Example of a weak shand. Someone too scared to buy into BTC and watched it rise from $10 to $15. The entire time was convinced it would crash to <$10 so they didn't want to buy. Finally due to the spike from $15 to $19 they buy in (capitulation buy). They don't really want to buy in at this price point but their short term plan has failed and they feel "forced" to buy in now or risk missing out on even more price appreciation. This hypothetical investor now has too much invested at too high of a price (relative to their own internal valuation). This investor is just looking for a quick spike to >$20 to sell for a profit. They are very likely to dump on any significant price movement upward which caps their gains however the larger risk is they are too long relative to their internal valuation and thus are very likely to panic sell if the price moves against them. Their impulse purchase, entry point, objective, and internal valuation all conspire to create a scenario where their upside potential is small and they have a large risk of selling in any downside correction.
Example of a strong hand. Someone dollar cost averaged with multiple strategic buys between $10 and $15 over the course of months. The investor believes long term the valuation should be north of $50 and thus $1 to $2 price moves are really irrelevant. While this investor may have a large nominal amount invested they don't "need" the funds and are psychologically prepared to suffer a unrealized loss for months of even years. They anticipate significant corrections and have undeployed capital ready to "buy on dips". The investor also accepts there is a non zero chance that the Bitcoin experiment will fail and this speculative investment will be completely worthless. This hypothetical investor has a strong hand. They are more likely to be buying on dips and selling some (but not all) on unrealistic spikes to continually improve their basis.
Over time coins (and thus wealth) are more likely to move from weak hands to strong hands.
A massive thank you all in this thread for helping me 'get' this. It hadn't even crossed my mind that its derivation could have come from card games but the switch from seeing 'strong' as in how big the investor's balls are to what position they're playing from opens the door for me to an entirely new understanding.
And this description from DeathAndTaxes is astoundingly clear. Whilst at first glance it may look like it is the indecisiveness of the player that makes them weak if I'm understanding this right that is not what is being referred to at all. That is only what lead to this hypothetical player holding a weak hand in the first place. It is the hand they are holding (their position/circumstance/attitude) which makes them a 'weak hand' which they are likely to lose if the market goes against them for anything other than the tiniest blip.
Interestingly, and especially when it comes to Bitcoin with its divisibility, it's not so much what we're dealt or how much we brought to the table that determines how strong or weak our hands are as the decisions we make in terms of how much (relative to our 'pot'), at what prices and when we buy, hold or sell. Our knowledge and understanding of trading, our tendency to make well reasoned decisions and to form a plan as well as our courage to carry that plan through all have a part in determining how strong our hand is. Of course luck has its part to play but deciding to select strong hands and carrying them through to their conclusion on a consistent basis is very likely to result in a long-term earned increase in asset value, at the expense of those who didn't.
OK, I'm converted. Now that I understand it I'm a fan of the notion of money flowing from weak hands to strong hands now
Now all I need to do (if I plan to do any more than hold onto my Bitcoin until such a time that I can earn in it and pay most of my living expenses in it) is to learn the skills and disciplines necessary to hold strong hands
I love this forum. I open my mouth with a misunderstanding and get presented with a beautiful opportunity to learn. The quality of thinking here bodes well for Bitcoin methinks
Thanks all.
