Bitcoin’s Flash Crash Offers A Lesson For New Retail Investors

As mentioned in previous articles, after months of inactivity, Bitcoin was responsible for a violent price outbreak. At the time of writing, the price has increased from $ 9,200 to $ 11,200 within 13 days.

The incredible price hike has revived some bullish forecasts similar to 2017, with several high-profile experts claiming, including Michael Novogratz of Galaxy Digital, who expects “Bitcoin to reach $ 20,000 by the end of the year, powered by a global liquidity pump and an influx of private investors. “The Novogratz statement contradicts the long-held view that institutional demand will lead the next upward wave similar to 2017.

Anecdotally, however, Novogratz's assessment appears to be only slightly confirmed, according to the recognized financial advisor Tyrone Ross. Tyrone Ross has seen a recent surge in calls from new private investors and trustees wondering what “hot” digital assets to buy. He further points out that the robin & fication of investing has changed retail attitudes from responsible long-term investments to quick home runs. H. On risky speculations.

In addition, the implementation of another stimulus package is likely to further encourage these newly discovered speculators as new $ 1,200 burn a hole in their pockets. Tyrone Ross comments that during the previous stimulus package, he received similar calls asking which digital assets and stocks to speculate on even though several people needed the money to fund the cost of living.

Theoretically, the combination of rising prices for digital assets and new stimulus checks offers the perfect mix of FOMO that could trigger a new influx of retail demand.

However, this frenzy of speculation is not without serious risks. For example, the entire crypto market experienced a major flash crash over the weekend, resulting in $ 1.3 billion in liquidations on the top exchanges, not to mention the numerous investors underwater with $ 12,000 are.

The most recent example of this dynamic with lasting impact was seen in early summer 2019 after the Facebook Libra was announced.

Nothing is certain, the story repeats itself exactly. For new retailers, however, it seems advisable to mitigate the irrational exuberance while distinguishing between long-term investment and speculation.

Disclosure: The author owns Bitcoin and Ethereum.

No investment advice, only for educational purposes.

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