2022 has been a turbulent ride for all crypto investors. What started out as a raging bull quickly turned into a full on bear market. Numerous tokens have dropped over 90% from their all time highs and the largest protocols have had their technology pushed to the limits. Some caved under the pressure causing ripple effects throughout the industry that we haven’t even realized yet, while others silently rugged.
Looking back on the past 6 months there are a few thoughts I wish I had taken the time to ponder. Reading about others' experiences during similar times in the past can save us time and money. For my own sake and yours here are some lessons I’ve learned the hard way and from others.
Doing less is more
We often believe that being busy means progress and this is a simple thing to do in the crypto space. At any given moment there are scams, token drops and Twitter beefs. All of this noise keeps us from focusing on the main reason we’re here. To make money. From an investment standpoint doing less can often mean more. The idea is that rather than have a complex strategy to make a profit you take the simpler route and focus on placing your bets and riding out the waves.
How many times have you realized that if you had just bought and held you would have saved yourself hours watching the charts, worrying about price drops and engaging in meaningless fud. The key is to set a target and wait. If you have done your research and believe the project will succeed, let your thesis play out.
FOMO and meme tokens never lasts
If you have been in this space for any period of time then you have likely been tempted and bought into the latest FOMO meme tokens. It plays out like this, you’re sitting there surfing Reddit, Twitter or wherever you get your crypto news and a new token keeps popping up over and over. Retweets, likes, people making 100% overnight. It's real and it does happen. You sit there wondering what is this? You then search and low and behold you've entered the confirmation bias zone. Reinforcing your belief in this new token and the potential to make “gainz”. At this point it is almost a self fulfilling prophecy. You think to yourself if I just put in $200 and it 1000X’s I’d be set. You place a market order and it gets filled, instantly it drops as is the law of the universe. Waiting there second guessing your decision as you watch the green and red candles flicker on the screen. The next day you get a 125% pump and think yourself a genius, watching the numbers go up, it's glorious. All of a sudden a big sell order comes in, crashing the price 50%, no biggy just a whale getting out, more for me and maybe you double down but then another sell, then another. A cascade of sell orders comes in bringing the price all the way down to where you bought it. You hold and hope for a pump and then you’ll get out. That pump never comes and liquidity dries up, no more orders coming in and the hype goes silent. You just became someone's exit liquidity.
I sure hope I’m not the only one that has experienced this. Likely more than once I have fallen into this trap in the hopes of making it big. Lesson, if you are hearing about it on social media it is already too late. The early birds and founders have loaded their bags and you are more likely than not the target for exit liquidity. Beware!
Take Profits
This one hits home with a lot of investors. If you bought any of the top 100 through the bull cycle of 2020-2021 you likely made a decent profit, on PAPER. The key to profit is that it only really exists if you sell. You must sell in order to realize profit. So many, including myself, watched our portfolios 100, 200, 1000% and didn’t sell. Why? You thought it would and could go up more of course! You let greed creep into your mind and want more. Then you watched your holdings as they went down and hoped they would return to their all time highs once again.
A good rule of thumb is if you get a 100% take the original investment off the table and let the rest ride. With the initial amount taken out you are now essentially investing with free money. Adjust percentages to your liking.
Chances are you had one shot at those types of gains in the current cycle. If your project survives the inevitable bear market then maybe you’ll have another shot at it again. Take profits!
The bigger they are the harder they fall, there is no too big to fail in Crypto
The recent drop in crypto prices put a huge strain on businesses and protocols. Especially those involved in Defi and leverage. What started the bear market is anyone's guess but the fall of UST had a huge impact. A large amount of money was used to trigger a death spiral that led to its inevitable demise. The subsequent forced selling created unstable market conditions causing prices to drop and drop.
This drop in prices led to other large companies exposing what was behind the curtain. No longer could they provide the returns for their customers. Liquidity dried up and they were left holding the bag.
Large custodial services had tons of liquidity and what they did with it has just begun to surface. Behind closed doors they may receive bailouts to prevent severe contagion affecting the broader markets but this goes to show that in crypto no matter how big they appear to be they can still fall.
Lesson, keep an eye on where you store your coins. If the return seems too good to be true it probably is. If you don’t know where the return is coming from it's probably you. And last but not least “Not your keys, not your coins”. These service providers can and have locked users from their funds.
2022 isn’t over yet and the markets still have plenty of time to rebound. Review your plays and get set up for the next run. Remember the money is made when you buy, locking in prices when there is blood in the streets and the fear index is at all time highs.
Of course none of this is financial advice and I am just giving my humble opinion of what I have learned. Do with this advice what you will.
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