The crypto market just suffered a staggering loss. Bitcoin, Ethereum, Solana – all crashing hard into the bloodiest red after news broke that Israel just bombed the hell out of Iran. We’re going to white board the process by which we suffered a 7% market cap loss. We saw $1.2 Billion in liquidations, Fear & Greed Index tank. Honestly, are we really surprised? This isn't new. This is human nature playing out on the digital stage.

Is Fear The New Algorithm Now?

Let's be blunt: markets are driven by emotion. Always have been, always will be. We break down intricate algorithms into bite-sized chunks. Ultimately, fear and greed dictate the decision-making. Remember the dot-com bubble? The 2008 financial crisis? Each time, the narrative changes, the technology evolves, but the underlying psychology remains the same: euphoric greed followed by paralyzing fear.

As a result, the Fear & Greed Index fell 10 points to 61. Still deep in “Greed,” but that’s kinda the misleading figure. That’s akin to arguing that the Titanic wasn’t really sinking when the first lifeboats were deployed. The trend is what matters. And that trend is downward, driven in large part by uncertainty in the Middle East.

Think about it: headlines scream "Israel launches Operation Rising Lion," casualties reported, Iran promises retaliation. Immediately, the rational brain takes a backseat. We’re hardwired to respond to dangers, to pursue security. In today’s world, that frequently means liquidating speculative assets – such as cryptocurrencies.

I spoke to a crypto trader, a friend of mine named Alex, who told me, "I know this could be a buying opportunity, but I just couldn't stomach the thought of losing more if things escalate. So, I cut my losses." That's fear talking. That’s the human element that no algorithm can ever completely predict.

From Geopolitics To Crypto Wallets

Here's the unexpected connection: the fear triggered by geopolitical events isn't that different from the fear triggered by a rug pull, a protocol exploit, or a regulatory crackdown. It's all uncertainty. And uncertainty breeds panic. We’ve witnessed this same panic production during the COVID crash and Evergrande crisis, as well as countless other supposed “black swan” events.

We see the headlines: Bitcoin down 5%, Ethereum down 10%, Solana even worse. But behind those numbers are people. Our friends and neighbors who invested their life savings into crypto, hoping to escape the rat race. These are men and women who today are watching their 401ks disappear, their dreams evaporate.

This is where empathy comes in. So it’s tempting to chalk up these incidents to the benign forces of “market corrections” or “shakeouts that need to happen.” For others, it’s not a hypothetical discussion but a dire financial reality. We need to get serious about responsible investing. It’s important to be aware of the dangers and avoid the temptation to pursue fast returns.

Remember how traditional markets reacted? Stocks dipped, gold surged, oil spiked. Investors fled to safe havens. It's the same playbook, different stage. The aspirations to decentralize, democratize and disrupt with crypto remain a powerful allure. Still, it’s far from insulated from the tumultuous global landscape or the mood swings of human investors. The recent jump in crude oil prices (almost 10%) should be a pretty clear indication of just how risky people think things have gotten.

Are You A Sheep Or A Shepherd?

So, what do we do? Panic sell and join the herd? Or simply pause, breathe deeply, scan the landscape, and then use data and knowledge to guide decision making?

Here's a dose of reality: nobody knows what's going to happen next. Between the incendiary situation in the Middle East and the crypto market’s reputation for volatility, this is a quickly changing landscape. That doesn’t mean we should completely throw reason out the window.

This is where the “greed” portion of the Fear & Greed Index kicks in. Second, fear can be a motivation for lowering prices. That opens up opportunities for the patient and strategic.

Think of it this way: when everyone is running for the exits, you can pick up some valuable assets at a discount. That is, only if you have the stomach for it. And only if you've done your research.

Things are apparently oversold on the market, as per the RSI. That could signal a potential rebound. But it's not a guarantee.

  • Review your portfolio: Are you overexposed to risky assets? Do you have a diversified investment strategy?
  • Do your own research (DYOR): Don't rely on social media hype or fear-mongering headlines. Read whitepapers, analyze market trends, and understand the fundamentals of the projects you're investing in.
  • Consider dollar-cost averaging (DCA): Instead of trying to time the market, invest a fixed amount of money at regular intervals. This can help you smooth out volatility and avoid making emotional decisions.
  • Zoom out: Don't get caught up in the short-term noise. Look at the long-term potential of crypto and blockchain technology.

One way or the other, what matters most is to stay informed, stay logical and stay ready. Don't let fear dictate your decisions. Don't let greed cloud your judgment. And remember, this too shall pass. Markets go up, markets go down. It's the cycle of life. How you respond to that cycle will decide whether you come out successful in the long game.

Whoever creates it, the best street art I encounter in my town feels like this emotional canvas – visceral, immediate, and affecting. After all, we’re all in the midst of this journey called life. Here’s to painting a beautiful future, stroke by stroke. So, here’s to approaching this exciting volatility with courage, resilience, and a healthy degree of cautious optimism.

Are we repeating history? Maybe. History reminds us that the true victors are those who learn from their missteps.

Are we repeating history? Maybe. But history also teaches us that those who learn from their mistakes are the ones who ultimately succeed.