Lessons I Learnt Being Addicted to Crypto

By alexroan | Blockchain Developer | 11 Jun 2020

I’m fascinated by Cryptocurrency. If you are too, this fascination was likely born from excitement.

When the market skyrocketed in 2017, I believed that becoming wealthy beyond my wildest dreams was genuinely possible. For the first time in generations, investing personal wealth into profitable assets was available to everyone. There was no minimum barrier for entry and it was not hidden behind a veil of financial advisors, brokers, crooks.

In that excitement, I threw myself into the crypto world. I learned all the jargon, watched videos from what were (in retrospect) pump and dump scammers, invested proportionally stupid amounts of my own money into coins that flopped to almost nothing, and I tried my hand at trading.

One year later, it was over. It’s a short history lesson, I know. But it was, of course, a bubble. And it burst.

After that, I didn’t look at anything Blockchain or Cryptocurrency-related for at least six months. The whole period was a lesson in self-restraint. I can see now that my emotions completely overrode any logic about where the perceived value of the coins I was investing in was coming from.

It was an obsession. I was an addict. But here’s what I learned.

Nothing is as good as it seems

It’s such a cliche, and I hate it.

I know first hand that it’s harder to heed advice that you haven’t learned from your own mistakes. So I say heed it, but I don’t pass any judgment if you don’t. Like me, you are human.

“If it’s too good to be true, it probably is” — some person, at some time

YAWN.

I know, you’ve heard it before and it’s boring. Pit this sentiment against the promise of profits and Lambos and yachts, and within ten minutes you’re deciding whether you want your Aventador in “Arancio Argos” or “Rosso Bia” (actual names of Lambo paint jobs).

I’m preaching it because as much as I hate to say it, it’s true. Honestly, I don’t think it would have ever sunk in for me unless I went through it, so I don’t judge anyone for at least trying something stupid. So long as you learn from it when you come out the other side.

There will be another parabolic bull-run in the future, and I feel more prepared to deal with the scams that inevitably seep through the cracks. Make sure you are too.

Names, branding, and buzzwords mean very, very little

There is a whole industry dedicated to manipulating people’s emotions into buying or using certain products. Depending on your definition of the word, it is essentially socially acceptable brainwashing.

What is this industry? Marketing.

Believe it or not, marketers are very intelligent people. The best are masters at reading sentiment of entire populations and steering them whichever way they’re paid to do so.

Weirdly, during the 2017 bubble, companies started to realize that changing their company name to add the suffixes “chain” or “coin”, resulted in huge spikes in interest from retail and institutional investors looking to get in on the hype. It was like the dot-com bubble all over again. Any garage-band company with an e-name in a shed could get funding.

Just because it has a “chain” in the title and a coin you can buy, doesn’t make it valuable.

Embrace volatility and beware of anything that promises otherwise

It can be scary looking at how much the price of even the most highly rated coins fluctuate. If you’re on the fence about investing, but don’t quite have the balls to do so, you look to minimize the risk of high volatility. Steady returns are what you’re looking for, right? I’ve got news for you.

There is no such thing as “steady returns”.

If at any point you find yourself being lured in by a platform offering steady returns with very little explanation as to how it works, take a big step back.

I was lured in by a few scams, one of which was the infamous platform Carlos Matos became famous for. Bitconnect.

Carlos Matos hyping Bitconnect, a Ponzi scheme masked as a Crypto trading platform.

The idea was that Bitconnect’s secret trading bots would use the funds that users supplied to the platform to make even more money for them. They claimed it was so clever that it could guarantee steady returns. The more you invest, the larger the payouts.

They had their own “cryptocurrency” with no evidence of a Blockchain even existing, and it could not be purchased or sold anywhere but on their platform.

It was a Ponzi scheme.

It collapsed shortly after the first few signs that the crypto bubble was bursting. The organizers, whoever they were, took off with obscene amounts of money, leaving thousands out of pocket, including me.

What about trading?

