Six Commandments For The Crypto Space

In today’s article I wanted to share some crypto Commandments that I learned through out my learning period in the crypto space. While I am certain that my learning days I long not over I hope that the experience I got so far can help new people starting out in this space or maybe even show experienced people a new thing that they might not have known. With that being said, I would be more than happy if you guys have any advice that I might have missed so let me know in the comments!

1. Not Invest More Than You Have

While I think that every commandment is very important on its own, I do think that the first one is a big key towards safety. You shall never invest more than you could afford to lose! I think this is one of the most important thinks in investing and especially in a volatile space like crypto. Like we already know this space can be easily manipulated just by Tweets like the ones back in May by Elon Musk which send the whole industry up and back down again. I do believe that crypto is getting more resistant against those kind of manipulations as people become more experienced but it still has some influence. This is the reason why it can happen very quickly and people can lose more than 80% in one day. Now, if this is money that does not belong to you, it can become a big problem. This goes hand in hand with leverage trading which is just another example of this method. In my opinion this is one of the most dangerous things people can do in regards to finance and especially in the crypto space.

2. Diversification Is Key

The second commandment is more of a general one. You shall never invest in just crypto. This is a very big mistake that especially young people are doing currently. I have some friends who can not stop talking about crypto but forget about all the other opportunities. People nowadays are trying to chase the next 100x gain and are not focusing on building their wealth but are mainly gambling on coins like Shiba Inu or Doge Coin. In my opinion, diversification is key. Not only within an asset class like crypto but also between different asset classes. This way you are making sure that sudden hits in these markets will not influence all of your invested money which is hopefully yours and not borrowed like we discussed in the first point. An example for great diversification is Kevin O’Leary. His rule of thumb is to never have more than 20% of one asset class and never have more than 5% of one industry within the asset class. I think it is very hard to achieve this exact distribution because not everybody has millions like Kevin O’Leary has but I think it is always good to think about diversification and expand ones horizon.

3. Scams Are Everywhere

Next up is something that is currently very popular. You shall not believe in false promises. A recent example is the million dollar token. This token was announced, promoted and created by a YouTuber that claimed he created one million tokens by investing one million dollars into this project making each token worth one dollar. While after a while the price of these tokens went up it was leaked that the creator only contributed about 50 thousand dollar into this project, making this a big scam. The conclusion for this is to never believe influencers and public people but always do your own research before investing into a project. Even if it is 2-3 hours of research, in this amount of time nothing major will happen even if you feel the FOMO. This is very important, because the crypto industry is very young compared with other markets and this is also the reason why it is not properly regulated yet, leaving room for an insane number of scams.

4. Believe In The Project

The next commandment might be very obvious but is very essential. You shall not buy high and sell low. Everybody reading this might be thinking: Duh, of course you should not do that but how will you know where the high and where the low is? Well, unfortunately I do not have an answer for this question as it is not foreseeable where certain highs and lows might be. The thing about investments is that the emotion of humans is always involved. This is also the reason why the markets behave how they behave. The recent example is the one of Bitcoin and the overall market drop. By the time of writing Bitcoin has not recovered yet but is also not on a downtrend anymore. This has several reason but what I want to point out is that everything that is going down will eventually climb up again if there is nothing fundamentally wrong with it. This is the reason why I would always hold on to investments that you believe in and that are not doing very well at the moment.

5. The Price Is Not Important

The penultimate commandment is: You shall not be fooled by cheap prices. The thing with crypto is that a lot of projects have tokens which prize is very cheap compared to Bitcoins. Like Dogecoins 0.17 compared to Bitcoins 40 thousand. A lot of people tend to buy the lower selling coin because they might see more potential in these. While this is an interesting attribute to compare there should be added more data to this equation. In my opinion the market cap and the volume of the coin can tell you the rest of the equation and with these three attributes you can slowly start painting the real picture behind a project. I do thin that is also important to look in more detail in things like distribution of coins and potential vesting schedules to get the whole truth but just keep in mind that the token price does not say anything about the current situation and the real value of a crypto project.

6. Not Your Keys, Not Your Crypto

Last but not least, is the store of your crypto assets. You shall store your crypto correctly. There is a famous saying: not your keys, not your crypto. If you leave your purchased crypto on an exchange it can be stolen by hackers more easily than if you are in the control on your own. There are some different wallets, mainly hot and cold wallets. While hot wallets are software wallets like Metamask which guarantee you some safety and flexibility I am preferring cold wallets like the Ledger. With these wallets, people should be safe as long as they keep their keys to themselves and only themselves.

Conclusion

I wrote this article because I experienced most of these situations or heard a horror story about it. With these commandments I am hoping to bring some attention to some points that some of you might be overlooking or did not experience yet. Like always, I would be very grateful about feedback! Does anybody have a different view on this, or can you add some more commandments to this list? I wish you all a great weekend!

Published by ga38jem on LeoFinance|Steemit On 15th January 2022

Posted Using LeoFinance ^Beta