Your pathway to graduating in crypto

The three mistakes you must learn

Crypto is one of those weird industries where time in the market really is critical to gain competency. You can’t just study some magical blog post or textbook which gives you all the wisdom you need to navigate these markets. Investors who don’t understand this keep funding the same Stanford/MBA types thinking that “they’ll be able to figure it out” when often they don’t because a lot of it comes down to culture then technology. Not the other way around.

Anyways, one thing I’ve noticed about people who get deeper into the market is that they all need to usually make all of the mistakes below until they graduate as an investor or competent capital allocator in general. I haven’t figured out why all people always fall for these mistakes — but until you experience it, your mental models about crypto won’t be as calibrated correctly. Anyways, let’s get into it.

Losing on a coin you love

This is almost everyone’s journey. Your friend tells you about some coin or you do some independent coin that you think is “the one” and will pave your way to the moon. You’re so certain that you know what you’re doing and everyone else is a fool for overlooking this gem. The only problem is you have no idea what unit bias is, fully diluted valuations, unlock schedules, smart contracts or social networks to verify any information. Regardless, you convince yourself you’re a sophisticated investor and go in. Things are great… until they’re not. As the love of your life keeps betraying you with negative candles you believe it’ll recover… you know it. After a month your hopes and dreams are crushed. You do more research, this time with your eyes open and realise that maybe you weren’t the smartest and those OGs weren’t spreading FUD but truth instead. RIP. My version of this story was a coin called Request Network. They did a $30m ICO in the day and were going to be the blockchain version of PayPal — or so that’s what I was told. It made sense to naive me, but not today me. Fun times.

Betting on the next big stablecoin (tm)

Haha this one never fails to get new market participants. It doesn’t matter how many have failed in the past or the fact that stablecoins are the biggest casino games in crypto, everyone thinks that they’re smarter than everyone else so they play the game. Those previous stable coins that failed like Terra? Nah this one is different you say to yourself. The stablecoin keeps its $1.00 price point while you give money to the protocol in some convoluted way and the protocol makes you some promise of future stablemonies that are more than you put in. The concept is the same but it’s more or less the same story, just with different flavours. One day you wake up and your stablecoin is now trading at $0.50. It’s just a blip, the peg will recover. It’s just in early days. Things get worse. You start panicking more. Turns out you are the last bag holder. Those promises of being the next reserve currency weren’t real after all. You then do the actual research into stablecoin designs and realise how dumb the whole thing was. Surely people will see this next time? Right?! My stablecoin loss was one called ESD aka Empty Set Dollar. It rode up all the way to a $500m market cap and offered 10,000% APYs at the peak. Things didn’t end well except for those who got out early (which wasn’t me lol).

The money printing automated trading strategy

The bear market is here, 100x returns are gone. You’re bored with your stablecoins or bags that aren’t moving up or down. You think, hm if I can just make 10% on my bags then when they 10x I’ll be up 100% overall. Some new product comes out offering you some sophisticated trading strategy that nets you 30-40% returns. Wow, even better than what you were aiming for. You’ve learned a few lessons in crypto so you decide to wait this one out and see how it performs over time. A few weeks pass by and you can’t believe it. They’re still printing decent returns and tell you how much money you could have made if you participated in the strategy from the start. Fuck it, you decide to jump in so you can get to those sweet gains. At first you’re nervous so you put a tiny bit in. You get more confident, then put a lot more in. Things are great. Suddenly the market has some sort of volatile price action and your strategy has lost all the money you’ve gained and even eaten into your principle. Just like that, gone. You’re lucky you still hold your principle. You look further, turns out your US dollar amount is the same, but you own less ETH than you put in. RIP. There really is no free lunch.

Closing

If you haven’t made any of these mistakes, keep a tiny portion of your portfolio aside to experience them so you can get them out of your system as soon as possible. The FOMO always gets people, it’s just a matter of when, not if. There’s many games to play in crypto but you never know the rules of the game until you learn the hard way. Anyways, I hope you enjoyed this and hope you all stay safe out there.