A hodler is a person who bought cryptocurrencies and decides to save them beyond the low price, with a view to a long-term investment. Sethi suggested that their investment strategy is fundamentally flawed because it is based on emotional identity instead of rational analysis.
For him, the reason why many cryptocurrency hodlers insist on suffering the price drops in bad market periods is because, for them, the fact of investing in cryptoactives is not a simple investment decision, but part of their identity. This means that they lose instead of making the rational decision to leave the market.
This behavior is now observed in the middle of a bear market and a very difficult year for the crypto holders and investors in general. At the time of writing this article, bitcoin was trading at the $4,000 level, one of the lowest points of the year, especially after the record high reached in December 2017, when BTC reached almost $ 20,000.
Sethi contends that hodler decision-making has been divorced from the practice of rational investment, and in this sense, refers to a popular phrase, ciptomonedas, or “buying during the fall” or investing in a market that does not seem to recover soon. Sethi says that they act emotionally, and are not based on the market moment, because technology is part of the investor’s individual identity.
He also argues that this behavior is analogous to when people publicly dubbed support for a politician when he was exposed doing some misconduct.
But the crypto ecosystem is not the only industry that acts in this way. Sethi claimed that
The development of emotional identities based on erroneous information and thought patterns is an almost ubiquitous fact in human society, specifically in the areas of money and investment.
One solution, in the writer’s words, is for crypto investors to take the trouble to periodically perform a self-analysis to audit the key messages that formed at the core of their identity.
“I do not care about identities. I have some identities of mine: personal finance guy, gym rat, hot sauce fanatic. But be very careful with the messages you tell yourself, because once you internalize them, you do anything to justify your choices.”
This story was originally published in Spanish at Cripto247