Blog | Cryptocurrency

Bitcoin Drama

When to Buy and When to Sell

Below Jeff, my crypto expert, talks about “crypto drama”. I like that because all investing comes with drama. Money itself has such a strong role in our everyday lives that it inherently has drama. But drama cannot be allowed to influence your financial intelligence. You need emotional intelligence.

Let me explain it this way. Emotional intelligence is known as the “success” intelligence. That means the higher a person’s emotional intelligence, the better they are at handling life’s challenges. Challenges such as fear, loss, anger, and boredom.

Here is the investing rule:

When emotions are high, intelligence is low.

There are many people who are very smart mentally but are weak emotionally. For example, many school teachers are gifted with mental intelligence, but emotions, such as the fear of failing, often hold them back financially.

Another example of emotional intelligence is called delayed gratification. Many people want to get rich quick. Working to get rich quick is a sign of low emotional intelligence. Those people cannot delay gratification. That is why I always say to get educated first. Not only is it making you financially intelligent, but it is also making you emotionally intelligent.

In 1983, Howard Gardner, a professor at the Harvard Graduate School of Education, published his book, "Frames of Mind: The Theory of Multiple Intelligences." In the book, Gardner outlined seven intelligences.

Rather than look at intelligence in a narrow way like IQ does, Gardner proposed that people had different intelligences in which they excelled. People didn’t usually excel in just one intelligence but instead had multiple intelligences that they were strong in but also multiple intelligences that they weren’t strong in.

The following are Gardner’s Seven Intelligences.

1. Verbal-linguistic

2. Logical-mathematical

3. Body-kinesthetic

4. Spatial

5. Musical

6. Interpersonal

7. Intrapersonal

Intrapersonal is the intelligence I’m talking about today. This intelligence is emotional intelligence. This intelligence deals with self-reflection and introspection.

Emotional intelligence refers to having a deep understanding of yourself, knowing your own strengths and weaknesses, and what makes you unique, with the ability to handle reactions and emotions.

Intrapersonal intelligence is crucial for high-stress environments, such as money and investing. In truth, intrapersonal intelligence is critical for success in almost any field or profession.

Intrapersonal intelligence is the one intelligence of success everyone must have. Intrapersonal intelligence means communicating within yourself—being able to talk to yourself and control your emotions. For example, when someone who is angry says to himself, “Count to ten before you speak,” that person is exercising intrapersonal intelligence. In other words, he speaks to himself before he opens his mouth and lets his emotions speak. This intelligence is something you must cultivate to be a good, drama-free, investor.

Intrapersonal intelligence is important for success, especially when times are tough, and a person wants to quit or is fearful. We all know people who are highly emotional. Rather than think logically, highly emotional people tend to let their emotions run their lives, often saying or doing something they may later regret. This inability to master the self leads to many struggles and heartaches for people, while those who put intrapersonal intelligence to work are some of the most successful people you know. More often than not, the emotionally intelligent investor profits handsomely from the 'dramatic' investor.

With that, Jeff Wang will tell us some ways to use our emotional intelligence in the investing world of cryptocurrency.

Thank you, Robert. I’ve gotten a lot of messages about how to handle stress and anxiety during volatile markets. In the videos I make for the Rich Dad Crypto Newsletter, I talk about this a lot, you feel like you have to sell when something is dipping, or that you have to buy when something is rising. It really hurts your overall portfolio if you’re not practicing strategic trading and investing. In our last newsletter, I went through what to expect, which was how to mentally prepare and attack volatile markets.

In this blog, I want to talk about a few things that are relevant, the first is what I call “stare at screen syndrome”.

Does this sound familiar, you pick up your phone, you open up your exchange, you see the price has gone down, you feel the compelling urge to sell right away. You think for a few seconds, look at another app, but then you quickly go back to the exchange app and hit the sell button. Whew, but then the coin bounces again, what do you do?!?

Staring at screen syndrome is where you feel compelled that you must act whenever you look at your screen. This is a big no-no; it throws out all the strategy of price targets and mitigating risks. It’s pretty much setting your trade schedule to “whenever you look at the screen”, which is unhealthy when you look at probabilistic outcomes. Since crypto moves so much, each time you look at the screen, the situation has changed. Be very wary of this, set price targets, understand the market condition, and then act accordingly. There have been times you look at the screen and you should act but choose those sparingly.

The other message I’ve gotten lately was “when to sell?!?!”

Even after putting price targets, explaining market conditions, expecting sharp corrections, people will still message this. That’s because knowing when to sell is much harder than knowing when to buy. When it comes to maximizing the “value” of a crypto asset, there are a few key types of events.

One is when it hits a major exchange. Typically, when a coin hits Binance or Coinbase, there is a pop in price, and in my head, I think, “ok, the coin is going to be overvalued by 50% for the next day”. So, this is usually a good time to take profits. However, some people might see a coin pop up on an exchange, get excited that it’s going up, and decide they want to buy in. This is a huge risk, if you look at probability, most coins tend to trickle down after exchange listings.

The second type of event, or rather collection of events, is when everyone else is shilling or pushing a coin on YouTube or Twitter. When this happens, the same thought should go through your head. If everyone knows about it, and everyone is buying it up, who’s left to buy? In my head I think, “Ok, the coin is going to be overvalued by 20% today,” when I see huge marketing pushes.

 

Finally, the third type of event is setting price targets and valuations and taking some profits at those. I’m guilty of letting some things ride, but generally the first instinct price target is usually more correct than after the price has already spiked up. I evaluate what upside or what comparable values have been for different projects. Last month I thought that Bao Finance would appropriately be valued at $0.003 (from $0.001) and it actually hit. However, I am guessing not many people sold because of all the future catalysts that were coming, and now they are caught in a correction. This happens but keep this in mind for future assets to set values that are appropriate and not get left behind.

The last thing I want to bring up is tunnel vision.

Sometimes you buy one coin, and up until that point you are convinced it is the holy grail coin of all time and it will keep going up forever. Then the price falls, you convince yourself it’s temporary. You read news that this is just FUD (fear, uncertainty, doubt), you read this is being orchestrated, maybe it’s just going to bounce right? Eventually you convince yourself, there is a 100% chance that this coin will shoot up forever.

The main takeaway I’ve learned is, anything can happen in crypto. There’s thousands and thousands of coins, and all of them are unpredictable. Once you’ve understood that, then it becomes easier to take a step back, understand the environment, and figure out what the price action and possible outcomes will be. Any coin can get pumped, regulated, a famous person might market the coin like crazy, or a million other things. The only thing you can do is mitigate risk (take profits where you can, rotate pumps into dips, etc.), but never get too attached. Understand there’s profits and losses everywhere, and coins can behave differently than expected. This is common sense, but not to most newcomers.

Thank you, Jeff. “stress and anxiety”, “must act”, “probabilistic”, “get excited”, “fear, uncertainty, doubt” and more. These are words of emotional power. Those that cannot control their emotions will lose, while those who can control their greed, their fears and the effects of emotions will be rewarded and profit.

I need to make one thing clear in closing, emotional intelligence does not mean being void of emotions. Emotional intelligence means you know it is okay to be angry, just not out-of-control angry. You know it’s okay to feel hurt, but it is not okay to do something stupid in the name of revenge.

You know that emotion of greed you feel when you read Jeff’s strategies? Ask yourself, “Am I able to delay my gratification long enough to take the time to learn and gain some knowledge BEFORE I take action?”

THAT is the question.