This sort of thing has been my profession for almost 30 years now. I can go on all day about it, and written the books and materials used by a lot people, professionals and non-professionals alike.
At the end of the day, the beauty of it is in how one distributes risk and how one modulates risk exposure to any ONE instrument or decision (crypto, stocks, trading cards, a gun collection) as part and parcel of ALL the things he/she gets into, in his life... hopefully to add up to a happy situation. That combination of ALL (things we risk) is what is unique to each and every one of us.
The way that each of us distributes (manage) our collective risks is where it's at.
Risk and rewards are forever intertwined. No one really wants the potential rewards of any ONE thing that will put ALL the other things at risk.
Thus, in a very hot (volatile) market like Crypto, it's absolutely crucial to modulate risk exposure, and minimize risks associated with it. There are 2 basic ways to do that:
(1) HOW MUCH of one's portfolio (or even net worth) that individual is going to risk. (Think "how many of your eggs into that ONE basket"). This is easy to do. One can think about it and decide "I will put in X% of my net worth into this"). And stick to that decision for a while.
(2) WHEN he wants to execute #1. In a very volatile market, it is crucial to distribute risk this way too. For example, he might decide (after much thought) that he will expose $10,000 of his money into Ethereum. It's not too wise to send an order for all of it, just a because he decided to do so. He can distribute the risk of his entry point across 5 different days @ $2,000 each, buying every time it's "on sale" or when the market is down. Vice-versa same goes for exit point, when he decides to take profit (or cut loss).
Lastly, A single crypto, stock, fund, option isn't anything special, it's just an instrument. And we must always be ready to cut it lose if it's not fitting into our "Big picture" scenario. I don't just mean that when things go WRONG, that also applies to when things go RIGHT. For example, he may have put 10% of his net worth into Bitcoin and it multiplied 10 times. Now it's worth 53% of his net worth. Half of his financial position is dependent on its price movements - is that still fitting his ideal Big Picture scenario?
There's a lot more to it. But those are the fundamentals. Managing ALL your risks, not giving too much importance to any ONE thing is where (I think) the beauty is at.
I would really like to see more of your analysis. IMO it seems you have a lot of knowledge that took someone like me a long time to learn but you summarized to cleanly in a few paragraphs.
In other news, we just saw a big pump followed by a pullback. This week, it's looking more and more likely that the Fed will cut rates somewhere between 0.25 and 0.50 basis points. Whether that’s good or bad depends on your perspective, but the push to devalue the dollar is fully underway.
You can see it everywhere: new highs in the stock market, and strong moves in gold and silver. Cash is flowing into hard assets to get ahead of the hit it’s about to take.
Personally, I’ve been shifting out of cash and into other assets as part of my strategy. The
Clarity Act is expected to pass in the next couple of months, and that’s going to open the door for stablecoins to play a big role in addressing a growing problem: treasuries and bonds with no real buyers left. The
Genius Act changes how stablecoins work, instead of being minted directly by the government, they’ll be issued by private companies.
Sovereign buyers are pulling back purchases and increasing sales, private companies will step in to buy U.S. debt. Meanwhile, central banks have been
dumping dollars and loading up on gold, which is why the dollar index has been sliding with no real sign of reversing.
If you’re holding large-cap stocks, you’ll probably do well. There’s a good chance a wave of newly printed cash will flood into the market once these policies kick in for small caps. But if you’re sitting on cash alone, you’re going to see its buying power erode fast over the next few years.
Big picture, there’s a lot of change happening right now. Normally, cash is king, but at this point, it’s only useful to keep on hand for buying opportunities during market pullbacks. Outside of that, holding too much cash is basically a guaranteed way to watch it lose value.
Do you think the economy will get better or worse in the near future? There's so much conflicting information, we all have to make some adjustments.
