Despair And Capitulation - Point Of Maximum Financial Opportunity?

Cryptocurrency markets are experiencing arguably the worst carnage in their history, with many assets shedding nearly half of their value, in the last few days. This appears to be a result of the global economic slowdown, caused by heightened fear and uncertainty in the world, resulting from the Coronavirus, the resultant quarantine shut-downs and significantly halted economic activity. The double digit percentage losses in the prices of most cryptocurrency project have left portfolios losing their worth, in a matter of days, erasing gains made throughout the last year and perhaps even before. This has undoubtedly caused distress and anxiety among investors and traders, painting a dark picture of hopelessness and point of no return for many.

However, there is a potential upside to all this, a silver lining in the clouds, if you will. For the savvy and bold, this presents a rare financial opportunity, the point of maximum financial opportunity, so to speak.

Contrarians – Buy When There’s Blood

The contrarian investment principle implores people to buy not when there’s optimism in the market, the conditions are stable/right and when things are flourishing. Instead it says that we should buy when there’s total despair and hopelessness in the market, the conditions are unstable/deteriorating and when things are withering. It is at these moments and events in the market, when the risk is the highest, but so is the reward. The point of maximum financial opportunity comes at times, when the market has truly bottomed out and everybody is selling, even at extremely low rates, compared to what they paid for it. The return of investment (ROI) is the highest at such times.

The phrase “buy when there’s blood” hints at exactly that. One of the most successful investors of all times, the Oracle of Omaha, Mr Warren Buffet advises people to be greedy when others are fearful and vice versa. The problem with most people is that they tend to follow the herd mentality, they are only likely to put their money into shares or assets, which everyone seems to like and think that they are going up. Unfortunately, for such assets, the return on investment (ROI) isn’t that high.

The contrarians, as the name indicates, go against the herd mentality and buy at times, when most people aren’t buying, because of the fear and uncertainty. Yes, its risky and takes a long time to pay off, but its worth it. That’s why not everybody does it.

This Too Shall Pass

It must be noted that while this may be the worst capitulation of the cryptocurrency history, similar events have happened before. The cryptocurrency market itself is known for its volatility and price swings. Actually, that is one of the reasons, it is so lucrative and brimming with opportunity. This results from the fact that the market is relatively new, is still under development and transitioning from speculation to use cases just now. Further, the current fall was caused and greatly compounded by worldwide panic and the resultant slowdown of the global economic system, because of the Coronavirus. However, this won’t last forever and the markets will recover.

The Phoenix Always Rises From The Ashes

Despite the carnage, there’s no indication that there has been any change or specially degradation in the fundamental value of the crypto-assets. The research and development has been in high drive, more than it has ever been in the history of this new asset class. New partnerships and joint-ventures for cooperation are being announced. The Decentralized Finance (DeFi) has come a long way and many projects have moved beyond the initial Proof Of Concept. The Non Fungible Token (NFT) are on the rise, with major game developers and teams taking interest, to develop infrastructure and products. The blockchain and currency projects are no longer in the infancy stage and integrating new technologies and applications. Lastly, a couple of significant crypto halvenings are due this year, which will have a positive impact.

Unlike the previous crash of 2008, this one wasn’t caused by speculative bubble and people paying more than what an asset was worth, due to hype and fear of missing out. This time the market crashed because of the slowdown on a global scale. It crashed because people needed money liquidated to buy necessary items and stockpile. It crashed because the traditional markets came crashing, causing a domino effect taking down everything else also.

So, it will recover again, due to the rising development, use cases and adoption. This time fueled by genuine growth and purpose. This is the time to invest for maximum return, because the phoenix will rise again from the ashes, as always.