Welcome to Crypto.

A reflection after the dump of 19th May 2021

TOTAL Chart (15min) on TradingView

On 19th May 2021 from 12:05 to 13:10 UTC, the total crypto market capitalisation had dropped by $428 Billion USD. As I watched the bloodbath unfold in real-time, I couldn't help but feel fearful. As I sat in the same seat for the 170th day in a row, watching the candlesticks form, never before had I felt so spooked. With every passing minute, my portfolio was plunging by the thousands. My unrealised profits were just that, unrealised. As such, I had "lost" $18,000 SGD in 1 hour.

"No one goes broke taking profits"

Portfolio on CoinMarketCap (7 days)

Takeaway #1: Stop-Losses & Risk Management

There are many takeaways from the crash. First of all, if you are a trader, stop-losses are key. While you may have been liquidated from your open positions, taking the L at the set stop-losses may be a blessing in disguise especially if the market dumps overnight. Risk management (and Portfolio management) has many schools of thought. Personally, I believe it is the rebalancing of your portfolio between Bitcoin, large cap altcoins, mid cap altcoins, micro cap altcoins and stablecoins to meet your investment objectives at your personal risk tolerance. While smaller market cap altcoins have the most upside, they also come with the most risk. Likewise, while Bitcoin is the largest market cap crypto with the "least" upside, it bears lower risk. Lastly, stablecoins act as a safe haven during such dumps and they can be used to buy the dips. My portfolio consists of 23% BTC, 42% large cap alts, 19% mid cap alts, 6% micro cap alts and 10% stablecoins. I may left myself too exposed to alts but I have no regrets. I am willing to bear the risk that entails with such a portfolio and despite the drops, I believe my portfolio has a lot of room to grow. My only doubt lies in the reversal of the BTC.D chart but that is for another day.

Portfolio Allocation caa 20 May 2021

Takeaway #2: Do Not Get Shaken Out

If you are an investor, large corrections like this (-54% in 35 days), should not shake you out. If you already plan to hold for the long-term, selling at losses or to be more technical, selling at or near support levels would be a grave mistake. For every seller, there is a buyer. While you sell at these low prices, others are accumulating these assets at said prices. If you really believe that time in the market beats timing the market, then if you should do anything during such dips, it would be buying it (which is what I did, granted I did not catch the bottom). Profits and losses remain unrealised until you secure them; you will only see losses if you actually sell it at a loss.

Takeaway #3: Huge Corrections Are To Be Expected

Prices of financial assets during bull runs do not monotonically increase. While prices may multiply by several times during bull markets, corrections will come in all shapes and sizes. As seen from our previous bull run (2017 to 2018), 30% and even 40% corrections allowed Bitcoin to gather momentum for future pushes in prices.

BTC/USD on BitStamp (2 Day) on TradingView

Takeaway #4: Hindsight Is Always 20-20

When you are left holding a bag of cryptocurrencies worth $50,000 when it was worth $100,000 just 2 weeks before, the first thought that comes to mind is "If only I sold back then, I bought back in now." Humans are loss averse. We absolutely abhor the pain of losses. It is only natural to wish we could have acted differently in the past. While this line of thinking is useless, reflecting can still be useful if done correctly. As of right now I am reminding myself of the principles a cryptocurrency investor must hold.

Takeaway #5: No One Goes Broke Taking Profits

At the end of the day, profits are king. Profit taking is by far the hardest part of investing. As an investor, you want to let the positions roll and see where they can take you. As you take profits on trades, you may see the assets multiply by 5 times just days after (I'm looking at you Enjin Coin and Matic). Taking profits, for me at least, is a battle between my greed and my rational thinking. "If you've done a 13x on an asset, why not take profits? Even just a little bit? Secure the bag, it is the right thing to do." - says my brain. "Yea, okay, but what if it doubles by next week lol." - says my greed. The compromise would be taking partial profits along the way. While it is a pain in the ass to track, I believe that I shall adopt the practice having experienced this significant drop. But at the end of the day, I'm spending more time in the market and like they say:

"Time in the market beats timing the market"

Conclusion

It was gut wrenching to see my portfolio that I had been building for months evaporate in no time. Fact of the matter is that the crypto market was ahead of schedule and in dire need of a pullback. That is not to say that the corrections are over. For all we know there may be more dips ahead. But ultimately as a responsible investor or trader, you should do your research and understand the risks involved. I held and bought the dips because I still believe in the long term growth of this financial asset. While this was a brutal experience to endure it was a learning experience nonetheless.