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intermediate
For those who’ve ever visited any funding or crypto boards, you’ll have heard the time period “bag holder.” It’s primarily used to explain retail traders and has a adverse connotation.
What Is a Bag Holder?
A bag holder is a time period used to explain merchants and (primarily) traders who’re holding onto belongings which have misplaced just about all of their worth. It originated through the Nice Despair when folks in soup traces held potato luggage with their solely possessions.
Trendy bag holders often have extra “belongings” than their namesakes from 1929, however they maintain onto them simply as tightly. Many individuals attribute bag holders’ conduct to both ignorance, sunk value fallacy, or reluctance to confess that they’ve made a poor funding resolution — all of which result in them not exiting what are clearly shedding positions.
Bag Holder Instance
Right here’s an instance of a typical crypto bag holder: think about there’s a man named John, who at some point made up his thoughts to spend money on cryptocurrencies. He noticed a bunch of moonings on the information and determined he additionally wished to make an enormous revenue. So, as a substitute of investing properly, he purchased some SHTC — a penny cryptocurrency that has been booming these days.
After all, as a substitute of mooning or at the very least locking in a decent common worth, this crypto, which had no technical basis to talk of and an absent dev crew, has begun dropping in worth. Whereas many different traders closed their positions and offered all their SHTC, John determined to carry on, not eager to waste his preliminary funding and anticipating the coin to rise once more sooner or later. After all, it by no means did — in just a few weeks, it collapsed to zero. John was left with nothing.
This can be an excessive instance, however bag holding is certainly quite common in crypto. It’s largely as a result of many traders on this market are relatively inexperienced and emotional and wouldn’t have an funding technique. So, to keep away from turning into a bag holder, we suggest you to follow investing with smaller sums first, preserve a cool head, and, in fact, DYOR!
Disclaimer: Please be aware that the contents of this text will not be monetary or investing recommendation. The knowledge offered on this article is the creator’s opinion solely and shouldn’t be thought of as providing buying and selling or investing suggestions. We don’t make any warranties in regards to the completeness, reliability and accuracy of this info. The cryptocurrency market suffers from excessive volatility and occasional arbitrary actions. Any investor, dealer, or common crypto customers ought to analysis a number of viewpoints and be conversant in all native rules earlier than committing to an funding.
