Word of the Day: Capitulation

You may have heard this term used repetitively the past two weeks.  So what is Capitulation?

In laymen's terms it is basically selling your position in an investment and getting out of the market.  It is giving up and taking whatever your asset value holds (usually a loss) out of the market.  Investopedia defines it as:

...When investors give up any previous gains in any security or market by selling their positions during periods of declines.

(For illustration purposes only- Please don't confuse that I think that this is the end of the bull cycle)

I try to keep my head in Crypto-Twitter (CT) and watch a few YouTube personalities that align with my crypto philosophy.  The past week I have been hearing the word capitulation non-stop, but why? 

A market correction of this magnitude often leads investors to panic sell.  Many investors believe that capitulation precedes recovery.  So, basically everyone is trying to call the bottom of this correction.  If someone has a large number of crypto Twitter followers or YT viewers they have a financial and/or psychological interest in keeping their audience calm and engaged.  They want them that way because

• they understand they have a lot of inexperienced traders that look to them for advice
• they don't want their audience to go and further crash the market 
• hopefully they are an experienced trader/investor and have seen corrections along with market reactions before (otherwise why are you giving them your time & attention?)
• they understand that market sentiment is cyclical and often predictable
• the majority want their audiences to succeed which lends to their own success

Why is there so much capitulation right now?

A large influx of new crypto buyers have been speculating in high risk crypto assets (which is ALL of crypto).  If they have never invested in crypto outside of this bull market all they have witnessed is their fiat value blowing up and this is their first true experience of the volatile nature of this asset class.  They are now realizing that there is actual risk involved when they throw money into the crypto-sphere and they are panic selling as they watch their portfolio's fiat value decrease.    

The past two weeks there has been an enormous amount of what can only be called orchestrated and organized FUD.  I don't solely blame Elon, he wasn't the only catalyst, he just needs to turn off Twitter.  No, I am talking about the China controls BTC/ the hashrate falling in April, the China banning crypto narrative that is perpetuated annually, the Big Banks banning accounts buying crypto FUD, a constant barrage of negative news cycles rehashing the tired "Environmental Concerns", the U.S. pipeline hackers that wanted their ransom paid in Bitcoin of all things. Gotta tell you that one made me put my tinfoil hat on considering how traceable the BTC LEDGER is; and yes I know about mixers, but why not monero or some other privacy-centric coin.  All of these "newsworthy" events that just coincidentally happen within a few weeks of each other that are scaring the crap out of people new to crypto. 

To top off all of the organized FUD you have whale investors that will take advantage of the fear, liquidate shorts and longs, and drive prices lower in order to accumulate more Bitcoin.  Thus causing more fear and eventual capitulation.

 Why I won't capitulate

There are many reasons, but here are the main ones:

• I philosophically believe in the long-term success of decentralization (my little bio states libertarian for a reason) and the future technologies of the projects I invest in.
• I believe this is a mid-cycle correction and I am actively buying this dip.  My next move is to focus heavily on Bitcoin accumulation, but ETH, DOT, ADA, SOL, TEL, and LINK are still on the dinner table for me to gobble up at discounted prices.
• Even if I am wrong about it being a correction- I'm a LONG TERM investor.  I haven't sold any of the ETH I acquired in 2017-2018; it is still in cold storage.  I have the long game in mind with my hodl portfolio and DCA into Bitcoin monthly.
• I don't spend more than I can afford to lose.  I have a set amount of my salary and overall net worth that I invest in BTC & crypto.  I will not risk the overall security of my family by being one of those people that drops their entire life's/retirement savings into a DOGE or even BTC.
• I hedge my bets.  While I believe crypto is the most rewarding long term asset class, I am diversified in other assets as well.

Probably most importantly, I have a very hard time believing that this correction is anything other than an excuse for nation-states, institutions, and whales to accumulate more crypto assets, specifically BTC, at discounted prices.  With so many project updates and upgrades on the horizon for incredible projects like ETH, DOT, TEL, and ADA later this year I refuse to believe we are heading towards a bear market.  Additionally, you have major institutions that are joining the game as soon as next month.  Wells Fargo, JPMorgan, and Bank of America have all recently declared their intention to open up crypto investment to their wealthy clients.  

This dip is the opportunity of a life time and I just won't capitulate.  I am going to sit back with portfolio, that has been fiat-slashed by 53% from a few weeks ago, and keep accumulating for the next month or two, because I don't believe we will see prices this low ever again.  Not Financial Advice but if I were you I'd be doing the same thing.

Thank you for reading. Take care of yourself.  Keep accumulating... Buy the Dip... Never capitulate. -Buss

disclosure: I own positions in all of the above mentioned cryptocurrencies...except DOGE.

original cover photo courtesy of Andrea Piacquadio on pexels