Bitcoin may be attracting new investors, but those investors don’t seem to be risk takers

When I first started investing in Bitcoin and Ethereum the general thinking was (or at least my general thinking) that crypto would do better when the stock market tanked. The idea here is a simple one, if people see stocks as risky, they’ll want to move money out of the market and crypto is one place they’ll put it.

Rewind the clock to pre-crypto days and it wasn’t uncommon to see gold go up when the stock market went down. Here’s a bit more on this from Zacks:

Individually, gold prices and stock prices move inversely. This means when stocks are lower, gold prices are higher. Because of this relationship, investors often consider gold a suitable hedge against a weak performance in the stock market. When stocks fall, investors usually choose to invest in gold, which causes gold prices to rise. (Source – Zacks)

The thinking above may have been true years ago…but the world changed, crypto is here and well, gold isn’t exactly something people are jumping to put their money into.

Over the last few years, more and more people have been turning to crypto, Bitcoin being the primary focus, when the stock market is down and they want to move their money into another asset class. And there have been many times where this has worked out…but today, it didn’t.

The price of bitcoin dropped sharply Monday as investors began shedding risk amid a global equity markets decline.

Many people have argued that bitcoin is most useful as a safe-haven asset, but that narrative could be changing as people realize its price often goes down with broader declines in risk assets. Bitcoin’s rally this year has coincided with the risk-on rally and, much like stocks, the cryptocurrency is prone to sharp declines in September.(Source – CNBC)

Ouch 😣 So what happened?

First I’ll start by saying, I don’t have a background in finance and I’m probably not someone you should be getting financial advice from or even listening to my ideas or theories. So if you’re looking for intelligent banter by a crypto or finance guru – you’re in the wrong place.

That being said, this is a personal blog by me, Morgan 🙋‍♂️ so I’ll share my two cents on what happened today and why it’s actually good for crypto investors, like me.

Let’s hop in our time machine and go back to 2016 back when I started investing in Bitcoin myself. Back then, everyone I told about crypto looked at my like they do when I tell them I’m buying JPEGs of apes for over $100,000, by which I mean – they thought I had lost my mind.

Fast forward to today and traditional stock market investors are attending webinars held by companies like Fidelity that are teaching them about Bitcoin and Ethereum. What this means is – regular investors are now into crypto, and well, regular investors aren’t used to investing in risky things…so when the financial markets get a little crazy, people who aren’t risk takers, but are invested in risky assets, sell them.

While many of us who have been in crypto for years have a HODL mentality, most people don’t know what the heck HODL means. Personally, I don’t plan on selling crypto this year, next year, or in ten years. I have no real plan to sell crypto, and most crypto investors I know feel the same way. We’ve all known crypto is risky since the day we invested, and we’re in it for the long haul.

Now that normal investors, people who are used to things that are a lot less risky than crypto are investing in crypto, they’re going to be impacting the crypto market more and more. And IMO, that’s okay 👍 In fact, I think it’s an opportunity to buy assets like Bitcoin and Ethereum at a discount.

That being said, I think that as Bitcoin and Ethereum see broader acceptance from traditional investors, it will only follow the market more closely and today was a good sign of what’s to come.

Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.