Emotional investing is not healthy investing. Warren Buffett, one of the best-known and most successful investors in history, says becoming a great investor requires becoming a “no-emotion person,” and while Buffett’s advice may seem extreme, its goal is to bring a strong dose of rationality to the decisions that drive investing.
Bitcoin’s extreme volatility has the potential to inspire the kind of powerful emotions that edge rationality out of the investing process. Bitcoin’s rapid ups and downs readily inspire the kind of impulse buying and selling that leads to unnecessary losses. Investors who reject rationality will regularly struggle to understand where Bitcoin is really going and how its movements should impact their investing.
“Bitcoin is a double-edged sword in that it inspires high emotion regardless of how it is performing,” says Sean Kozak, CEO of NeuroStreet. “You saw this when everyone was afraid to buy during the bear market. In the aftermath, everyone is afraid to buy because they feel like they’re chasing the top of the latest bull run. Savvy traders and investors need to approach this from both a technical and fundamental perspective that is dummy proof and newbie friendly.”
Kozak is at the forefront of revolutionizing the fintech industry with NeuroStreet, a “globally recognized fintech trading platform and education ecosystem” encompassing brands including ARC-AI, Cryptostreet Academy, Neurotracker, and Neurostreet Trading Academy. The company’s mission aims to empower traders and investors with the tools and education they need to thrive in today’s changing financial markets and blockchain domain.
“You don’t need to be a rocket scientist to get Bitcoin right,” Kozak explains. “You just need to understand the key drivers for making sound decisions in the crypto space.”
For investors looking for insights on how to best invest in Bitcoin in 2024, the following are some factors that should be considered.
Patience Pays Off with Bitcoin Investing
Patience pays off in investing most of the time — but there are exceptions. During a major market crash, for example, getting out quickly can be a healthy choice.
Review the last several years of fluctuations in Bitcoin’s value, and you’ll see a lot of activity that looks like a major market crash. In late 2021, Bitcoin fell from $64K to $46K in just over a month and was down to $16K a year later. While that type of activity may seem to indicate the need for a quick exit, experts say another perspective is more valuable.
“Bitcoin is not like other markets,” says Kozak. “We are fortunate because the supply is limited, which will over time drive up the demand for Bitcoin – and its price — regardless of investor sentiment. If you’re smart and patient, you’ll benefit from a market that is bound to go up no matter what.”
The perspective Kozak recommends is often referred to as “time in the market,” which is a passive long-term approach that banks on his belief that Bitcoin’s inherent properties will always — over time — lead to an increase.
Buy the Fear, Sell the Hype
Few emotions impact investing as powerfully as fear. Investors who fear a downturn will become a nosedive can fall into an emotionally charged practice known as “selling the fear.” They get out because they fear the worst is yet to come.
Similarly, fear of missing out can also drive investors to buy into Bitcoin when the market starts to climb. That practice is known as “buying the hype.” Some savvy investors believe the opposite strategy — buy the fear, sell the hype — is more productive.
“The problems with ‘buy the hype, sell the fear’ can be seen in the recent Bitcoin ETF buying frenzy,” Kozak says. “Everyone was flocking to buy right before the recent Blackrock fiasco. Stupid money got in when the news came out, while smart money waited for the immediate sell-off to buy the pullback in a clearly defined lower-risk opportunity.”
Kozak reminds investors that the short-term ebb and flow of the market should generally be seen as a secondary indicator, with its long-term performance serving as a better guide to investing. “If you’re looking to invest longer term, look beyond a daily or weekly timeframe and remove the noise on the charts,” he says. “It’s easier to read and cleaner to see, allowing you to make better entry decisions for lower-risk trades.”
Gear Up for Mainstream Adoption
While Bitcoin investing has grown considerably in recent years, it is still premature to say it has experienced mainstream adoption. One factor keeping investors on the sidelines is the lack of applicable regulations, which experts do not believe will come into force before the end of 2024.
The introduction of Bitcoin ETFs, however, indicates the movement toward the mainstream is gaining momentum, which should inspire investors to gear up.
“It’s only a matter of time until mainstream money managers and financial advisors will be permitted to start selling Bitcoin as a main portfolio product in everyone’s long-term wealth bucket accounts,” Kozak says. “That is when the true bull market will kick in and we will see the real rally.”
