Don’t be the Weak Hand at the Table

Don’t be the Weak Hand at the Table

Right now, the crypto market seems completely irrational.

Despite the strong fundamentals behind it, we’ve seen bitcoin drop as much as 25% over the past month. That’s the biggest drop since the 2022 bear market.

This current bout of volatility is shaking out the “weak hands.”

Weak hands are investors who flee their positions in the face of volatility. When they see down days putting a dent in their profits, they panic and run for the exits.

I should know because I was once one of them.

In 1994, I was a young and inexperienced investor. But I knew computer stocks were the future. So I took positions in Microsoft and Oracle.

I bought these names in 1991 when they traded for the split equivalent of pennies.

But boy, did I sell way too early…

In 1994, the Federal Reserve vaporized my tech investments when it raised interest rates five times from a low of 3% to a high of 6%.

When the Fed raises rates, riskier assets like tech stocks drop in price.

And when the Fed doubled its key interest rate, the tech-heavy Nasdaq dropped about 14%.

High quality stocks like Microsoft and Oracle fell as much as 28% and 30%, respectively, during this period.

My research still suggested tech stocks had a long way to go in their respective adoption cycles of home computer ownership and internet adoption.

But I was young and inexperienced.

So despite my research telling me to hold on to these stocks, I did what young and inexperienced investors do: I panicked and sold my shares at their lows.

My mistake was that I confused short-term price volatility with a long-term change in fundamentals.

I wish I could go back in time and teach the young me that lesson… Fortunately, you can learn from my mistakes.

Don’t Be a Weak Hand – Take Advantage of Them