By now I've been through several amazing upturns and downturns in the crypto markets. It is time to consolidate some lessons. Bet: sometimes I know something or learn a lesson on its face, but the truth of it takes longer to sink into my bones, emotions, and belief system, so that I still make mistakes and bad decisions in the real world. I will never know it all, and can never do everything right. But I can continuously improve, and make better decisions and less emotionally driven mistakes. Sometimes, I have to work against my own emotions to do the right thing, because it's these emotions that have led me down a bad path before. Sometimes, we have trained ourselves into having the wrong emotional reaction. Knowing this is a start to improvement.
Often we don't change because we are afraid we are "leaving" ourselves... we are doing something that feels wrong, or alien. But isn't it the case, that if you are not performing as you wish you were, you may look to someone that is performing better - real or archetypal - and isn't the reason for this superior performance because in some aspect, they feel and see the world differently than you? So to "change" means just that - to act differently than you are used to. And that may bring a feeling of discomfort. Thus the other great lesson behind the lessons..
Don't Get Attached To Your Assets.A lot of times I haven't sold something because I feel like I'm "betraying" a project. I got in because I believed in its potential as a technology and/or to do good, and, as well, to make money... which does good for me! This feeling gets compounded when the particular asset, in the past, has made me a huge profit. I felt this way about Matic/Polygon, which I bought a fair amount of when it was less than 10 cents. I was interested in it but had no idea how well it would perform, price-wise. Thus, it was hard to sell some when I felt it was time to convert to some fiat (we do still live in a world where you have to pay for things in dollars and such, like it or not). When I sold a whole bunch, after a 100x, I felt like I was saying goodbye to a romantic partner. But assets are not a lover. If I ever miss my Matic, I can simply go to an exchange and buy some more. I suppose you can do this with certain types of romantic partners, but that's another story. In any case, it was absolutely the right thing to do. Which brings up the next lesson....
You Won't Know If You've Made The Right Decision Right Away.Sometimes you buy something and it goes down. Sometimes you sell something and it goes up. But unless your purpose is to trade in very short intervals, it takes longer to confirm a movement. Once I sold a double digit percentage of my Bitcoin at a local bottom. I knew I could have been doing the wrong thing, but I just felt I needed protection from more downside, since I felt depleted in dollars or stablecoins. It was a hard decision. And sure enough, within a day, it had run up well above my sell point. I hated myself. I could have just waited a bit more, and still gotten out, with more protection and more reserves. But within a week, it had dropped again, to well below my sell point. My feeling was right, but, as I'm not a time wizard, I didn't optimize. Likewise, with Avalanche (AVAX), I bought just below $100 on an uptrend because I felt that once it crossed that barrier I'd lose any opportunity in the short term to get it below that resistance... and in fact I wanted AVAX to join some DeFi projects, so it was more urgent than just a need to trade. Well, after I bought, it dropped below $90, and once again, I hated myself for not waiting. But within a week, it was above $100, and soon claimed an all-time high. Now, I didn't sell that high, but that's another lesson. The point was, I coudn't, and shouldn't expect to, ever time a market perfectly. Now about not selling that high.. let's let that take us to the next lesson, shall we?
Alternately: Sometimes Your Feeling Is Right, But Your Timing is Wrong.
If You Don't Want To Sell Because You're Afraid You'll Miss Out On Bigger Gains, You Should Sell.We have all heard stories of people who sold their business that later went on to grow exponentially without them. Or bought pizza with their bitcoin, or sold a crypto just a few months before it went on a parabolic run. That... is not this story. This story is the one of the asset that jumps 100% in a day, or a week, or less than a month, and you hold onto because you would hate to miss another 200% jump. Note also in this lesson's headline, the use of the word "Afraid", as opposed to "Confident". If you are truly a long term hodler, and you truly plan on sticking with the particular asset all the way down the road, then I can't blame you for just letting it ride. But truth is, it's rare for something to run up exponentially, quickly. It happens in crypto more than in other places, but it's still not the norm. If you happen to catch a run, well it's a great feeling, and we want to have that feeling again. But I've been through a few of these runs, and they always retreat. Now sometimes, they will run again, but it takes time. And profit is profit. I have found that I am often waiting for another run because I want that feeling again, but it's unrealistic to ask the world to give me a rare occurrence more than, well, rarely. Recognize the gift, and take it, and be grateful. You don't have to sell it all, you can buy back later, and management of risk and reward is the long term way to success. Think about the pain of losing a huge gain vs the pain of making a smaller vs larger profit. And the ability to sell a percentage of your holdings is what brings us to the next lesson.
Make Big Enough Moves To Count.You've heard the warning, or you should make sure to hear it several times if you haven't, not to risk all your financial capital in one basket. If you're not prepared to lose your investment, don't invest it. Now for me, that's not really a lesson I ever had to learn, because I'm kind of a more fearful than gung ho personality by nature. Dipping my toes into a new thing before diving is an ingrained part of my behavior. But, just a toe is not a swim, and just a few dollars is not an investment. A few hundred pennies to start can be useful if you are, say, seeing how something works, or making sure that a project is legit. But if you do have a good sense of something, and know what you want to do (even if it still gives you nervous feelings), then put enough in there to matter. That doesn't mean everything, but it means enough that if it does work out, you can take a profit without having to exit completely. You can possibly take out your initial investment and let the rest ride. Bitcoin may jump $10,000 in a day, but if you only made a $100 trade, you'll only be able to take a $10 profit. When you make an investment, you're by nature taking a risk. You can't eliminate that risk by betting small. Just make enough bets and manage your risks such that you can lose some battles and win the war. Note: I am not referring to the DCA, or dollar cost average strategy, here. That is a long term approach which is just fine if you have that outlook. Which brings us to the next rule.
