Being new in a deregulated market, where everyone is rushing after the next big thing that can make them rich brings along with it a lot of risks. Sadly, the thirst for financial gains heavily outweighs the interest in the underlying technology at the moment.
The last crash that happened in the market left many new investors with heavily red portfolio, but more importantly they lost confidence in the market. However unfortunate this is, experiencing such hardships early as an investor can be extremely beneficial.
In this article, I will be outlining some of the lessons I have learned, and observations that I have made during the past several months. Hopefully, these tips will be enlightening and lead to better decision making.
FOMO — Fear of missing out: Is the feeling you get when you see a huge green candle on a chart and you dont own that coin, so you sell your own coins in order to chase the increasing price. Emotional trading such asFOMOing can be extremely dangerous, as you are investing in a coin that has gone up considerably and that might even be at ATH (all time highs). The chances of the coin going down from this point is larger then it going up. This was proven during the last crash for coins, such as Tron (TRX), Verge (XVG) and Ripple (XRP).
Lesson learned: Leave emotions out of your investing strategy and don´t chase prices. The time for your coin will come. In a bull-market every coin with potential gets its chance to shine.
Twitter — Influencers: Twitter is a great tool for news and research. However, sometimes Twitter can feel like walking through a room filled with bear traps. Self proclaimed crypto-influencers share their ideas and tips for investing. What many new investors and people don´t see is that everyone has a hidden agenda. Not everyone is a saint that wants to share valuable information, unless it benefits themselves in some way or another. Influencers often have personal stakes in certain coins that they are shilling (promoting) and might even have been sponsored by companies to shill their coins. Many have even been caught spreading FUD (Fear, uncertainty and doubt).
One recent example of this is the McAfee and Binance debacle. Where McAfee tweeted out that Binance had been hacked, even though there was no evidence to support this at all. This resulted in panic in the market. Fortunately, Binance hit back hard at these accusations and put the issue to rest. Incidents like these weaken the credibility of the cryptocurrency market and spread FUD.
Lessons learned:Transparency is a scarce attribute in the cryptocurrency market. Stay woke and be critical to what people say and research why they may be saying it before you share it with others.
Loudmouths: Loudmouths are the ones that get the platform. People that scream and shill coins are usually the ones that get the most up votes on reddit-articles or the most likes on their tweets, as their words reflect the intentions of the masses. For example, when scrolling down r/cryptocurrency, there is always going to be at least one post regarding a certain coin that has a huge community following, with bias posts promoting a coin they most likely have huge bags (large amounts of coins) of. However, as controversial as these posts may be. Go through them and listen to peoples opinions and then form own opinions accordingly. Don´t follow the masses without having research done.
Lessons learned:DYOR — Do your own research while not dismissing others opinions.
News — Be critical: There are several reasons that may have led to the recent stagnation in the cryptocurrency market. Some of the drivers, according to speculators are — bitcoin futures, the lunar new year, loss of interest in bitcoin, shorting by whales (people with power to move the market), etc.
However, I believe that the main driver for the recent crash was fake news.
Korean Exchange Regulations: In January, the South Korean government announced regulatory measures on cryptocurrency exchanges in the country. This news was blown out of proportion. People thought that this meant an all out ban of cryptocurrencies in South Korea. However, it was later found out that the government only wanted to regulate the exchanges and prevent anonymous trading, which actually is a good thing as it makes it safer to trade. Trading was commenced again on the 31. Jan.
In addition, it was later found that South Korean government officials were caught doing insider trading. They sold their cryptocurrency holdings and profited just before the regulators announced crypto regulatory measures.
Lesson learned: DYOR.
Diversify — Risk Management: Diversification is one of the oldest and most important concepts every investor needs to learn to protect their investments and mitigate risk. This is how i deal with this issue:
- Low risk — High market cap: 40% of your portfolio. These are the safest and most resilient investments, mostly found in the top 10 coins. Popular choices are Bitcoin, Ehtereum, Neo, etc. These are the coins that I believe have a strong future ahead and will survive volatility in the market the most.
- Medium risk — Medium market cap: 30% of your portfolio. These are up and coming projects with developments coming in the near future and with potential for further growth. These are found in the top 50 coins. Popular choices are VeChain (VEN), ICON (ICX), Omisego (OMG), etc.
- High risk — Low market cap: 30% of portfolio. This part of the my portfolio is dedicated to high risk — high reward investments and active trading. These coins require constant monitoring and maintenance. Recent investments made are Red Pulse (RPX) and Internet Node Token (INT).
PS: Sometimes you may find yourself with too many coins in your portfolio. If this happens, try consolidating your investments. Consolidation makes it easier to manage your investments, reduces fees and frees up your time.
Lessons learned: Never put all your eggs in one basket.
Protect your investment — don´t leave your coins on exchanges: If you have been around for the last couple of months, or even years, you should know by now that the exchanges in the cryptocurrency market are prone to attacks. Over the last couple of months several cryptocurrency exchanges have been hacked. The most recent ones being the Nano and Bitgrail hack where $170 million was lost and the Japanese exchange Coincheck hack where $500 million in NEM was lost.
The technology provided by blockchain gives us the platform to be our own banks. Practicing this is another case. People keep their hard earned money on centralized exchanges. Transferring your coins from an exchange to a hardware wallet or desktop wallet is costly, painful and time consuming, but it is essential to keep your investments safe.
Lessons learned: You don´t own your coins as long as they are on an exchange.
Ponzi schemes: BITCOOOONNEEEEEEECCCTTTT! — Enough said.
Lessons learned: Just don´t.
Disclaimer: This is not financial advice. Just my opinion.
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Lessons learned: Surviving in the cryptocurrency market. was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.
Posted by Sajwal on February 22, 2018 @ https://hackernoon.com/lessons-learned-surviving-in-the-cryptocurrency-market-75672c153af1?source=rss—-3a8144eabfe3—4