The most vicious people in altcoins are the bagholders.
They’re in pain and they will lash out whenever possible to try and bring other people down to their level. It hurts losing money and misery loves company.
This phenomena is not exclusive to alternative cryptocurrency. All financial markets have plenty of bagholders who bought high and don’t want to exit a trade because it represents a huge loss.
On one hand, you can’t blame them. They ‘bought in‘ based on a ‘tip‘ or a story that sounded convincing. They jumped in during the height of their own irrational exuberance. Now they can’t get out and make a profit.
They probably realize they were duped or that they acted foolishly. Some will hold on until the bitter end. They won’t allow themselves to admit they were wrong. They’ll come up with every rationalization in the world to prove to themselves that their investment will someday earn them a return.
You Can Become A Bagholder Instantly If You’re Not Careful
With altcoins, the life cycle of investments happens quicker than in other fields. Almost all altcoins are involved in pump and dump cycles that create many high-priced buying bagholders. Altcoins are thinly traded items where a relatively small amount of capital can push the price into the stratosphere in short order. Pumps are always accompanied by a flurry of ‘news‘ and excited Tweets and posts. As the excitement builds, more and more market participants are pulled into the pump - almost by gravitational force.
The last wave of buyers buy at all-time highs. The prices they pay will likely never be achieved again.
Why? Simple. Once an altcoin is pumped, it is then DUMPED. Once it’s dumped the pumpers take the money they earned during that pump and move it to another coin, repeating the cycle.
There’s no way around this fact of life and it happens every single day.
So where does that leave the person who bought a cryptocoin at an all-time high just to watch it plummet 98% in value?
Bagholders Have A Choice To Make
This person has two choices. The healthy psychological choice is to cut his losses, admit defeat, and take whatever lessons he can from the experience. Learning is part of becoming a better trader. He can analyze what went wrong so he can make sure it doesn’t happen again.
The more damaging choice is to ‘hold the bags.’ Holding the bags is an irrational decision that carries with it negative psychological pain. When you hold the bags you’re forced to become a coin salesman who has to try and pump the price so you can get out of the trade. The chances are high that you won’t be able to generate the sufficient volume and price momentum to ever get back to break even. Not only that, but you’re forced to expend time and energy that could be better spent moving on to the next trading opportunity like all the successful traders have already done.
Profitable traders learn to control their emotions. They also do their own research and apply clear, critical thinking to their traders. With altcoins they tend to have a healthy sense of skepticism and street smarts. Most realize that almost all altcoins fail. They are aware that they need to use intelligent entry AND exit points in order to profit off trades consistently. Bagholders don’t understand these basic principles. They let emotion and the enthusiasm of the crowds inform their snap decision to buy. Once in, they have no way to get back out. They’re trapped, wounded, and down LOTS of money.
Before you buy an altcoin have a plan. That means you should have a plan whether the coin goes up or down. Execute that plan based on PRICE and not based on emotion. If the trade moves in the opposite direction of where you thought it would go - get out! Decisively cutting losses is what separates the men from the boys in crypto trading. Dump those bags and experience freedom!
Here’s a great video about Penny Stock Pump and Dumps that applies completely to altcoins. Thanks for stopping by!