Know Thyself. Know Thy Reasons.And those reasons may be different at different times, and in different places. Whether you are in something for years or days will have a big effect on how you handle volatility. And be honest with yourself. I must admit, I often confused my short term holdings with my long term holdings, my temporary goal of clearing a position with my permanent goal of growing my non-daily capital. I can get caught up in what youtubers say, in what the twitterverse feels, in what the financial news reports, and I have let it all influence me at times, almost never positively. Research is good, but make sure to hold on to your original reasons, and always check yourself. Learn, but to thine own self be true. Evolve, but on your own terms. If you invested $1000 with the goal of making $1500, then when you make it, take it. If it doesn't work, maybe drop it. Don't pay any attention to strangers you don't know, who don't know or care about you, who taunt with terms like "paper hands" or "pussy" or whatever. If you genuinely feel selling is right, then sell. You're the only judge of yourself that matters. If you want to sell something because you want to sleep at night, even at a loss, then sell. If you think a project is shit even though everybody is getting into it, then stay out. Even if it's going up and up and doesn't seem to stop. Which brings us to our next lesson...
Never Chase.Have you ever seen someone run after a moving plane that they just missed?
Have you ever seen them catch it?
In the movies, maybe. In real life, once the plane takes off, it's pretty much carrying the people who are on it and bought their tickets months ago. There will always be other opportunities in crypto. If you are upset because you feel everyone is in on a project that you missed, or worse, thought about but didn't pull the trigger on, then this is the worst time to get in. Likewise, maybe you sold a project, at a loss or even a profit, but it keeps going up and up. Same thing. Look at these examples:
The people on the plane are the ones that were rewarded for buying when nobody else was. Hopefully they took out some of those rewards and had a nice meal with it... maybe with their pet pooch.
The rule of not chasing applies on the downside too... while things may dip on a larger run up, a dip can also begin a serious retreat. It usually is a matter of how high it's been and for how long (higher and shorter is bad, m'kay?). I bought Polkadot at $5 back in mid 2020 and sold most of it between $20 and $30. Then it went to $55, and I hated myself! When it retreated, I bought some again in the $40s, and as I write this, it's in the low $20's. Lesson? Well, let's continue:
Buy Low means Low. Sell High means High. Patience!I suffered some serious trauma when living through my first crypto crashes, after starting with mostly positive results in 2020. The irony of having succeeded in that year, was that it almost made me a worse investor for a while. As markets recovered in late 2021, I was so nervous about losing what I had again, that I was unwilling to let prices rise enough to make a real profit. And I was too scared to buy in at the prices that would really allow for it. I would buy some Sats at $45,000 and sell at $46,000 within a day, as soon as I felt a drop was coming. My DOT story above illustrates that I needed just to have patience. We can't know the absolute low, and we can't know the absolute high, but we can get a sense if the work, time, and stress justifies the profit. Low often means hope is lost! High often means you start to fantasize about just how rich you could be if this were to keep going. Knowing these levels, for me, is a matter of experience and refining instincts, which is a constant effort.
Base Your Decisions On Where the Market Is, Not Where You Want It To Be.I failed to sell Bitcoin and Ethereum in May 2021 because everyone was talking about it going to higher levels, and I didn't want to miss out when that happened. I had not yet learned to temper my greed. Actually whether I have learned that, remains to be seen. Because I failed again to sell when Bitcoin hit another all time high in November 2021. Again, everyone was predicting 6-digits soon, even after a coming dip. This time, at least, I was skeptical, but I still stayed in because, like before, I didn't want to miss out. But really, I was listening to others and not to myself. Listening to others is good, but we must follow our own roads. There was one prognosticator whose words stuck with me. His name is Willy Woo. I don't know this man other than that a lot of people cite him, but I recall an interview in which he claimed he had sold all of his Bitcoin because he wanted to concentrate on his family, even though he believed it would be going to record levels soon. This seemed very strange to me. If you believe in something, so much that it is your career to give predictions about it, why not do the classic thing and put your money where your mouth is? But despite my skepticism, I did not get out. And I suffered, along with everyone else, the painful downturn of November and December. I am still suffering! So now, I am not even thinking that Bitcoin goes to $100,000 before the end of the year. Maybe even next year. Maybe never. Anything is possible, but all I know is that Bitcoin is at about $48,000, it is down 40% from its high, and the future is uncertain and the possibilities are numerous. How will I handle what occurs, favorable or unfavorable? I have my plans. If it goes down another 50%, I have my plans. If it goes to a million dollars, I have my plans. Have at thee, cryptocurrency!
Additionally: Base Your Decisions On Where You Are, Not Where You Wish You Were.
No Rule Applies To Every Situation.For instance, my plan was to write a paragraph for each basic lesson in this article. But the article is long enough, and this particular headline speaks for itself. So there!