Bagholding

Bagholding is when you buy an asset, the price drops and you end up holding it for a long time while it sits under water.

This causes PTSD in many traders. 2018 and 2019 were full of bagholders. I was one of them.

I early 2019 I experienced this with the E-mini futures market, holding a position too long and getting my ass handed to me. Same thing happened with crypto. Years later I look back on this and realize what was going on.

Holding a bag too long usually has a deep emotional grip, especially when it’s a big position. We tell ourselves some bullshit story about a narrative that’s coming or how some big catalyst is going to make it pump, but deep down we usually know that we are full of shit.

We scour Twitter and Discord to find some influencer who we can borrow conviction from hoping it will give us some break from the daily onslaught of mental anguish. We look at CoinGecko and the missed opportunities, feeling wave after wave of regret.

Objectively, this looks crazy. Why would anyone put themselves through this?

I would argue it’s rooted in a misaligned emotional system.

Usually, bagholders are created during the periods of peak emotional intensity. In crypto this is at the middle and end of bull markets — the hope of the elusive 100x trade is burned into the brain by people who are very good at selling ideas.

The bagholder buys a position and begins to imagine what life will be like when all of these things come true. The quiet confidence that he will feel as the rest of the market slowly realizes how good of an investment it is. The zen like patience as the price moves up 2x, 3x, 10x, 100x. The triumphant Fuck-You energy of selling at the exact top, cascading generational wealth directly into his Metamask wallet. Every single person will bow down to him in awe, his clairvoyance and skill enshrined in the trading hall of fame.

Every day the bull market continues this story is played in the mind of a bagholder. Every day this story becomes more powerful.

What the bagholder does not realize is that none of this is about money. It’s about being right. It’s about feeling like they finally have some huge power move that’s going to get them ahead in life where they no longer have to stress and deal with the daily battle of anxiety, depression and self-doubt. It’s about being able to tell people in their lives how smart they are when the entire market called them crazy. It’s about holding through the hard times and proving to the world that they are, in fact, right about how to live life and everyone else is out of their mind.

The bagholder dreams not of being rich but of being whole.

Compare this with the Mercenary Trader. He lives on the opposite end of the spectrum. He sees a list of coins that all have charts, fundamentals and tokenomics that can be put into a spreadsheet. Each trade/investment is done without emotion and profits are harvested regularly.

The Mercenary Trader does not care about what he’s trading, he’s just here to make money. Bagholding, to him, is the lowest form of market participant. Imagine not cutting your losses? Ngmi.

The Mercenary Trader sees the market as a place to exercise his trade in defined hours of the day and will sleep 12 hours a night on the weekend, followed by lazy brunches and high fives with his other, relaxed friends. The Mercenary Trader does not care if it’s a bull market or a bear market, he just cares that there’s a *takes a fat rip* market (s/o HsakaTrades).

The mercenary trader is usually not as wealthy as the conviction investor. They focus on trading for income and often miss the big 10x-100x gains.

But there is much the bagholder can learn from the Mercenary Trader mindset.

Imagine you have everything you could ever want in your life. You are happy, healthy, financially free and connected to people you love. Each day you wake up feeling grateful and blessed.

More importantly, you feel excited about the future and building a future. You’re hungry to win and create great things. You don’t think about yourself nearly as much as you think about your goals and ambitions.

In this state, the idea of bagholding becomes rather silly. Why would you ever sit on a losing position that’s not helping you get to where you want to be? Why wouldn’t you constantly be optimizing your portfolio to grow to the maximum degree?

The usual response from a bagholder would be that the pain of selling the bottom is too hard to bear, but why is that? Why is it so painful?

Because you’ll feel like the ultimate loser. If you’re already feeling defeated, the brain cannot compute another loss. It is the spiritual death blow.

The bags become our proxy to happiness. Where price goes, so goes our life satisfaction. This is the most dangerous game there is.

Right now there are thousands of bagholders in crypto. Some of them know they’re bagholders, others will find out in due time.

The most important step in your journey out of Bagholders Anonymous is admitting you are a bagholder. The second step is accepting that this is not about the assets, it’s about you, and it’s time to stop fucking around with hopes and dreams. The third step is to sell 5% of your bag and rip off the band aid.

I write this not to condemn anyone or to act like I have it figured out. Lord knows I do not. I’m writing this because being a bagholder in crypto is a guaranteed way to maximize stress and minimize the odds of beating a hodl BTC/ETH strategy.

Sure you might hear stories of people who held Litecoin for 4 years and now they’re living their dreams but is that really a win? Missing out on the greatest bull market in history for a 3x because you were married to an idea?

Assets are supposed to work for YOU. You are not supposed to work/stress/worry about your assets. YOU are in the driver’s seat of your life.

It’s time to stop being a bagholder and to start being a winner.