It turns out I didn't have $3,000 after all. There was a moment, the other week when it felt like I did, and I wrote about it here. I had made the plunge into cryptocurrency after much hemming, a deal of hawing and a couple of agonizing days watching the price fluctuate as Coinbase chugged my USD into ETH. My first bet on Ripple (XRP) paid off handsomely, though not so handsomely as it would have had I been able to buy it when I wanted to. A subsequent bet on Tron (TRX), worked out even better, and for a moment it even seemed like I had been able to staunch the bleed off of a Ripple peak by moving those coins into Tron — a successful trade from the successful investor, clearly. You can see where this is going.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Prices collapsed, both across the board but moreso for my coins in particular. The Coinbase coins — Bitcoin, Ethereum, Bitcoin Cash and Litecoin — haven't been hit as hard as the smaller coins, and Ethereum, in particular, is still up overall. But the altcoins are getting hammered, and where there once was money now there is not. Perhaps there never was.
The reasons are various: South Korea is considering getting aggressive about regulating cryptocurrencies, and the entire market is suffering as a result. South Korean traders, for a time, seemed to be responsible for the atmospheric rise in Ripple, after all. And then there are the cracks: Ripple is a promising idea for transferring funds, but the reality of it is that there's no reason why banks or businesses would have to use the XRP coin to take advantage of the Ripple platform. Tron was accused of plagiarism and had largely risen on market momentum and obscure promises: the traders left once they realized incredible gains. In a general sense the market got oversold, people took profits and an adjustment was made. No asset can quintuple in value every week.
And yet sitting here in midst of a major selloff offers a fascinating glimpse into the mindset of the crypto community. The Reddit communities for Tron and Ripple are as unconcerned right now as they were last week: prices will stabilize at some point, they say, and they'll be back. To many, the price collapse isn't a reason to despair but a reason to rejoice — it's just a sale on coins. It's time to load up, wait out the saps and return stronger than ever. I don't know when these people bought their Ripple but it's possible that many are still up several multiples despite the recent collapse, and so they may know something I don't.
— Paparazzi Stocks (@PaparazziStocks) January 12, 2018
People point to Bitcoin and to Ethereum — coins that doubtless had their cycles of bubble and bust but always came back, coins that have now delivered massive returns for those investors with the foresight to tough out the lean times. It's a philosophy called HODL, an appropriately meme-oriented investment strategy. Some would call it an acronym — Hold On for Dear Life — while others would just call it a drunken misspelling of “hold” from an old forum post. Regular investors would just call it being long on a stock, but the crypto world has no time for such arcane phraseology. It's the idea that the price will go up, even if already went down. It's the idea that noobs are the ones who panic and sell, but seasoned crpyto investors double down. For some, HODL is a researched position, for others it feels like more of a philosophical stance akin to the power of positive thinking.
For a long time, at least for a number of coins, HODL has been a sound strategy. The space has grown in fits and starts, but it has grown. There's no guarantee that it will keep doing so in the future.
And this is where things get dangerous. I believed these coins would succeed two weeks ago: am I really so fickle? And if I haven't stopped believing, why aren't I pouring more money into the market and snapping up the cheap coins before the price skyrockets again. It was just last week I was doing calculations on what price TRX would need to hit for me to make X amount of money: here's an opportunity to bring that price way down. I gave myself a limit on how much I would invest, but are these the thoughts of a sucker? Or are they the last gasp of a rational brain resisting being totally overtaken by a sucker?
It turns out that the mind games a selloff plays with you are no different than the mind games a bubble plays with you. Lurking in the middle of all of this is the notion that you are not a leaf on the wind but rather a savvy operator who can best the market trends through grit and guile. There was a sequence of decisions that could have made this all work, after all. I could have recognized the bubble when it happened and moved all of my assets into USDT, a currency meant to stick as close to $1 a coin as possible. Or I could have bought Ethereum, which was going up when other things were crashing. Then I could move back into Tron and Ripple once they hit bottom, losing nothing in real value but tripling or quadrupling my crypto holdings. I had an inkling the price was cresting, after all, and perhaps next time I can just trust that instinct and make each right move at each right time. Perhaps next time that instinct will be dead wrong.
I'll hold, though I'm not sure I'm HODL, at least not like those other guys. I always told myself I was making bets and seeing how they'd land: it's the same whether they're down or up. The headline states that I lost $3,000 on Ripple and Tron, which is true and not true — just like it was when I had made that money. I still have a bunch of cryptocurrency, not USD, and it's still anyone's guess how much it's worth. If only I could stop refreshing that price.
Disclosure: The author participates in cryptocurrency markets and holds long positions on Ripple and Tron.