If you make a million dollars and then lose it all, you’ll feel way worse than if you never had it at all. The math may not add up, but humans are built to survive in nature, and that means holding on to what we have.
This is what’s called loss aversion, but what works fine for nature can cost you big time in the crypto market. Imagine somebody bought Bitcoin at the end of March 2017. They got onboard just in time for the big late 2017 rally. Then, imagine they held it until the same time a year later.
They’d have gotten about 7x gains in about a year. Great, right? Only, that person is probably just kicking themselves for not selling three and a half months earlier when it was more like 19x gains.
But by letting that feeling get the better of them, they’re missing two important things. First, they still made a ton of money in just one year, and second the overall potential of Bitcoin was still strong and unrealized.
Years later at the end of 2022, the 19k price point that was an incredible peak in 2017 is now the baseline, and a year ago, we saw prices that were three times that.
So, if this investor was so shaken by loss aversion that they immediately sold everything, took their gains, and ran as far away from the crypto market as they possibly could without looking back, they would have missed out on the chance to get back everything they missed. With careful profit taking, maybe even more…
Keep Your Eyes on the Prize
If this person put $5,000 into Bitcoin in March 2017, then they would have cashed out with $35,000. That’s great. Maybe it’s a new car. Maybe it’s enough to put one kid most of the way through a state college. Maybe it will pay off a major credit card. But day to day, life will still be the same. It’s sure not “retire early” money.
And that’s why you can’t let loss aversion put you on defense. You can take profits sure, but you have to keep looking for the next fundamentally sound trade or get stuck with wins that are convenient, sure, but that won’t change your life.
With general A.I. technology on the horizon, we may be seeing the last chance for a human trader to really change their life by being smart about the market. Don’t let loss aversion push you into wasting it.
The 5T’s strategy is all about building wealth at a steady pace. At all times, we are watching the market and looking for opportunities to make moves with the best possible odds of returning a strong profit. This is a long-term strategy – no one single investment move is meant to turn your life around completely.
Betting everything on one trade would be absolute insanity. The “legend” of the successful crypto trader is a college kid who spent twenty bucks on Bitcoin in 2012 and wound up rich enough to never work again. Don’t get hypnotized by the legend, getting rich that way is like winning the lottery. We can’t count on it. It can only happen by blind luck.
Instead, the idea we’re going for is to stack one winning investment on top of another over and over again until you end up with 100X profits or more. It’s a continuous process, and the longer it goes on, the higher your potential profits get.
That’s why I need to stress the importance of staying the course and sticking with the program. Thanks to the natural Loss Aversion instincts that everybody has, you’ll start feeling more cautious the better you start doing.
The more money you make, the more you’ll want to avoid taking any risks, but letting this instinct get the better of you can lead you to cash out long before you reach your goal.
But the 5T’s investing system is designed to keep risks managed and consistent. If you start making decisions based on how much you’ve already made instead of what crypto you are trading and what’s going on in the market, the system stops working.
The system was designed to grow wealth, not preserve it. And by the way, growing your wealth is really the only way to preserve it anyways, thanks to inflation. If you start going off of the plan due to loss aversion, you’ll miss opportunities and may even lose money due to not following through on opportunities.