Let’s have an adult conversation. I believe we’re all mature enough to not believe in fairy tales anymore. Some of us, myself included, have been in the cryptocurrency space for years, searching for the next coin that will make us rich. But, if we’re being honest, the chances of this happening are much lower than we like to think. Why is that? Well, let me walk you through another study on risk, and today I’ll discuss one of the biggest concerns in cryptocurrencies.
Liquidity Risk
Liquidity risk refers to the seller's ability to transfer a specific asset to another party. In the financial market, we measure this by an asset’s liquidity, which determines how quickly a buy-and-sell operation can be executed. To better understand the major liquidity issue in cryptocurrencies, let’s use TERRA (LUNA) as an example. Some of you are familiar with what happened to LUNA, but let me summarize. A key player with insider information, who was also close to the development of the crypto, secured credit in the traditional market. Using manipulative tactics, they acquired significant holdings (far beyond what regular investors were allowed to acquire, as their limits were set much lower). This player then profited at the expense of thousands of other investors, using them as liquidity. These investors kept buying at increasingly lower prices, causing the supply-and-demand curve to spiral out of control, disrupting market balance, and making it increasingly difficult for some players to exit their positions.
This isn’t a rare occurrence—it happens daily. While some profit, others lose. And for most of us here, let’s admit it, we haven’t lost just once.
Building a Solid Foundation – Forget Betting
To build a solid foundation, we must stop believing that the market (or cryptocurrency operations) alone will make us rich. As I’ve mentioned in previous texts about diversification, I now emphasize the importance of generating multiple income streams. For example, I own a Business Consulting company and am expanding into two other ventures—one in Landscaping and Urbanism, and another in Programming. Let’s say I receive my monthly salary and still earn profits from stock and cryptocurrency trading. This gives me a solid, diversified income system. But now imagine if I didn’t have this and focused solely on a few cryptocurrency strategies—it might work for a while, and yes, you might get rich. But you could also lose everything, just like the developer of TERRA (LUNA).
I hope you enjoyed this text and make wise choices in the market and in life. Don’t just sit in front of screens—add value to the world. Get some sunlight (boost your Vitamin D levels), and you’ll grow in cryptocurrencies just as much as before. You’ll see!
Donations for this young analyst.
BTC: 12uJuXTqRUMQTCLxgW5NSHUcwQWNW4WwDW
USDT or TRX TRC-20: TJg2wFrdXsDPLLLeqXKuxcCA9RAvqpfbUk
