Bitcoin’s Recent Rout Rattles Retail Investors

With many retail investors pouring into Bitcoin for their first time ever, the psychology of one of the most volatile markets in the world will play out again as it has countless times before.

Soyou finally did it. How could you not? After all, practically everyone was talking about it.

After months of wavering, you googled how to buy Bitcoin, linked your credit card to a cryptocurrency exchange and with much trepidation, bought your first Bitcoin.

You were now one of “us” a full-fledged member of the cryptocurrency community.

From then on you would be one of “those people” who’d bore their friends at dinner parties (where available) about how Bitcoin was going to revolutionize the world of finance and how central banks’ relentless money printing was going to make Bitcoin the most valuable asset in the world.

That is of course, until Bitcoin plunged 7% yesterday and is now well below the price you bought it at.

A period of introspection and some soul searching typically leads to one of two outcomes — do nothing and accept that this is cryptocurrency, it’s volatile and speculative, and write it off until the next Bitcoin bull run (where available).

Or sell now, tell yourself that Bitcoin is a scam and never mention it to your friends ever again.

And at future dinner parties when someone asks you how the “Bitcoin thing” worked for you, just mumble something and avoid the question altogether.

If any of this sounds even remotely familiar, that’s because it’s the almost inevitable path of a vast majority of retail cryptocurrency investors.

As mentioned repeatedly and constantly, Bitcoin is not a “get-rich-quick” scheme.

If the point of buying Bitcoin is to make you more dollars, then you’ve missed the point of Bitcoin.

Overnight, Bitcoin crashed to as low as US$10,100 and remains just slightly above that level at the time of writing.

But based on technical indicators, Bitcoin is still very much above key resistances.

And none of the macro factors that fuel Bitcoin’s narrative have changed either.

So why the recent price plunge?

Well a lot of it has to do with a shift in risk sentiment and an inability to clear the US$12,000 level of resistance for the fourth time in five attempts.

The other has been a sudden resurgence in the dollar.

On the back of stronger-than-expected economic data, a stronger dollar has undercut sentiment not just for Bitcoin, but for tech stocks and gold as well — the darlings of the coronavirus pandemic.

But has anything fundamentally changed?

Not at all.

And investors can expect even more volatility prior to elections in the U.S. — better unemployment data is due more to a measurement methodology change than any meaningful improvement in employment figures.

A stock market rout, especially if prolonged, typically pushes the Fed and Congress to do more about it and right now they can do only one thing — print more money.

In the time that it has taken to write these paragraphs, Bitcoin has since recovered and is closing back in on US$10,300.

Yes this is crypto, but the volatility is real.

And let’s be honest, you never much enjoyed those dinner parties anyway did you?

Here’s another excuse not to attend then.