On How Cutting Big Losses Becomes A First-Mover’s Advantage in an Irrational Market.
Mr Fox breaks down why "HODLing" may not be the best strategy during a downturn.
As we experience an NFT downturn, many across the board are encouraging market participants to “HODL” through the cycle, citing that these are the traditional ebbs and flows of the market.
Apart from the fact that NFTs in themselves, let alone over the last 6 months, are anything but a traditional market with ebbs and flows, I think there should be dialogue on why HODLing may cost you the next 100x.
Firstly, nobody knows how long this bull run in currencies will last. If we all remember, each currency bull run tops at a magnitude higher than the previous cycle, and right now we are nowhere near the top if we follow this line of thinking. An argument can be made that we have not yet entered the thick of the bull market in currencies.
So, keeping in mind that we do not know a) how long this run will last, and b) how exponential it becomes, why are we encouraging a blanket strategy of HODLing in NFTs? I’m not sure. Perhaps people are overinvested with money they can’t afford to lose, and are trying their hardest not to lose it.
Now to why I think HODLing may cost you the next big opportunity:
The assets that create bull runs are the ones built in downturns. Look at what BAYC started.
You have a greater chance of securing a new asset when nobody else has money to buy it.
If nobody has the money to rival yours in pursuit of a new asset, you will get it over them. Simple as that. We are now in a period where that is the exact framework. Take advantage of it.
If you own a true blue-chip NFT, you likely shouldn’t sell unless you have no ETH liquid. If you own anything else, consider cutting your losses, letting the market truly consolidate, and simply keep your eyes and ears peeled for the next big thing.
The chances we draw down another 75% from here as opposed to doubling are high, and that is what we call a bad risk/return ratio. On the flip side, the chance that you come across the next 100x may not be probable, but is no doubt non-zero.
This is crypto, a market where the future is entirely unknown. The technology and assets that will shape the future of Web3 have not yet been created. There is something to be said for doing the hard work and finding them. You will miss these chances if you have no money to execute on them with, though.
In a market where nobody has capital to deploy, money you have from losses you cut may mean you’re actually the wealthiest of the bunch.
And down the Rabbit Hole we continue.
Mr. Fox.