When the South Korean government accused crypto traders of tax evasion and proposed a bill to ban the activity in the country, the dedicated market took a nosedive. The best example that illustrates this is the case of Bitcoin, the leading currency in the field. In the first ten days of December 2017, BTC had acquired a never seen before value of 20,000 dollars per unit.
This Winter’s Bloodbath
But shortly before Christmas, it dropped, and it kept on doing so until this Wednesday morning when it reached 9,700 dollars. With its value situated below the critical 10,000-dollar mark, specialized news outlets such as CoinDesk quickly took to expressing their concern that the cryptocurrency will soon fall under the 8,000-dollar limit as well.
Still, all isn’t lost just yet. Bitcoin can still recover, and if it does so, Ethereum, Ripple and all the others will follow suit as well. Therefore, you should take this event as a lesson and use it to gain valuable experience in the field.
What We Learned
As grim as the situation might seem now, here is a valuable learning experience to be uncovered from all of this. Before jumping in to open a Forex account, here are four important lessons that can be drawn from the latest cryptocurrency bloodbath.
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1. Bubbles Always Burst
According to Robert Shiller, a Nobel Prize laureate economist who predicted the crash of both the dotcom bubble and the housing one before it, it was only a matter of time before this happened to Bitcoin. In fact, Shiller foresaw this decline even before the news on regulatory interference broke.
2. How You Exit Is Vital
Any seasoned trader will tell you that exiting at the right moment is vital. In this case, that would have been when BTC reached the 20,000-dollar cap. Because the currency’s value grew so fast, assuming that it would continue past this point was as educated of a guess as any other one, but by circling back to the aforementioned point, the inevitable drop was clear to see.
3. Emotions Hurt Business
Letting your emotions get the best of you in any business is bad news. Business Insider has detailed the reactions of many people in South Korea who came out on the losing side of the bloodbath, and they haven’t been pretty. A lot of monitors, keyboards, desks and even a bathtub were destroyed in the process.
4. Recovering Takes Time
CoinDesk reports that the value of BTC grew by almost 5% over this past couple of days, after its Wednesday morning plunge. It has now reached 11,800 dollars per unit, and ETH and XRP are also recovering slowly, but surely. Stabilization will follow regardless of whether regulations are imposed or not. However, the process will take time, so having patience is essential.
Although a lot of players on the forex market lost tens or even hundreds of thousands of dollars due to Bitcoin, Ethereum and Ripple’s downwards spirals, recover is still an option. Furthermore, this situation has made for the perfect learning opportunity. First of all, it’s important always remember that bubbles eventually burst. It might take a month or a year, but it does ultimately happen.
To avoid being caught shorthanded when it occurs, you need to eliminate your emotions from the game completely and start assessing your moves on purely objective bases. This will help you master the art of clean exiting from any trade. And when recovery is finally triggered, have patience with it. These things take time, and fretting over them makes the situation more frustrating than it has to be.