Cryptocurrency Investing Wisdom: Insights from Coinbase’s COO

At a recent Technology, Media and Communications conference, JPMorgan Chase, Coinbase (coin -3.77%) COO Emily Choi made some comments that will resonate deeply with both veteran and new investors.

When asked about the current stage of the cryptocurrency cycle, she dodged the question with great insight: “That’s why I’m smart enough not to predict where we are in the cycle, because I’m sure I’ll always be wrong.”

This was just the opening line of a fireside chat that quickly moved into a deeper analysis of the current cryptocurrency market. But this quote stayed with me long after I walked away from the broader presentation. Choi’s self-deprecating nugget of wisdom highlights an important lesson in any form of investing: trying to time the market is the wrong kind of foolishness.

The futility of market timing

Investors are often tempted to time the market – buying at the lowest price and selling at the highest price. This is a great idea when combined with long-term thinking, but it can be dangerous if you’re chasing the thrill of day trading or get-rich-quick schemes.

Even the most experienced experts admit that predicting market cycles accurately is nearly impossible. This challenge is exacerbated in the notoriously volatile cryptocurrency market. While it may be tempting to enter or exit based on short-term trends, doing so often leads to missed opportunities or major losses.

Here at The Motley Fool, we often see a different approach. in Market. This strategy involves buying and holding investments for the long term, allowing growth and compounding to occur over time. Great investors like John Bogle and Warren Buffett have always believed that compounding returns is the true magic behind wealth-building investment results. Any small increase in value will allow for even bigger gains in the future, and the effect is exponential.

Historical data also supports this philosophy, showing that long-term investments generally perform better than more frequently traded investments. Emily Choi is following in the well-known footsteps of some world-class role models here, following sensible principles.

Why spending time in the market is beneficial

By continuing to invest, your returns will grow through compound interest, meaning you get a return on your returns. Over time, this effect can significantly increase the value of your portfolio. Generally, economic markets tend to rise in value over the long term, experiencing occasional dips, crashes, and crashes along the way. Trying to avoid these inevitable setbacks is just as likely to cause you to miss out on the next big upswing.

Constantly monitoring the markets and making quick decisions can be stressful. A long-term strategy allows you to focus on other important aspects of your life without worrying about daily market fluctuations. Opportunistic investors should be ready to buy more stocks, funds, real estate, or cryptocurrencies when prices drop. More level-headed wealth builders can instead use a dollar-cost averaging strategy to continually add money to their favorite investments over time, regardless of short-term price fluctuations. This approach can even be automated.

It’s important to remember that investing can be an emotional act. Decisions made during market booms or economic panics often result in buying high and selling low — the opposite of a successful strategy. Staying calm when investing can help you avoid these common pitfalls.

Applying the “Time in Market” Concept to Crypto

Cryptocurrency markets are inherently volatile, so long-term investing can seem daunting, but the principle of time in markets still applies here.

While doing your research and choosing a cryptocurrency with solid fundamentals is important, a calm, collected, long-term approach can help mitigate the risks associated with short-term volatility. As long as you’re investing in solid stocks with promising long-term futures, unpredictable market fluctuations along the way won’t be an issue.

Remember, the markets will have ups and downs, but with a disciplined and patient approach, you can weather the storm and enjoy the sunny days that follow. Coinbase’s President and COO gave me just the reminder of this core principle I needed today. As a longtime Coinbase investor, it’s inspiring to see her approach her C-suite role with such humility in a volatile sector.