Are you an alt-coins lover who spends most of his time scrolling a huge amount of pairs? We must be honest with ourselves: everyone likes to spy on alt-coins.
One of the most common mistakes is to spend so much time doing it that traders lose their focus over the environment, which is mainly dictated by BTC, then ETH.
Actually, losing focus is one of the main reasons why people lose money, in general.
For now, we’ll restrict this matter to the crypto-assets, and we will see why giving main attention to alt-coins can be dangerous for your career as a trader.
Main Reasons Why You Lose Your Focus
There are three main reasons why one deviates from the righteous reference in judging the crypto-market, therefore majorly shifting the attention over alt-coins:
- Appealing rates of return
- Greater entertainment
- Urge of trading
Appealing Rates Of Return
Alternative coins are widely chosen from traders because of their capacity to TEMPT with high expectations of gains. The volatility of these coins is much greater than Bitcoin and Ethereum; this leads to very big movements in price charts that make traders think they can easily profit from those kinds of episodes.
Reflect on it: the majority of wealthy people still hesitate to invest in Bitcoin, mainly because of its volatility. And even if they do invest, they use a small portion of their portfolio, usually no more than 5%.
Imagine traders who not only invest in crypto-assets way more volatile than Bitcoin, but they do also completely focus on them.
If you feel to identify with this last group, you may want to re-wire your focus.
Yes, volatility is the very first powerful instrument to enlarge one’s capital. If you decide to take advantage of it in very risky environments, and you have no sound reasons other than speculation, you MUST be backed by very sound KNOWLEDGE and DISCIPLINE.
Be aware that everything comes with impatience. Learn to be patient and balanced to overcome being tempted.
Greater Entertainment
The second reason is a direct consequence of the first reason.
Alt-coins have one great quality: they are very entertaining. BTC and ETH have reached relative stability so that they are leaving the niche and reaching the real market out there. This implies that they cannot guarantee the appeal of a usurious rate of return like minor alt-coins, neither the same volatility.
How boring.
However, entertainment is very dangerous. When you start subconsciously switching your priority from making money to seek entertainment, you obtain entertainment but you don’t make money.
Dig into the root of your intentions and spot how much importance has your need to be entertained compared to your true purpose. If you feel you’ve forgotten that you are doing this for your wealth, re-wire your focus.
Before deciding on risky environments, ask yourself this question:
Am I doing this to entertain myself or to increase my wealth?
If you are proceeding with zero discipline, no reasonable motives, and pure gambler instinct, you can easily find the answer.
Urge of Trading
Are you one of those people who check their charts 100 times a day, or even wake up at night?
There is a high probability that you are the victim of your urge to trade (and fear too). Remember that trading has a lot of common points with betting, especially when one is not completely sure of what he is doing.
This means that, if a trader is not backed by discipline, he may eventually fall into addiction.
Alt-coins are perfect for this; they can provide appealing rates of return, great entertainment, and a larger than ever amount of choice; therefore, a super opportunity to satisfy the urge.
If you identify yourself with this description, you may want to free yourself from the trap. Rely on the true qualities of an asset, on your discipline, your knowledge, and your patience. If you have an efficient strategy, stick to it. Do not rush or force trades just because you feel the need to trade. If the asset you trust is not providing opportunities, turn off your pc and wait.
As you may have noticed, this third reason is a direct consequence of the second reason.
Why Most Alt-Coins Aren’t Reliable Environments To Trade In
Being Fooled By The Appearance
This matter affects both traders and investors.
Most altcoins are very good-looking: they have a nice social network page, a pretty site with colors and stuff, smiling guys in the team section, a very long white paper that they are sure no one will read because people are too bored to verify their investments.
They also seem to have a nice market cap, and their charts are looking great.
Try to keep always in mind that appearance is not what makes an asset great, just like everything in the world.
Search for true qualities, compare them with other existent assets, gather as much info as you can, then establish if the environment is safe to trade in. When you’re well fuelled with enthusiasm, turn off everything and come back after 3 days. If you still see the same positivity, you’ve made a nice analysis.
In the end, you will probably conclude that BTC and ETH already have what every other alt-coin has, they can be developed further, and the ones that will probably last. If you are good at your craft, you may spot one exception that will in some way join the club.
Again, if you are doing this only for speculation, be aware of your discipline and knowledge, and be sure when you will leave the carousel.
Lack of Liquidity
Alternative coins are thousands in numbers, and they are being traded in more than one exchange. Each exchange provides its liquidity. This causes the capital to be distributed a lot into the environment, resulting in a lack of liquidity for most coins.
The results of this situation are less freedom and delayed completion of the trading process. If you trade into a low-liquidity environment, you may encounter serious difficulties that will prevent you to get out of the market quickly if you need to, because there will be not enough liquidity to complete your request. Such things lead to loss of capital.
In financial economics, this is a major problem for large individual and institutional investors. As a matter of fact, the impact increases the greater the capital.
Significant Vulnerability To Manipulation
Because most coins belong to small market cap environments, they can be easily manipulated by both insiders and large holders.
You surely have heard before about the Pump & Dump phenomenon. Well, let’s say that everything is a pump and dump in some way, but in little assets, these episodes could happen in a matter of minutes or hours. In some special cases, popular individuals can influence vastly the price of a coin by sharing comments or news.
Some altcoins only exist to be manipulated eventually: there are a lot of cases in the crypto history about insiders dumping their coin after having hyped the community.
You may want not to find yourself in scenarios on which you have zero control.
Conclusion
BTC and ETH are the leaders of the crypto-assets revolution, and there are multiple good reasons for it: it is not just a case.
Most alternative coins are not reliable assets, and they are contributing to a general loss of discipline among traders, because of their properties.
If you choose to speculate over such risky environments, be aware that they are not supposed to make you gain money, and you need to have enough discipline and knowledge to bypass the very purpose for which they are made.
In any case, make sure that this field does not steal your main focus and deviate you from the right path.
Always rely on what you know will last at the end of the day.
Everything described in this article has the sole purpose of being informative and providing general information. The author has no intention of providing any financial advice, legal advice, or tax advice. Do not rely on this article to make investment decisions. Seek professional help before making any such decision. The author does not take any responsibility for loss or damage of any nature. The use you make of the information contained in this article is your sole responsibility.