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Time in the Market vs Timing the Market

Altcoin Trading Blog
06/22/21 · Crypto trading technique
They say that in the long run, time in the market beats timing the market. With the short term direction you cannot know for sure - even technical and fundamental analysis together with Reddit sentiment can only give you what's likely, not what's hundred percent sure.
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Coinrule

Let’s take a quick look at the difference between trading and investing.

When you trade you don’t care which way the market goes as long as your position is making you money. All you need is to be right about the direction. For what it’s worth, even if you hold a shitcoin with absolutely no future and it pumps, you are making money - not that it wouldn’t resemble casino though.

When you invest you are looking for value and you put in money that you realistically won’t need even in a few years time. You go for value.

Which one is more profitable?

They say that in the long run, time in the market beats timing the market.

With the short term direction, there are so many variables and unknowns. Even if you combine technical and fundamental analysis together with market sentiment from online forums, the best you can get is what’s likely to happen as long as the current conditions last. And in crypto, things can change fast.

Realistically you have much higher chance to be wrong in timing the market than you have when carefully picking an asset which you think has a long term chance.

Time in the market is so much more important for an investor’s long-term returns than timing the market. This is something The Motley Fool takes to heart, because no one can accurately know when to get in and get out. […] “Generally that tends to be true. But, alas, there are no firm rules here, and context is king in pretty much all of this. For example, there are times where valuations get super lofty.” - via The Motley Fool

Hodling: When your biggest risk is losing your position

These days everyone hates the hodler cult in both BTC and ETH.

The truth is though, the HODL position is just a type of ultra long-term “long”. It’s not true that hodlers risk nothing: Their bullish opinion can be wrong, the market appreciation can be derailed off by circumstances, it can take decades before an asset moves up from “severely underpriced”.

But if we discount the risk of your poor judgement, as a hodler who is in a market for the long run, your biggest risk then will be only that of losing your position. The best way to lose it, fully or in part, is to try and sell high to rebuy lower.

If you want to hold a cryptocurrecy, you should value it as underpriced enough to be OK with riding out the occasional retracement.

So, how do you judge a crypto asset to see if you want to hold it for the long haul?

Investors look at the following characteristics:

1/ Real-World Adoption™ - That’s why Ethereum on Alphabay is bigger a deal than Raiden network even though Raiden is really cool.

2/ Transactions per day which is related to adoption, because it shows actual daily network activity.

3/ Exchange volume per day and (anti)correlation with bitcoin to see how much of the daily network transfers is speculation.

Food for thought: An unlikely altcoin fundamental

Time in the Market vs Timing the Market

What would happen if Ethereum lost Vitalik? Something quite explicit for sure, right?

“Go for a business that any idiot can run - because sooner or later, an idiot probably is going to run it.” - Peter Lynch

I believe this is a drawback of Ethereum as an investment asset. That doesn’t mean ETH wasn’t an outstanding trading opportunity couple years ago - but that’s precisely the difference between trading and investment.

For the long long term, it’s a question how sustainable this is.

Now, compare it to other popular altcoins on the market.

I am sure there are people who believe some coins are lead by idiots at present already, while other coins are quickly getting there.

This is crypto. Holding on to an asset with slow development and moronic leaders might not be such a bad idea.

After all the longer the assets are surviving this misfortune the more valuable they are for the long run.

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