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A word of advice to a crypto newbie

By I-HODL | A Crypto Journey | 15 Aug 2022


My friends, I've got a quick question and a long spiel to follow, you know how I do.

Question: I've been wondering, when you first entered the crypto space, did you make a bunch of mistakes that in hindsight you wish you didn't? What were some of those mistakes, and what are some things you wished you knew as a crypto newbie?

Spiel: Personally, I made a ton of pitfalls. After all, I got into crypto from gaming, all right? It wasn't like I had this huge investment portfolio and was looking to add to it. I wasn't an active trader in stocks and bonds or even forex, for example. I was just doodling around, playing a game, was paid some crypto dust for it, thought hey, this is pretty cool, and then began investigating, all right? That's where I started. 

And to add to that, I got in last year just when AXS was going on a really beautiful pump. So I was all over it, AXS, TLM, ENJ, you name it.

Added to that, there were all these stories on social media about Dogecoin millionaires and SHIB investors who had hit the jackpot, and so, I was like one of those latecomers to the gold rush, running with my pan to the river and hoping to sieve a rock or two. Man, I was looking around for projects that I hoped would moon so that I would wake up at some point in the year, stacking coins, and not having to work another day in my life. Uh-huh.

In hindsight: Let's just say that I am grateful for the journey because while my pie-in-the-sky dreams were not realized, I have learned a lot about tech and finance that I would not normally have paid attention to. And over the past year or so, I'd say that while I've tempered my expectations and sobered a lot from my wild enthusiasm, skipping from project to project, my love for this space has grown. And so, if I were to speak to a newbie thinking of investing in cryptocurrency today, I'd say:

Manage Your Expectations

If you're entering the crypto space purely because you expect to gamble on a project that would moon, maybe you should rethink your strategy.

Yes, many, if not all of us, invest in crypto for high returns. Of course there's the case for security, and for swift and low cost  transactions, etc. They're nice too, but the real reason many of us join the space is because we expect the return on our investment to grow at rates we'd never see in mainstream finance.

Having said that, there's a huge difference between moderately high and astronomical, unrealistic, unsustainable high returns on investments, right?  Sadly though, many newbies, and I admit I was one, think that the higher the return, the better for us. And so, we can sometimes be wooed by Ponzi-like  schemes and promises, and invest in crypto scams and shit coins or lending and saving institutions that promise unrealistic returns. The crypto space is rife with examples of this, and so in the past year, I've learned that if it appears to be too good to be true, it likely is.

Research the projects you invest in carefully

You shouldn't simply invest in a project because influencers are shilling it on social media. 

People shill and promote projects for different reasons. It may be that they truly believe in it. It may also be that they're paid to promote it or that they're pumping an investment, hoping to get the price high enough to dump on gullible investors. And so, to me, running off and investing on projects just because some individual says so on YouTube or Twitter or TikTok makes you the ideal candidate to buy a number 8. Remember this video?

Try to find out as much as you realistically can about the project you're supporting, its development team, investors, and use cases.

And get this, while reputation is important in the crypto space, and people follow projects that attract big names, one has to be careful even then to examine the fundamentals behind the project itself. One should look into: What does this project promise to do? How realistic is its proposal? And what is the real world value in achieving this promise? What has adoption on this project been like? What's the competition like? What are the tokenomics and how decentralized is the project? What are risks for manipulation? 

And so, there's a lot to look into when investing, a lot more more than simply joining a Discord group or posting questions on Quora or reading the thread of a Reddit chat or subscribing to an influencer on YouTube. 

BTC is probably the best starting point 

If after you've done your research, you still don't think you understand much, but you still want to invest in the space, then you're safer on BTC while you learn a bit more. As the largest and oldest cryptocurrency, BTC is arguably one of the safest investments you can make in this space.

Altcoins change their ranking all the time

You shouldn't simply invest in a project because it's in the top ten or because it appears to be rallying at a particular point in time.

