The Captain’s Column: January

eToroFC Captain – Conor Houlihan

 

Conor discusses the current corrections ongoing in the market and shares his experiences of previous market corrections.

It’s not been an easy ride for investors and traders recently as equities and commodities see increased volatility. Q4 2018 was a quarter to forget as trade issues and a “slowing economy” sparked fears of a recession. In true Wall Street style, we saw panic amongst investors leading to a sharp selloff in stocks. This type of market overreaction is common as investors often become overwhelmed by fear when macro-economic issues and bearish predictions are posted all over the media.

I have sat through many similar corrections or flash bear markets in the past 3 years alone (July 2015, December 2016, February 2018) where the best decision every time has been to avoid selling into panic. It seems as though this could be another classic example of the above as fears now appear to be subsiding with stock prices jumping as much as 25-50% over the past couple of weeks. We will no doubt continue to experience high volatility over the next few months as the market reacts to issues such as the US government shutdown, trade negotiations, Chinese economic data and Brexit.

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Providing we get clarity on these subjects, then I think we will see stock prices steady and continue their traditional climb higher throughout the rest of the year. We can pretty much apply the same thought process to the cryptoasset market and refer to similar examples of where investors were right to avoid selling their assets during such price corrections. Historically, buying during this stage of the “crypto correction” whereby I mean that we have witnessed a huge drop in prices followed by a sustained period of reduced volatility has proven time and time again to be an extremely lucrative decision.

Similar to the stock market, there are some key issues that need resolving before we see the return of the crypto bull market and the two most important things to look out for include greater clarity on pending regulation and better investment infrastructure. Only when these two things are improved can we begin to see the kind of meaningful institutional investment that should propel the blockchain / cryptoasset revolution forward.

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eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFD assets. 

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. 

Cryptoassets are a highly volatile unregulated investment product. No EU investor protection. Your capital is at risk.  Past performance is not an indication of future results. This is not investment advice. 

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