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Good Investors Don’t Take Buy Signals via Tweet

by Jessica Lynn about a year ago in alt coins
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Savvy investors invest by their own conviction.

By mkfilm

In the last several months, Elon Musk, CEO of Tesla, has been tweeting about crypto the way Trump used to tweet about foreign policy and domestic terrorism. Giving investors whiplash.

One difference between Trump and Musk is Trump was president of the United States. The highest office in the land. Elon Musk is president of a car company and is actually wealthy, very unlike Trump. Musk is the richest man in the world, with an estimated net worth of $197 billion. Unlike us, he has money to lose.

Musk is allowed to have opinions and tweet about them.

Just because he is the richest man in the world doesn't make him an authority on crypto markets. Yes, he is moving them up and down drastically with each new tweet. But that says more about us, than it does about him.

Musk takes a break from figuring out how to land his SpaceX on Mars, moves his thumbs rapidly for a few seconds, and shoots off a tweet, Bitcoin tumbles 12%.

You should not be making investment decisions based on tweets.

Last week Musk sent Bitcoin (CRYPTO: BTC) plummeting 12% in one day, and it's tumbled another 11.45% today. Last week, the SpaceX CEO also sent dogecoin (CRYPTO: DOGE) prices up 30 percent after tweeting that he was working with dogecoin developers to improve its efficiency.

This is not a good investment strategy for those of you hanging onto every tweet. I glanced at some of the comments after Musk's bitcoin tweet that Tesla would no longer be accepting bitcoin as payment, and the general consensus is "fuck you, stop manipulating the markets."

I don't believe Musk sells off large amounts of crypto and then tweets to drive the price down. Or tweets to drive the price up so he can then sell.

Yes, he is the richest man in the world. The richest man in the world has options most of us do not.

Just like investing in traditional markets - the stock market - investing comes with risk. It is how we manage our emotions around the risk that count. Even though crypto is now 12 years old, it is highly volatile. But it is here to stay. There is no going back from crypto. I don't know which coins will survive or make money, but cryptocurrency is here.

Any investment decision you make should consider your personal situation, financial life, and what is best for your money. It should not be dependant on what the richest man in the world tweets.

The Upsides of Crypto

When you invest in a traditional market, you have to work through a clearinghouse or broker, like the stock market. There are regulations, the middleman has the upper hand, which creates disadvantages for smaller investors who don't have a ton of money to invest.

In the crypto world, the sheer amount of cryptocurrency markets grants those who have some money to invest liquidity and find some true price value and early discovery.

Traditional markets carry risks and inefficiencies, while crypto markets are driven by open-source code, which grants equal access to everyone regardless of their portfolio size - yet, crypto carries risk and volatility.

Decentralized exchanges (DEX) make markets more level and efficient, making improvements in transaction speed, settlement speed, and reduced costs. Decentralized exchanges are a type of cryptocurrency exchange that allows direct peer-to-peer cryptocurrency transactions to occur online. This can be done securely and without the need for an intermediary, like a brokerage firm.

This benefits the average investor.

There is a low barrier to entry, leveling the playing field.

And because of the Internet, you can do all the research you want on crypto before you buy. Just be discerning about where you get your information. Always consider the source, a tweet isn't a sufficient research.

Someone who has never invested in the stock market - which is daunting for those who haven't and don't have the education or experience - can take $20 and put it on something like Dogecoin or Polygon.

Musk has tweeted in the past that "crypto is promising, but invest with caution." You shouldn't be investing your entire life savings in crypto; that is not wise.

Yet, I don't see people talking about this tweet. The get-rich-overnight mentality seems to be making people lose their collective minds. Your investments are your decision alone - unless you're buying in the traditional stock market with the help of a financial advisor.

Blaming an eccentric millionaire for losing money isn't taking responsibility.

Risk Management is Behavior Management

The future of security prices, as well as crypto - especially crypto - is never predictable. Since you can not predict the behavior of markets or crypto exchanges, you must learn how to predict and control your own behavior.

You have no control over what an outlandish billionaire tweets next.

In traditional investing, stocks do well or poorly in the future because the businesses behind them do well or poorly - nothing more, nothing less.

When I invest in crypto, I first research the people behind the specific crypto I'm interested in, to decide whether that person building the currency is someone I want to take a risk on. Ethereum founder, Vitalik Buterin, seems to know what he is talking about and has been working on Ethereum (CRYPTO: ETH) since 2015.

This is why most of my money in crypto is in Ethereum (CRYPTO: ETH) and Polygon (CRYPTO: Matic).

In traditional investing, stocks do well or poorly in the future because the businesses behind them do well or poorly - nothing more, nothing less.

Elon Musk

I have to admit, I don't know much about Musk. I haven't read anything about him. I'm a true believer in his product, Tesla, though.

From paying attention to his tweets only in the last several months (I have yet to watch the recorded SNL skit on my DVR), he seems to be having a ball and a ton of fun putting effort and energy into whatever project he is creating. He participates in the creator economy fully and seems to be having a blast doing so, making cars, buying crypto, and getting to Mars.

I would never take buy signals from him with my hard-earned money.

However, I have a ton of respect for his company producing Tesla. Whether it's his intention or not to help get us off our dependence on oil, everywhere I look in Los Angeles, everyone has a Tesla. Making a difference, although tiny, in the quality of the air we breathe.

If you're taking buy signals from tweets and have lost money, that's on you, no one else.

At the end of the day, we each have to assess our own risk and what we want from our financial situation. As with anything, you need to take a deep look into how you feel about money and how you would feel if you lost it.

Some stay out of the market because they don't want to take any risk, but even then, you have the risk of inflation eroding your purchasing power as the US Government prints more and more paper money out of thin air.

Good investors manage risk when they can but also embrace risk they can't eliminate. If investing our money in stocks and crypto didn't involve risk, then the returns available through those two options wouldn't be nearly as high

"By being able to face your fear of risk and invest anyway, you're doing what millions of people can't bring themselves to do - and in the long run, you'll reap ample rewards from doing so." - The Motley Fool

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I own stock in Tesla. I am not an investment advisor. All opinions are mine alone. There are risks involved in placing any investment in securities or cryptocurrencies. None of the information presented in this post is intended to form the basis for any offer or recommendation. It is for informational and entertainment purposes only.

alt coins

About the author

Jessica Lynn

Entrepreneur + Writer. I care about helping others learn to live a better, healthier life. www.thrivingorchidgirl.com.

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