Hello Steemians,
Bitcoin and Bitcoin Cash last night illustrated a perfect example of one of Bitcoin's greatest threats: The herd-like mentality of many investors in this market. In other words, fear.
Given the younger demographic and low experience with investing, many investors in this market follow the money due to FOMO and FUD. Many emotions run rampant, but especially fear (on both sides of the equation). Even the pastebin that is making rounds just adds more fear to the equation. On that subject, I want to say that there are thousands of conspiracy theories out there - Don't blindly accept them as truth.
How many of you bought Bitcoin Cash to ride it up a little bit and make some money? How many of you hedged against the Cashening by buying Bitcoin Cash? Sometimes, moments like these convince me that cryptocurrencies are a bubble despite their phenomenal potential as people invest to make money quickly or out of fear.
For those of you who bought Bitcoin Cash as a hedge for the Cashening last night, please reconsider that strategy. Given their near perfect negative correlation last night, hedging through buying Bitcoin Cash just reduces your net long position in Bitcoin (just sell Bitcoin & reduce position size instead). The opposite is true as well. Note that this is only true as the negative correlation was so high (smaller negative correlations are good). The main reason to do it would be because you want to avoid realizing capital gains on Bitcoin. If you do it because you suspect Bitcoin Cash will have better gains, then realize that is an oxymoron. Just buy Bitcoin Cash in that event.
The point is, scale your positions based on confidence rather than buying both of them. When you buy both, you tie up way more capital for little benefit. That capital could be either deployed elsewhere or left as dry powder on sidelines. If it is all tied up in BTC & BCH, you leave yourself little wiggle room.
Lastly, take a step back and breath. Think about what you feel will be the future of Bitcoin and invest accordingly. Don't go chasing performance just for the sake of chasing it - that's a sure-fire way to get burned.
I'd love to hear your thoughts as always, thank you.