how much they matter.