Crypto isn't all about Lambos and telling your boss off once and for all...
One of the less-sexier aspects of this game: paying forward the lessons & blessings.
Those of us who've had "success" in this domain of investing wouldn't have were it not for the pointers and lead of someone who had gotten into it before ourselves and passed on enough knowledge for us to orient ourselves properly on the path. And as such, there is a certain degree of responsibility to pass on the torch once we do earn our stripes, letting the wisdom gained in our trials carry on to make the learning curve shorter for others.
This piece of writing are a few of the nuggets of wisdom I have acquired through four years in crypto - over the course of which, I went from zero to $1.6 million USD in less than a year during the last bull market and then losing 95% of it. Costly lessons. Passed on here, free of charge.
Such experience was not all fun.
So what is shared here, is done so in hopes that you'll learn from some of my mistakes in order to make the most of your investment capital and refine a strategy that'll work to grow your portfolio for long-term, life-changing profitability.
While everyone is free to go through their own process of trial-and-error, the types of opportunities that may be available in the unfolding bull market may be once-in-a-lifetime. Critical decisions in these times can be make-or-break. And as such, I invite you to leverage the lessons herein to save yourself the turmoil of learning the hard way. To implent these key principles in your own crypto-investing endeavors and make those critical decisions with greater awareness, confidence, and strength from well-informed positions that shall increase your overall success in the crypto game.
These are two entirely different roads.
While there's a certain alluring nature to trading with its promises of short-term profits, the risks are also alot greater. And it takes a certain type of psychological temperament to success it that not everyone has.
Personally, I discovered that I am not a trader. And that trying to be not only typically resulted in losses, but much undesirable stress. For myself, I've found that a long-term buy-and-hold strategy works much better - both to increase my comfort level without having to worry about always keeping an eye on the market and timing trades correctly, and results-wise.
One other key factor to consider here: tax obligations.
While the whole tax issue is another sizeable matter, there is one basic premise that must be factored in at all times: income vs. capital gains.
When trading, the profits of all trades are considered a taxable event at income rate. When holding a token for a minimum of one year, any profits upon the sale are taxable at the capital gains rate. Meaning, half the tax rate.
While it may seem tempting to trade over the course of a year to seize the opportunity for smaller price swings, you'd better get clear on whether it's really worth it - considering your tax obligations will be double what they were on profits than they would be if you were simply HODLing.
And if you're gonna trade while also holding a long-term bag, you'd better have a damn good organizational system to separate the accounting for the two.
Though for myself, I've prefered to minimize complications - and risk, when it comes to taxes. If I had some skill at trading, it might be worth dabbling to earn a bit extra on the side - and complicate my tax accounting process while doing so. Though given I don't enjoy trading and rather suck at it, it's not worth the headache to attempt doing both.
However, devising a long-term HODLing strategy does require a minimum amount of the similar type of outlook as a trader as you're gonna need to figure out when to sell how much of your tokens at what price.
This is what will make the biggest difference of everything in your success or failure...
If you aren't clear on your general targets - with set timeframes and allocation percentages - you're all the more likely to make costly mistakes.
This is where I lost $1.5 million USD.
The bull market was booming 2017-2018. I was overoptimistic that it'd keep on climbing indefinitely, thinking the retracement/correction would be nowhere as deep and long as it was. I'd been a decentralized-idealist with an anti-establishment mindset, trusting little in the fiat banking system, and hadn't yet figured out how the whole tax issue would work (especially considering I'd made the bulk of my crypto while living permanently in Bali and then returning back to Canada as a resident). Though most critically, I had no plan for how to manage these funds over the long term - other than buying into the foolish "HODL" mantra without realizing the peak is the time you want to sell.
Now, it's alot clearer in hindsight what the appropriate move would have been: put 10-25% of my portfolio in stablecoins, from which to sell slowly for fiat to cover my living expenses for the next three years. (And possibly alot more than even that, gearing up to buy back in near the bottom of the bear market.)
Had I done that, I would not have had to touch my portfolio since. Instead, I ended up having to sell alot of my holdings for ten cents on the dollar (from the peak). I also started using credit in fiat, thinking the bear market wouldn't last that long and I could pay it off soon when the market boomed again - a move which left me carrying $30k of debt for the last 18 months, in order to minimize pulling out more funds from my portfolio.
Credit can be a powerful tool to use. And I'm glad I did use it. (Though wish I'd utilized crypto-backed loans such as those offered on Nexo more than fiat credit cards.) However, I wouldn't have had to, had I taken out profits at the peak to cover expenses for even just half the bear market. Of course, all lessons come with a cost. And moving forward, there is greater wisdom in how to manage my funds moving forward.
From this point...
It's expected that our current bull market might last 1-2 years. So... plan for that...
The key principle: *take out as little as necessary... at least until it's clear the market is at a peak.
So... taking profits at staggered levels on the way up.
Knowing full-well that ETH, for example, may very will at least $5000 in this next bull market, it doesn't make a whole lot of sense to sell for any less if unnecessary. Though, since it is necessary to pay some bills along the way - given I hadn't put away the profits to cover expenses and don't have a J.O.B. with steady income - I will needing to be taking at least some profits, given I don't wanna put everything on credit. So... staggered profit-taking.
