Opinion articles

An atypically hectic week in the digital markets.

Una semana atípicamente agitada en los mercados digitales

“Half of what separates succesful entrepreneurs from non-succesful ones is pure perseverance”

-Steve Jobs-

An atypically hectic week in the digital markets was the one that took place from November 7 to 13. We proceed to explain in more detail what happened. In the markets, there are “highs and lows”, which are perfectly natural. These can be technical (chart analysis), which basically proves that history repeats itself and that markets have “memory”, or fundamental, which is when “news” has a positive or negative impact on price behavior. Technical data are predictable, so it is easy to read the movements, knowing how to do it, while those of fundamental order are generally of “immediate” impact. Technical analysis is more consistent in the long term, while fundamental data are transient; they pass when the news passes.

This 2022 has been characterized by having a momentary technical reprieve in Bitcoin, after two years of almost uninterrupted growth. We like to call these periods “breaks” because the market requires time to plan the next upside move. This is one of the reasons why client tenure, in the background, should be long-term.

However, there has also been news that has lengthened technical events, such as the war in Ukraine, the food supply chain, and gasoline and natural gas prices, which, together with low economic growth in the world’s major powers, are causing an event known as “stagflation, which is understood as inflation coupled with low, or negative, production. In the digital world, recent news, such as the bankruptcy of a well-known exchange, creates a natural nervousness among investors.

These elements, acting together, cause the prices of financial assets to fall in value across the board. Bitcoin is of course no exception. On the question of whether this is the time to get out, the answer is no. It would be if the backing asset, which in the case of DIG Fund is Bitcoin, primarily, had no new possibilities for growth. This is clearly not the case. Gains or losses are realized upon sale, in the case of an asset, or exit, for the example of a mutual fund. At that point there is no return.

After an atypical 2022 in Bitcoin’s behavior, after hitting the “bottom” of its price on several occasions, it does not seem that the probabilities of the same thing happening in 2023 and 2024 are equal. We are firm believers that “the worst” is over, so the next two years should be positive again.

Finally, I would not want to neglect to mention investor psychology. Reacting at the expense of nervousness is what makes people and institutions make the mistake of taking unsubstantiated losses, triggered by natural market events. This phenomenon is known as FUD (fear, uncertainty, doubt). The strange thing is that when prices go up, the same psychology provokes a desire to re-enter, which is known as FOMO (fear of missing out), which is not wanting to stay “outside” of the rising event. . In conclusion, the psychological aspects cause clients to do exactly the opposite of what they should do: exit when the price is low, and enter when the price is high.

We hope this has answered everyone’s questions, and we thank you, as always, for your trust in DIG Fund.