Life doesn’t give you what you want, it gives you what you need, and inside the cryptocurrency market of 2018, life gave me a negative return on my dollars, but a wisdom that I couldn’t have received if I had been making money. I learned how to analyze before emotionally reacting, and in investing and trading, this is 90% of what you need to know to be successful. If you remember this lesson, to not let your emotions rule your decision making process while you invest, you’ll join the elite group of investors in this world who become wealthy – not rich.
Although trading didn’t come into my life until more recently, Bitcoin entered my life 6 years ago. I was in Asia at the time, looking for hobbies to pursue while I had downtime with my laissez faire teaching job, and while I was searching for new interests, I stumbled across a Gawker article about a deep web marketplace where you could use new technologies to facilitate illegal transactions online. The new technologies were Tor and Bitcoin, and the website where you could buy drugs, guns, stolen property, and pretty much anything awful you could think of, was called The Silk Road.
I became fascinated with the possibility of how this was actually a reality, and soon I found that not only was this real, but the website was making tens of millions of dollars a day in global transactions. I, along with millions of others at the time, had found a door to the criminal underworld.
To be clear, I never entered the door to this underbelly of criminality, but I did learn a lot about how it worked. What fascinated me the most with it was the technology Bitcoin, which people were using as a form of digital cash to pay for their illegal goods. At the time, nearly every government agency in the world was trying to figure out what it was, and what – in the fuck – this thing called “the blockchain” did.
Days passed where I dove into Reddit posts, blogs, and anything I could get my digital hands on, slowly beginning to understand the technology of what Bitcoin was. As I learned more about the technology, it quickly became clear to me that Bitcoin was much bigger than a means to buy something illegal. It was a form of digital currency, with no bank, no government, no entity to control it, and it could shape the financial landscape for the next generation of human beings. I had found my new hobby.
Years passed where I gained hundreds of dollars and lost hundreds of dollars in Bitcoin trading. I put money into Bitcoin when it was down, when it was up, when it was going sideways, whatever. I had no strategy. I just wanted quick money. I understood the technology, but I had no comprehension of trading. Then, in 2017, everything changed.
The story of what happened with the cryptocurrency market is well known, so I won't describe it. All you need to know is that in December 2017, people made profits upwards of 100,000%. That isn’t a typo. Think about that.
When the 2017 bull market hit I was in an excellent position to capitalize. I had been in the market for years, I understood the tech, saw it’s potential, and I was a financial professional. I made big, fast money. However, easy money is never actually easy, it just veils itself as being that way, and soon the market crashed, tumbling my profits down and down. I made a pretty penny with the profits I actualized, but like most people, I left a majority of my money in the market and everything went to shit. The billions that were made in the market were lost. 9 months ago, the 2018 bear market began, and as I write this, it continues.
In each of these last 6 years, I learned many different things about cryptocurrency, but it was these last 18 months that truly shaped my overall view of it. What changed the most for me was that I became a trader, not an investor, and the lessons I learned from this transformed my life. Here are the 5 life lessons I’ve learned from trading cryptocurrency:
1.) Manipulation is rampant
The first and most important rule to understand while trading cryptocurency is that you’re playing against massive odds. There is major money being pumped into the market by big players, and if you think that you can predict price movements because of news stories by Bloomberg, tweets by professional traders, or what your crypto expert neighbor told you, you’re being naïve. This marketplace has no rule except one: you make the rules if you have the money. Lesson: understand and be aware that there will be times when everything is looking great, but out of nowhere the price will plummet. Many times this is due to market manipulation by traders who have hundreds of millions of dollars to play with. The manipulation can go both ways, up and down.
2.) Focus on real world adoption over the technology
This one will hurt a lot of you but you need to hear it. You know your favorite coin that you’ve grown attached to and learned about since day one? People in crypto always have one coin that they won’t shut up about. For me it was NEO, the “Chinese Ethereum”. I invested truckloads into NEO when it was hovering at $100, convincing myself that the technology behind it would take over Ethereum, Bitcoin, and every other cryptocurrency. It now sits at $17. My mistake? I used speculation to believe that it could be something great. What I needed to hear is that until there is a real use case for NEO, there will be no need for it. Lesson: this is a speculative market. There have been no real world use cases for crypto – yet. Find the ones that solve a problem you understand needs solving. Don’t rely on others to tell you what problems need solving; they’re coming from a place of their own bias.
3.) Never invest when you feel FOMO.
Do you ever feel compelled to make a trade because you’re afraid you might miss out? There is one mistake that people will never stop making in trading: buying high and selling low. People will buy high because they see everyone else doing it and they’re afraid they’re going to miss out on the action, and they sell low because they’re afraid of “losing” more money. Always be aware of your emotions while investing, and before you decide to cash in or out, carefully analyze your decision. Lesson: take a 30 minute break from your computer before executing an important trade. Clear your head, analyze the situation, think of counter arguments that could prove your decision to be a mistake, then make a decision.
4.) Irrationality can carry marketplaces.
Mark Douglas, the author of Trading in the Zone said it best: “The market can do anything at any moment because every person who trades is a market variable. That means you will never learn enough to anticipate every possible way that the market can make you wrong or cause you to lose money.“ In other words, don’t overthink the market. Be free of overcomplicating every scenario. Remember that the market is simply a place where one person / entity sells something that another person / entity wants to buy. That is it. Lesson: anything can happen when trading, so be at peace with it. The only thing you need to do is to have a plan ready in place when something does happen.
5.) Learn to accept the risk
When you accept the risk of what you’re doing, you won’t perceive anything that the market can do as threatening. Read that again and again. This, when understood, can lead you to making decisions not based on fear or euphoria, but rather, on rational realities. Lesson: to succeed in trading cryptocurrency, you must accept the risk and understand that you could lose everything. Once you do, you can free yourself from anxiety, fear and self doubt. Only then can you become clear headed and act with confidence and clarity when entering trades.
The opinions, thoughts, and ideas represented in this article are purely for entertainment purposes. Statements on this site do not represent the views or policies of anyone other than myself. The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities.