As I type this, the price of Bitcoin ($BTC) is $40,228. After typing that, the price decreased to $40,217. As the clock changed from 11:59pm on June 2nd to midnight on June 3rd, the price was at $38,880. A month prior, when May 2nd turned into May 3rd, the price was $57,706. One year ago in June 2020, the price hovered around $9,000.
Bitcoin is extremely volatile. And this is not a phenomenon exclusive to the now legal currency in the Central American country of El Salvador. If we look at some of the other popular cryptocurrencies, some recurring themes will start to unfold.
Currently, the price of Ethereum ($ETH) stands at $2,585. On May 10th, just one month ago, the price was $4,169. Although on a much smaller scale, Dogecoin ($DOGE)—the cryptocurrency that Elon Musk has attached himself to via online memes and his SNL appearance as the self-proclaimed “Dogefather”—is also very unstable. Its price one month ago was $0.692. It now stands at $0.323. Ripple ($XRP) is now $0.88 after it was $0.20 in June of 2020.
Just from this small set of data, there are a few different patterns that are worth pointing out. For example, the value of the coin does not seem to impact its stability. That is, cryptocurrencies are unstable regardless of their price. Both Bitcoin and Dogecoin have drastic price changes relative to their prices in the same time period, even though Bitcoin’s price is exponentially higher than that of Doge.
Another consistency across all of these cryptocurrencies is the triviality of time. What I mean is, the price can change at any time, day or night. A third pattern seems to be that year-over-year, the price of these currencies is largely increasing. However, the majority of these coins are at very early stages in their existence and so this claim ought not be taken as fact just yet.
If you do the math though, there is one main pattern worth focusing on from a philosophical perspective. Namely, in the short run, cryptocurrencies are extremely erratic.
Based on this, it becomes clear that a guiding maxim set forth by the Greek philosopher Aristotle finds yet another area of relevance.
Life In Moderation
Most of the actual events in Aristotle’s life are hearsay and therefore unreliable. On top of that, a good portion of his writing was destroyed by Julius Cesar when he burned down the Library of Alexandria in 48 B.C.E, allegedly accidentally. Even still, it would not be hyperbole to say Aristotle’s influence stretches throughout the entirety of Western Society.
Naturally, Aristotle’s significance in philosophy cannot be understated. From the fall of the Roman Empire in the 5th century to the period of Enlightenment more than 1,000 years later in the 17th century, Aristotle was uniquely referred to as “The Philosopher.”
Aristotle’s lasting influence in philosophy is believable enough. Even his early effect in other disciplines are understandable, especially if one takes the Heideggerian stance that all disciplines stem from philosophy. When it comes to laying the foundation of study for fields far beyond philosophy, the list is extraordinary: zoology, poetry, theater, politics, economics, physics, biology, rhetoric and meteorology, just to name a few. But what can an ancient thinker have to say about cryptocurrency investing?
The Philosopher also set forth guiding principles of how to properly reason. Plainly, it is these principles where the markets can still look to Aristotle.
According to Aristotle, to live in moderation is one of these key principles. This is one that comes up throughout his corpus. One of the most poetic examples comes in the Nicomachean Ethics from 350 B.C.E. He tells us that, “It is best to rise from life as from a banquet, neither thirsty nor drunken.”
There is an appealing argument for prioritizing moderation. It is best to not overdo or skimp yourself in life. Finding that middle-ground, or “golden mean” is key. By doing so, you will be on your way to living a moral life.
So, unlike the way morality is commonly understood—weighing the intentions and consequences of an action—Aristotle theorizes morality is based on how you follow these principles, in which moderation is one. Regardless of what the intentions or consequences of any individual action is, you judge the morality of an act by whether you are following the principles.
This is an idea that goes beyond just morality. It inherently applies to your diet, how to safely and fairly reopen workplaces after the pandemic remote-work era, and navigating partisanship in politics.
Further, this principle has as much importance with emotional response than it does with actions. Just as you can act in moderation, you can conduct your emotional responses in moderation. By not over or under reacting to life’s happenings, you will be able to think clearly and rationally respond.
Tying It All Together
This is especially important to keep in mind if you are a crypto investor. As we have seen, cryptocurrencies are extremely volatile in the short run. The drop in prices that seem inevitable can produce extreme emotional reactions. This can cloud judgement and lead to making very real mistakes.
Every investment holds some risk. So should you wake up and see your Bitcoin investment down $7,000 from when you went to sleep, think of Aristotle. So long as you can control your emotional response and not overreact to inevitable volatility, you will be better able to focus on durable and sound decision-making.