Remember, there are reportedly more than 19,000 cryptocurrencies in existence at the moment and this number is growing, and according to conventional wisdom, many of these projects will not survive. In fact, if you look back over, let's say, the past five years, you'd observe that many well-known and credible projects waned in popularity while others surged.

At one time, for example, NEO,  a layer one, open-source, decentralized blockchain focused on digitizing assets through smart contracts and once dubbed the Chinese Ethereum, was among the top ten cryptocurrencies to watch. Today, NEO ranks 74 on CoinGecko and 64 on CoinMarketCap. NEO remains an interesting project today, to be sure, but its popularity amongst investors is nowhere near what it was a few years ago. The same can be said of many other crypto projects.

Take Fantom. This is a project that I personally love, and it did fare well near the end of 2021, but as a supporter of the project, I'm not blind to the fact that after popular programmer Andre Cronje announced his departure, the project waned in popularity. This, combined with the double blow to the market when Terra collapsed, saw Fantom floundering in the 50s and 60s in terms of its ranking, and exchanging hands at bargain prices below $0.50. And there's also IOTA. Like Fantom, IOTA uses directed acyclic graphs, and it did attract a lot of attention and seem to have a lot of promise at one point in time. Maybe these projects will rally again. But who knows, right?

Be careful about investing in projects that are already on a rally

As far as buying into a rallying project, investing in highs and hoping for the project to continue to climb higher is probably not very smart. This is because it's very hard to call the top of a rally, and sometimes when you run into a project that's already pumping, the prices can start to plummet as soon as you buy in and in short time you end up with a coin that's worth a lot less than you bought it for. 

New and Untested Projects can be Extremely Volatile

Take the Ethereum layer two project, Optimism. When Optimism was launched near the end of May, there was a bit of a furor because the developers airdropped tokens and many recipients cashed in early, causing the price to plummet. And so, the project started above $1 and traded for between $1.40 and $1.60 for two or three days and then began to fall. In less than a month, Optimism was exchanging hands for between $0.40 and $0.60. Doesn't mean there aren't opportunities though, it's just that you've got to be mindful of the risk and volatility. In fact, Optimism did rally again on news of the ETH merge and recorded a new all time high of $2.21 on August 11 before plunging again. When you're taking risks like that, you can't have a queasy stomach because it's kind of like this, right?

 

And so, friends, I've run out of time, but what's some advice you'd give to a newbies entering the crypto space and looking for projects to support? How would you guide them through navigating this space so that they manage their expectations on entry, make better investment choices, and maybe- hold on a bit when the waters get a bit choppy? I'd love to read your thoughts and recommendations on this one. 

Well, friends, I'm off again in search of another story.

News Updates

  • Luna's Do Kwon is once again doing media interviews
  • The Acala Network team has provided an update on the attack on their aUSD stablecoin

LUNA's Do Kwon is once again venturing into the limelight, having sufficiently licked his wounds following the TERRA/LUNA catastrophe, and is out and about doing media interviews talking about his alter ego, I kid you not. Forgive me, but this one teases my morbid curiosity. I'm going to look into it. 

Additionally, I promised in my previous post to provide an update on the collapse of the Acala Network stablecoin aUSD following an exploit of 1.288 billion  aUSD tokens. The team has been continuously providing updates, and this morning notified the public that the "erroneously minted aUSD have been identified and their transfers are disabled until a pending Acala community governance decision resolves the error." Ha! 

Since then, a community proposal was submitted, to be followed by a referendum vote to, in essence, return the erroneously minted aUSD to be burnt from identified accounts. Double ha! 

On this issue, the team at Acala Network must be commended for their swift action and continuous updates to the community. My question is though, following the thwarted attack, what is your confidence level in the aUSD token should it be repegged? I'd love to know.

 

Arrivederci, my friends. Until we meet again, please remember to be safe. We'll chat soon.

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I-HODL
I-HODL

Your friendly, neighborhood crypto enthusiast.


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