There’s nothing more satisfying than watching a graph move exponentially upwards towards three big dollar signs. I started to believe I knew which direction graphs were going to move before they did. Everyone thought the same during the bubble, and that group-think sentiment drove prices upwards.

But sentiment all it was. Sentiment founded in hype and speculation. That speculation was not based on technical or social possibilities, but purely on price: how to make the most money, quickly. That is the definition of an immature market, in an over-inflated bubble.

However, that’s easy to see in hindsight. When my predictions were consistently coming true, I thought to myself: I should be a trader.

I like to think of myself as an intelligent person. I’m a Software Developer turned Blockchain Developer with an analytical view on most things. However, with very little understanding of financial markets and group psychology, I did not have what it takes to be a trader.

Even teaching myself how to technically analyze graphs didn’t improve my trading. It was infuriating. What I know now is that it was because I was being driven by my emotions. I wasn’t making informed decisions from what I saw.

Here’s an example. There are plenty of platforms out there that lure you in by giving you a “practice” account in which you can first try your hand with fake money before you put your real money in. Those platforms have an incentive to lure you to put real money in, so they skew data to make it seem like you’d be a successful trader. Suddenly, when you do put money in, you’re not as good.

Trading only works for the top 5%. That’s right. The only ones who make profits from trading are the top 1/20th.

The time and mental energy you need to focus on making the right trades at the right times is almost inhuman. It’s at least a full-time job to day-trade.

Take your emotions completely out of the equation. I’m saying this from a position of not being able to do that myself. I don’t have the patience or the confidence in my ability to spot when to go long or when to short, despite watching hours and hours of training videos on technical analysis.

We also have to talk about Robots.

The vast majority of trading is now performed by bots, making predictions based on mathematical calculations in fractions of seconds, with instant access to markets. You have to be very good if you’re going to beat that. To get there, you’ll likely need several years of training, losing money for most of it, and you can never be sure you will get to a position of overall profit.

Think of it as an investment in an asset, not a get rich quick scheme

When is the last time you bought a house to sell it thirty minutes later for 5% more than you paid for it? Better yet, why do you buy a house? You buy it because it adds value to you personally, continually, far into the future.

Why do you buy a laptop? Is it to sell an hour later for $100 more than you paid? Of course not. You buy one because it makes you productive and it enables you to earn more money in the future. It’s an asset that pays for itself, and then some, over a long time.

These are all assets, not get rich quick schemes. You have to see Crypto investment through the same lense.

Find what you believe in, and bet on it. I’m obsessed with the possibilities Bitcoin brings to the world. I genuinely believe that it can change society and the way we look at finance and institutions for the better. That’s why I invest in it. It’s an asset that I believe in.

Learn more about the difference between Bitcoin and Ethereum, and why there are so many others.

You have to be OK with not being perfect

Virtually no one buys the lowest dip and sells at the highest high. Not the best traders in the world, not the most efficient bots in the world.

Set yourself targets like: “When Bitcoin hits $x I’m going to cash out y%”. Accept that profit is profit, regardless of the extra 8% you could have made if you waited for another 23 minutes. If you’re always second-guessing your decisions, you’ll never commit to them.

At the tender age of 24, I made the mistake of putting a large portion of my savings into a small-cap coin which, in several weeks, increased to 4x the amount I purchased at. I didn’t set targets, I stayed invested. That coin is now worth about 5% of the value I purchased at, rendering that substantial chunk of savings virtually worthless.

So where now?

Since the 2017 bubble, I’ve altered my career trajectory to focus on Blockchain development. I’ve educated myself on the technology, and I’m now more invested mentally in the Blockchain industry than ever.

From this standpoint, it’s a lot easier to notice when I’m being rash, but that may come from the experience of having done rash things and being burnt from them. Those mistakes were costly, and it was because they were costly that I learned from them.

I wrote this to try to convey those lessons to you, but in all honesty, I can’t say I would have heeded my advice had I read this back then. I am human, and I get carried away. That’s in my biology and it’s in yours too. I sincerely hope you do take some of the advice I’ve outlined in this article to heart, but I will not judge you if you don’t. That would make me a hypocrite.