Sometimes, the only way to keep a financial market alive is to think for yourself, and according to Changpeng Zhao – the CEO of Binance, the world’s largest and most popular cryptocurrency exchange – the herd mentality is really doing some heavy damage to the digital asset space.
Changpeng Zhao Thinks People Need to Invest Long Term
To be fair, he comments in a recent interview that this same attitude is seen in the stock market, though crypto appears to be more vulnerable somewhat given how new it still is. He says that there are many people active in the space at the time of writing that do not necessarily think about what they should do or how they should invest. Rather, they are “reactive investors” who likely run away as soon as the price of bitcoin goes down and invest all they have when it goes up. He says that this is not always the best way to handle things, as this ultimately leads to heavier volatility.
The herd followers are less committed. Whenever there is some negative news, they run away. Whenever there is positive news, they try to rush in.
Zhao further states that while there are a handful of people out there who really understand bitcoin and its altcoin cousins and purchase units specifically to hold them long term, many retailers do not take this route, and typically react quickly whenever bitcoin makes a sudden move. He also says that many institutions are to blame, mentioning:
There are also large institutions that do volatility trading. They seek volatility, and they sometimes even want to generate the volatility, so it is not to say that just because there are more institutions trading then there is less volatility.
He says that if institutions want bitcoin to remain in a strong position, they must behave in a way similar with MicroStrategy. The institution made headlines in August of last year when it arguably became the first institution in the history of the digital asset space to publicly support the world’s number one digital currency by market cap and purchase a huge stake in the asset. Since then, it has continued to add to its stash and now holds more than $5 million worth of the cryptocurrency.
MicroStrategy Has Helped Quite a Bit
Zhao states that MicroStrategy has managed to assist in making sure bitcoin’s price reaches a new pinnacle on a permanent basis. He also says the firm has helped reduce its volatility for good, though there are still several companies out there making mistakes. He says:
It is nothing new in crypto. Volatility is everywhere. Um, and actually bitcoin is probably less volatile than a similar-sized asset like an Apple stock or even a Tesla stock.
Binance was founded in the year 2017 and currently boasts more retail clients than institutions.