Cryptocurrencies

Did you start investing in Cryptocurrencies within the last two years?

If the answer to that is “Yes”, then let me start off by congratulating you on an excellent decision! Crypto is quite literally “life changing” and you could not have made a better long-term financial decision.

This is a short explanation of some things which you need to know, because you’ll surely encounter them sooner or later. Experienced guys and girls, this post isn’t for you – unless you want to recap.

People will doubt you and call you “crazy”. This is normal, we’ve all been through it. Family and friends beg you not to do it, or they tell you you’ll lose your money. Remember this: they don’t know crypto! If they did, then they would never say that! People are used to seeing scammers run off with other people’s money. True crypto is a decentralised trustless system. There IS nobody to “run off with the money”.
… unless you get conned into investing in a scam (more on that a little later).

You’ll doubt yourself and/or crypto itself. This is also normal. Remember that you were taught a very different view of the finance world for your entire life. Crypto goes against mainstream economics, ergo, it goes against what you were taught for years – probably decades. What you learnt in the past is wrong. What you’re learning now is right. Fiat is a runaway train on a track to hyperinflation. The evidence in favour of this is freely available. Play around on this site for a while: https://fred.stlouisfed.org/categories/24

Scams are everywhere. By now you probably already know this. But realise this: some are outright scams – like BitConnect. Others are not as obvious. XRP is a scam, it’s just played very well, but it’s still a scam – a constant pump project for the huge XRP bags of the Ripple foundation. Then there is the MLM stuff: the Karatgold Coin, DasCoin (now forked off into GreenPower, undoubtedly to try to sake off its previous image) etc. Probably the most dangerous are the scams which aren’t scams – until they suddenly become one. These are all too common, and usually take the form of an exit scam: one day everything is fine, the next day a team member uses an exploit and runs off with all the money. Envion got me this way – it happens. The most obvious scams are those which promise a return. Anyone who promises you a fixed percentage return is a scammer.

You’ll stake your coins and not hold the private keys. Most people do this, to a greater or lesser degree. I do it. It’s fine – but only if you know the risks and realise what you’re doing. The overarching maxim of “not your private keys, not your crypto” must always prevail. Any time that you don’t hold the private keys, that crypto is at risk. Some DeFi platforms allow you to control the private keys, others don’t. Be wary of this.

A hint – here’s how Bit Brain does it: I do keep some coins on centralised platforms to which I do not hold the keys, but only in one of the following three situations:

  1. I’m busy trading it. – I send a coin to the exchange/platform, trade it, and then send the new coin to a wallet of my own.
  2. It’s too small to matter. – I have small bags of various cryptos lying all over the show. Moving them around is often not economically viable (thanks to fees), and because the bags are small, my portfolio will not sustain a substantial loss if something happens to them.
  3. It’s the native coin of the platform. – This is the most common situation for me. For example – I permanently have KuCoin Tokens (KCS) sitting on KuCoin Exchange (where they earn passive income) and I permanently have Binance Coins (BNB) sitting on Binance (where I stake them in Launchpool projects). The reasoning behind this is as follows: if something major happens to the exchange – such as a huge hack which forces it into liquidation, or a situation where the exchange scams users out of their own tokens – then people will lose trust in the exchange and my tokens will become valueless anyway. So I might as well keep native tokens on the centralised exchanges and stake them for more rewards.

But remember: the majority of your crypto should be under your own control. That’s the right way to do it and the only safe way to do it. My BTC – my main store of value – is always under my own control.

You will become a part of some or other tribe. EVERYONE falls for this, I guess it’s just human nature. The vital part is that you realise how destructive it can be. For example: when I look at Cardano at the moment, I cringe. I don’t hate Cardano – not at all – but on the other hand I find its comedy of errors history and complete lack of a working product (after all these years) to be major red flags. Yet there it is, in the number 3 market cap slot. I Tweeted about this last week and drew immediate flak from the zealots (which is always fun! – but still sad to see). Cardano is where it is because of hype. That’s all. That’s the only reason. It’s not the first, and it won’t be the last. This happens all the time in crypto, and every single time, the holders of coin X think that “this time it will be different and our coin will rule them all”. Every. Single. Time.

No.

Your coin is no different.
Your coin is not special.
Your coin does not have hidden “fundamentals” know only to its holders.
Your coin is going to correct – hard.

Crypto with your head, not with your heart. If you hang around in Cardano forums, you’re going to hear good stuff about Cardano all day. Same with VeChain. Or XRP. Or EOS. Or anything else. The hype generated in these echo chambers has no value. It’s subjective, chronically over-optimistic and downright dangerous to those who are gullible or new to the game – and that describes 95%+ of crypto investors. Look at Ethereum investors at the moment, they seem to think that their coin is “too big to fail” and is immune to market forces. Now where have we heard that one before…

You’re going to lose your money and be poor.

What?

Come again?

THIS sub-topic is the reason I really wrote this post. It’s also why the title singles out investors who joined within a particular time frame.

If you got into crypto anywhere from the start of 2019 to date, chances are that you are now well in the green, and happily so. You may even be euphoric, and this is where the danger lies.

You need to realise that what you’ve experienced so far is only a part of the market cycle. It’s been the “Sideways” part and some of the “Upwards” part. It’s very hard (though not impossible) to lose money during a period such as this and peoples’ hopes and dreams start to differ from those of a realistic future.

I’m here to shatter those dreams.

You HAVE TO PREPARE for the loss of around 85-95% of your crypto value (depending on how altcoin heavy your portfolio is – altcoins tend to crash harder than BTC). Historically this is what we’ve seen at the end of each major market cycle. While there is no guarantee of future events, it is unreasonable to expect those events to radically diverge away from the norms of the past. It is highly likely that the markets will “rhyme” yet again. In practical terms, that means that BTC will drop to below current levels (I estimate that it will fall to a little below $40k) and that altcoins will fall to below their current prices (they’re all over the show, some have mooned, some have not, some have partially mooned, so it’s hard to put a percentage to them).

This is not the end of the world.

The markets will almost certainly – as in 99.9999% certainty – bounce back even stronger after the crash. That’s not just based on past performance (where it has happened that way every time), but also on fundamentals: the horror of the fiat system, the groundswell of libertarianism, the wealth gains visible in a supply-limited decentralised currencies etc.

So you can either try to time the market and take profits (not nearly as easy as it sounds, especially to relatively inexperienced investors), or you can hodl your way through the crash – which is perfectly acceptable. I hodled through 2018, and I’m happy to have done so (hodling is less risky, easier and FAR less stressful).

Conclusion

The main thing I want you to take away from this post is that this climb will not last forever! I’m writing this because I see a LOT of new money in the market, in the hands of investors who are clearly EXTREMELY new – so new that they buy coins first and then “research” them afterwards! Such people are prone to making a lot of very costly mistakes, hopefully those are the people reading this right now.

Guys (and lady-guys), a substantial market correction WILL come. It will be unpleasant and it will tank the value of your crypto holdings. But as long as you are prepared for that, you will be just fine. Don’t panic, ride it out, the sun will shine again when the next day dawns.

Do not forget these words.

Yours in crypto

Bit Brain

P.S. If there is anything about crypto that you wish to know or chat about, feel free to drop me a message or comment on one of my blogs or on Twitter.

“The secret to success: find out where people are going and get there first” 

~ Mark Twain

“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful” 

~ Bit Brain

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