Why I Don't Trade Bitcoin
In my experience, the bitcoin price movement is completely irrational.
Trading Bitcoin is Hard
Trading looks deceptively easy.
- Do a simple registration
- Put money in
- Select one of 2 buttons
- ???
- Profit!
- And… it’s gone.
Trading looks extremely easy which attracts many beginners blinded by naive optimism. These traders quickly learn that trading isn’t so easy, after being separated from their life savings.
You Should Not Trade.
I don’t trade either. Statistically speaking, you are likely to be terrible at trading. Most people are. I am a terrible trader too. The sooner you realize the fact that trading can ruin you, the better position you’ll be in.
Speculative trading of Bitcoin is essentially just gambling on what the price will be a bit later. As with all gambling, the casino always wins, and everyone else gets the money of other players at best. Some people do make money from trading. The money that they make is the same money that others have lost.
Trading is a Zero-Sum Game
The most important fact to remember when attempting to trade is that trading is a game played against other people. The aim of a trader is to get money from other (less successful) traders. Whenever somebody wins, someone else must have lost an equal amount.
Speculative trading doesn’t generate anything. It is simple gambling.
The only way for traders to earn money is for other traders to lose money. That means that trading is essentially a zero sum game. It is impossible for everybody to profit. Someone always has to pay the bill.
That means that trading is extremely competitive. All other traders are essentially your opponents. That makes it extremely hard to to find good trading advice, since all other traders are motivated to see you fail.
That’s just how trading works.
The Bitcoin Price is Irrational
In my experience, the bitcoin price movement is completely irrational.
The price moves up or down for even the most insignificant reasons, yet at other times it remains unmoving when extremely important news are coming out. There are multiple reasons for this. The poor understanding of people about how Bitcoin works is one such reason. But the biggest reason, by far, is the small market capitalization of Bitcoin. The smaller the market is, the easier it is for single individuals to change the price.
Trying to predict the price when the system behaves like this is a bad idea.
To make matters worse, some not-so-legitimate players are part of these markets too. Market manipulations on all levels are quite common.
For example: I remember once how a coin went up in price more than 400%, just because of an announcement that a completely unrelated product (but will the same name) is being started.
That’s just one of many examples.