“A person is smart; people are dumb,” is one of my favorite truisms about investing.
It is true of stock markets and about cryptocurrencies, though not in the ways you might expect. But let’s take a step back here. Why are we talking about “herd mentality” in today’s Ethereum news update?
The answer should be obvious if you’ve glanced at CoinMarketCap today. Cryptocurrency prices suffered a major setback on Thursday morning, dropping unanimously across the board.
ETH prices, for instance, fell 21.8% against the U.S. dollar. This brought the Ethereum to USD exchange rate down to $401.24.
Daily Ethereum Chart
Meanwhile, a simultaneous drop in BTC prices softened the Ethereum to Bitcoin exchange rate’s fall. It only lost 4.83%, bringing it to 0.04405800 BTC.
This is where “herd mentality” comes into play.
Most investors never really understand how blockchain works, or why Ethereum was (and is) technologically superior to Bitcoin. All they saw was the exploding price, and they bought into ETH.
And you know what? That’s okay!
There is absolutely no reason why an average investor should know different hash rates or be able to write an essay on decentralized application blockchains versus payments-focused blockchains. That’s not their job.
However, investors should know are the basic rules of investing: Buy low and sell high.
Or to borrow a line from Warren Buffett, “Be greedy when others are fearful, and fearful when others are greedy.”
I have met people of extraordinary intelligence—doctors, engineers, qualified professionals—that seem to forget these rules in market crashes. They completely lose their heads.
When markets reach a fever pitch, as cryptocurrencies did last week, they reach for their wallets. But when prices correct, they rush for the door. It’s totally nonsensical.
Ethereum prices are still above our prediction for 2017. Our 2017 Ethereum price forecast had pegged a $400.00 target on the currency, so we are not worried about its long-term trajectory.
These kinds of price swings are both a feature and bug of cryptos. If you want the upside that they offer, you have to be willing to stomach the downside. Or, if you want to be daring, take advantage of the downswing by scooping up ETH at a discount.
We recently upgraded our 2018 Ethereum price forecast to $1,500. We hold to that prediction.
Source: Price Confidential