Bitcoin went from $3,000 at the beginning of 2017 to almost $20,000 by the end of the year. By the end of 2018, it traded at $3,000. I lost $45,000 in crypto during that market cycle.
You’d expect that I’d never want anything to do with crypto after wards. Well, at first I took a break. But after further research and study about cryptocurrency and Blockchain technology, I decided to try again.
By April 2021, I had invested 90 percent of my life savings into cryptocurrency. I’ll share why I decided to take this step in another video. But for today’s I’m going to share some of the lessons I have learned after putting almost everything at stake into a high risk, highly volatile investment like cryptocurrency.
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If you have been following the news, you would have learned that the crypto market crashed by more than 50 percent. Some altcoins lost over 70% of their value. The majority of crypto investors lost a good part of their money. Interestingly, I did not lose my investment. I’ll also tell you how I managed my risk in this video.
- The world is ruled by greed
Regular people are quick to call out banks and the corporate world for being greedy. But the truth is that majority of people are a bunch of greedy lots. We always want to have more. And we are willing to be the last lucky one, even if it means that the next person becomes the scapegoat.
This dominant nature of greed was fully demonstrated with the craze of meme coins that trended over the past few months in the crypto world. The market quickly turned a revolutionary technology into a Ponzi scheme. It was no longer about what problems crypto and Blockchain technology was trying to solve, it was about chasing after the next dog coin.
Influencers on YouTube, Twitter, and Tiktok lend their voices to become evangelists of meme coins, creating a distraction from the original movement for a decentralized economy.
I’ll have to admit that the crazy profit was tempting. People turned $100 to $10,000 in a few weeks. More people poured in their hard earned money into these meme coins – more than they could afford to lose. You didn’t need to be a fortune teller to know that this was going to hurt more than it would benefit the crypto space. The majority lost their life savings.
The lesson is this; if you want to invest in crypto or any of such tradable assets, you must understand that you are also susceptible to greed and be more intentional with your investment strategy.
- Controlling your emotion is the most important investment skill
If you are a daily trader, you need to control your emotions to know when to take some profit or when to count your losses. If you are swayed by the possibility of making 100% profit in a few days, you expose yourself to the risk of losing big. As a day trader, it is better to walk away with 10% gain than to lose 50% chasing pumps.
If you are a hodler, you have to control your emotions to only invest in projects with fundamental and long term potential. You have to control your emotions to keep holding on when the marketing is not moving as expected. You also have to control your emotion to avoid jumping on bandwagons.
Most retail investors are just regular people driven by emotions. They invest out of the Fear Of Missing Out. They only invest in what is popular. Understand that, in crypto, even in stocks, there is always an asset you could have made quick gains from if you had invested few days ago. It’s impossible to always be on the moving lane. If you don’t control this feeling, you are bound to lose a lot of money in crypto.
- What goes up always comes down
I learned this lesson from my 2018 experience in crypto. Since then, I always have it in mind that what goes up will always come down. I remember discussing a particular crypto project I found really innovative and prospective with my wife. She also invests in crypto. The project has a credible and solid team and organizations behind it. And it hasn’t attracted much attention yet. When I mentioned the percentage of my portfolio I had invested in it, she asked, “if you believed so much in it, why aren’t you investing more?”
She was right. I seemed to be really enthusiastic about this project to not have invested more. But my experience thought me to always consider the possibility of a worst case, no matter how convincing a project is.
That is why, in crypto, you should only invest what you can afford to lose. I can’t afford to lose 90 percent of my lives savings. So I always ensure to balance my risk exposure. Because no matter how exciting the bull market may be, what goes up will always come down.
- You can save in crypto without the volatility
Most people who venture into crypto don’t understand the investment opportunities in decentralized finance. DeFi protocols offer investors a variety of options to make money; from highly volatile to stable investment.
Stable coins are cryptocurrencies whose value is pegged to a stable asset outside cryptocurrency. The most popular stable coins like USDT, BUSD, and USDC are pegged to the US dollar – one to one. Instead of allocating your entire portfolio to volatile crypto assets, with DeFi protocols, you can invest dollar pegged stable crypto and earn daily interest. You can earn 8 to 40% interest per annum.
Of course, compared to the potential of making 10 times and 100 times gain from volatile crypto assets, this may not look attractive. But you are at higher risk of losing your money due to the volatile nature of the market. I always kept a balanced portfolio of stable to volatile assets. Apart from earning interest, another advantage of this is that when there is a significant market dip, you have spare cash to buy cheap tokens and earn quick gains with slight market recovery.
- If you want to be consistently successful, don’t follow the crowd
The interesting thing about cryptocurrency and the Blockchain technology that powers it is that the more you learn about it, the more excited you become about its future potential.
Unfortunately, the majority of people don’t care. In fact, they don’t care about anything. People just want to go where it’s easy and proven to make money. And when things don’t go their way, they look for whom to blame.
Did you notice how the number of people talking about crypto dropped after the May 2021 crash? People only want to be a part of success. They don’t want to be early adopters or pioneers.
That is why you can never succeed following the crowd. You have to develop self conviction through personal study and learning. And you have to control your emotions; a quality you can never find among the crowd.
- This technology could change the world
In the past, you had to be worth at least a million dollars to get a chance at investing into early stage startups with a global vision. This space was reserved for high net worth individuals, just like the media was reserved for traditional media houses a few decades ago. You had to wait until a company is listed in a stock exchange before you can invest.
As digital technology democratized the media; cryptocurrency and Blockchain technology is democratizing finance and investing. Just as it is hard to imagine the world without the internet, social media and other information technology, in the near future, we may wake up to a world we can’t imagine without Blockchain, cryptocurrency, decentralized finance, NFT and other new tech coming out of this space.
- Saving in the bank is a losers strategy
You probably already know this. When you save your money in the bank, you lose. Inflation and currency devaluation will eat up your hard earned money. From my experience, investing stable coins in tested and trusted DeFi protocols is far better than leaving money in the bank.
Note that this is not financial advice. I’m only sharing some of the lessons I have learned and continue to learn from investing, trading and saving in cryptocurrency. It’s up to you what you make of this. This is my personal observation and experience. As always, do what is in your best interest. Until next time, YOUR SUCCESS MATTERS!