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6 Lessons: Unpacking Crypto Banter's advice on the Luna experience.

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I am writing this to save you some time from watching Crypto Banter Ran's YouTube video where he gave some advice and afterthoughts over this Luna crash.

I listened and thought hard. I picked up six points for sharing.

More importantly, writing this serves as a reflection for myself as I refine my crypto thesis.

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1. Anything can fail

It should not come as a surprise that anything can fail. All investment can go to zero suddenly.

Even Bitcoin can fail. I once thought about what might happen if quantum computing could mess up the Bitcoin blockchain. I brushed it away, believing the assurance others have given. But now I am not so sure. If someone can come up with a smart idea like Bitcoin, then perhaps someday someone can come up with an equally smart idea to neutralize Bitcoin.

Indeed, there is no certainty that our hardest investment will not fail. For example, our real estate, which war could take away!

2. Diversification as a safeguard

Warren Buffet (and others) reportedly said that the diversification approach is for fools, while picking an asset and sticking to it builds wealth.

While there may some truth to it, diversification guards against receiving the 'nothing' in the all-or-nothing outcome. Given that anything can fail, diversification of a portfolio is important to prevent one from losing everything when that one thing one invested in fails.

Some kind of well-strategised diversification is needed.

3. Avoid blockchain ecosystem maximalism

Investing in the base protocol token and projects under it was once thought like consistent and aligned support for a protocol, and much applauded. For example, investing in Luna and UST at the same time, or Ethereum and its dapps. For Hive, it would be buying Hive and Leo, for example.

However, it is important to recognize that there is limited diversification when one invests in the main token and the different projects within the same protocol. The danger is that if the base layer protocol fails, everything else could go down with it. Everything can be lost.

Having a bit of diversification based on different asset class and avoiding blockchain ecosystem maximalism could be a good idea.

4. Have an emotionless investment strategy

It is really hard not to feel attached to a token, when you know it's good stuff, like Hive.

The inner navigation to balance between supporting the protocol emotionally and supporting the growth of personal wealth is one that we have to handle ourselves. When it's time to let go of a token, we have to let things go, without emotion. We are not married to any protocol.

That is why a well-thought-through investment thesis is so important as it is something that guides action.

In this regard, when there is a need to rebalance the portfolio in accordance with the crypto thesis, one should act without emotion when doing so.

Also, if fundamental changes, act according to the contingency plan. Be sensitive to any changes.

Be disciplined, and above all, personal survival of one's portfolio is the ultimate goal.

5. Defensive investing

Plenty of reality check is needed.

We often dream of the 100x and not the losses.

Of course, we want our investment to 100x, but most of the time that is just senseless wishful thinking.

Best to be defensive and aim for a conservative portfolio that performs with 10-15% gain p.a., rather than aim for a portfolio that has dreams of 100x that is irrealistic.

I like to think of investing as playing soccer. We need good defense and a goalkeeper to prevent losses in order to end the game well. We can't have a team full of attackers.

Defend!

6. Get out of the echo chamber, be open-minded

There is danger in restricting one to adopt only one worldview.

The same goes for investing approach.

For every good thing people say about Hive, we should be equally open to criticism about it. This is the only way to make everything safer and better.

On the contrary, if everyone accepts what is within the echo chamber as truth, blindspots can be missed. So it is best to be open to criticism from even the biggest critique.

We all know how dangerous blind spots are in driving, so they should be prevented in our own investing journey.

Conclusion

The learning never stops.

Posted Using LeoFinance Beta