Hard Fork speculation

It happens quite some time and a hard fork may be necessary. The largest one was the Bitcoin hard fork in August 2017 and this was also a great opportunity. In the end it was a very trade with almost 100% in just 4 weeks. The reason it worked is simple. When there’s a hard fork everybody is aware of it (at least should). Investors are usually risk averse meaning they try to avoid risks that are unnecessary to them. They prefer to buy stocks after information about the company was revealed instead of buying into the blue and waiting on more information. Information in this regard is just data to avoid risk. The investment is getting less risky and thus more attractive.

But in market theory there’s something called risk-return relationship. Meaning the higher the risk you take the higher your return should be. This is obvious but it’s not a linear relationship. Investors are still human beings in the end and do not act 100% rational. They value loss avoidance higher than gains of the same amount for example. Behavioural finance is a topic on its own but here’s what is interesting for you as “hard fork grinder” so to speak: Hard forks give you a chance to buy when other investors are risk averse. They think “uh, there’s a hard fork coming up, not sure how this turns out. There might be a chance that the currency becomes worthless or I have to sell for a loss”.

You should not be that kind of investor and go for it. You are looking for 100%+ returns on your investments and that’s a lot. You need to be ready to take some risks for that to happen. Otherwise you’re better off buying real estate or stocks again. But then you have to live with 5-8% annual returns.

Anyways, you should get greedy when others are cautious. And before a hard fork the majority is cautious. I recommend reading the news regularly to know about hard forks in advance. Usually it’s not best to get into right before the hard fork but a couple of days before. Just watch 5-7 days before daily or even hourly and seek for a good low point to get in. Even if you don’t hit the exact low point (which is pretty tough anyways) you may only lose a couple of % in returns but it’s still enough.

When to get out is another question and depends on your preferences. Some traders may only trade hard forks with high volumes. I would not recommend that as you’re dependent on this strategy to work out quite often and you risk a high amount on each hard fork every time. I would consider it as part of your strategy to seek for low entry points and then keep for the long run. This also depends on the potential of the currency. In the beginning we mentioned the BTC hard fork. In this case there’s no need to discuss and you should keep it for a long time. This may have been the last chance to get into BTC with $3k or less. No reason to get angry, the next hard fork is already scheduled.

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