If you follow the crypto community online you will very often hear experts like Robert Testagrossa talk about the need to have diamond hands. What people mean when they say this is that you should be approaching this for the long term. There are so many people who panic sell when the price of crypto dumps and then FOMO buy when it starts to rise again. The phrase diamond hands is used to refer to those who hang on no matter what the price is doing.
There is a reason why experts suggest that you should do this, and here is why they are recommending it, especially to new investors.
Volatile Market
This is the planet’s most volatile market and that means that you are going to be highly unlikely to relax if you don’t have diamond hands. Take the last 7 days as the perfect example, which has seen the price of Bitcoin rise by 22%. Now there will have been many people who panic sold when the price of Bitcoin hit $33,000 thinking that it was going to plummet. The price of BTC is currently $38,000 meaning that those people who sold now have to buy in at a more expensive price, or be frozen out altogether. The best approach is to just invest and wait.
Trading Dangers
Anther dangerous idea which many investors have had, especially smaller investors, is that they are trying to trade their small investment up to a larger amount of holding. In order to do this of course you would have to sell when the price is up and then re-buy when the price falls. This is a great notion but given the level of volatility which the market sees, it is a much smarter idea to just wait. There is a danger that if you do sell on the way up, that the price continues to rise and then you will find yourself frozen out, or having lost money. The reality is that unless you are prepared to invest a huge amount of time in this, it is far better to just invest once, at a price which you are happy with, and then let the investment ride out.
Stability in the Market
What many fail to realize is that the market will be far more stable if there are many people who are just holding. If we keep on selling we will eventually drive prices down, which will impact us all. If however we have a larger percentage of people who do have diamond hands, then we will be able to maintain a better price, encourage more buying and a larger market cap, and ultimately we will all make more money.
The idea of holding onto your investment is also about the fact that the large majority of people believe the likes of Bitcoin to go upwards of $500,000 in the future, hanging on now gives you the chance to sit at the table when it does.