Thinking ahead and knowing the market is likely to go through some big corrections before making big leaps to significant all-time highs, it might - for example - make sense to take a small amount of profits around or just above it's last all-time highs around $1400... enough that if it drops back down to $600 or so, I'll have enough in fiat that no more withdrawals are necessary for a few months until it breaks new highs again.
So basically: taking bits of profits at significantly higher highs, putting those aside as a buffer to pay bills until can take a few more profits at higher highs, even if price dips in between.
Of course, someone else's personal strategy might differ entirely. For instance, if you've got a secure job with a good steady, income, it might make more sense to not take any profits until your long-term targets are hit.
As for timing exits with long-term investments... that's something each person needs to determine for themselves.
Knowing that a bear market can last 2-3 years, you may need to ask yourself what percentage of your portfolio you're willing to keep locked in and ride out significant drawdowns. Or if you'd prefer to take a semi-trader approach and try time a top and get back in near a cycle bottom. Of course, it's not always 100% clear at the time when a peak is a peak or a bottom is a bottom, so doing so does entail risking the opportunity cost of missed gains on either end.
Thus, why - as I found for myself - it may be wise to secure a percentage of profits to have as a stable reserve from which to pay needed expenses until the peak of the next bull market is near and the golden goose lays her next set of eggs. At least that way, withdrawals are not a requirement and you can choose to keep invested for the long-term if desiring to do so.
Unfortunately, no one has a crystal ball that can tell us where prices in these markets are going to.
Thus, setting targets to exit positions - whether entirely or just staggered percentages of a holding - is a combination of guesswork and realistic comprehension of informed probabilities that can only come together solidly through diligence researching of the project fundamentals and market sentiment.
The more you investigate the details of a project via the most highly-knowledgeable in its community, the better idea you'll have of what realistic price targets may be for given timeframes.
The more perspectives you integrate from a wider variety of well-experienced professionals in the cryptocurrency space and broader financial markets & economic world, the more quality information you'll have to piece together to clarify the puzzle and grasp the likelihood of dynamic outcomes.
There is no substitute for doing your homework.
Acting upon a "hot tip" might turn out to be lucky every now and then, but the more responsibility you take for your own education into the projects you invest in and the space itself, the better equipped you'll be to confidently make well-informed decisions - and assess the practicality of what price targets could be hit in what long-term timeframes.
Of course, nothing is set in stone, all things are in continual motion, the unforeseen can occur, and there is a certain amount of randomness that may throw off even the best prediction models. Market sentiment can change, regulatory forces can redirect major capital flows, innovative projects can drastically transform the landscape, and black swan events can derail even the seemingly most-sound trajectories. Yet, there are patterns in all of nature - financial markets included. There are universal forces at play behind comprehensible cycles in human behavior and societal development. And the more you humbly seek to arrive at innerstanding them through proper due diligence, the greater the clarity you'll be able to see into the 'codes of the matrix' - including the spectrum of timeline possibilities on which certain investments' fates may lie.
For some examples...
The deeper you dig, the more obvious it will be that it is likely Bitcoin will hit at least $100k. But not likely next week or month. (And if you are just buying in when price has risen from $10k to $40k, you'd better not act surprised if/when a retracement back to $20k happens.)
While there are projects hyping themselves up to be "the next big thing," further investigation into who they're (not) partnered with and what their value proposition is (not actually serving a large need in the market justifying multi-billion flows of capital), it will be apparent there is little substance behind the flashy marketing and there's no way they'll ever hit the prices some say.
And then you'll have projects which may not seem to be held in the highest regards by all in certain sections of the crypto community for reasons of fundamentalist ideologies, with a vocal market sentiment swayed by current news events - yet, if having spent months researching the core fundamentals of what they've been building, who's all involved, the bigger picture of where they're at in the larger market cycles as a whole, and the position they've placed themselves in irregardless of the hurdles others in tribal battles are using to support narratives rooted in cognitive bias, you might be see some of the lowest-risk, highest-reward investment opportunities available that are not visible at the surface level. And in such a context, realizing that what some may believe to be outrageous price predictions could in fact be feasible - over the course of two, five, ten years.
However, to grasp the potentials for any project/token's future requires more than merely listening to the noise of abundant, loosely thrown around opinions.
Educate yourself on fundamentals to inform a grounded outlook on where the market and projects are heading over the long-term. And then, learn at least the bare basics of technical analysis to develop the skill of assessing the core patterns at play in price movement to inform your sense of the range of possibilities for when prices may realistically be reached...
While it's impossible to time the turning of trends with impeccible accuracy every time, it is obvious once you know the ropes whether the market is in a bull or bear market and roughly how much further a turnaround may be.
And with this sense of where you're at in the larger market cycles, you'll be better prepared to set your price targets to take a percentage of profits - while remaining clear on how much you're comfortable leaving in for the long-haul and what levels to sell at in the next bull market, and so forth.
There are many tokens to invest in. Many will be profitable. However, there is one key principle of Economics 101 that is absolutely essential to innerstand and implement within your strategies if you would like to maximize your success in this game: opportunity cost.
Translation: for every dollar you invest in a project, that is one dollar less you have to invest in another.
It may be tempting to put your money into something that's got alot of buzz and has prospects of massive gains. Though to do so may require an allocation of that capital away from another project that's stood the test of time, proved its fundamentals, has far lower risk, while will still itself be likely to produce significant profits.
i.e. some fringe project vs. Bitcoin or Ethereum.
Perhaps the most costly mistake I made was keeping a third of my portfolio at peak in January 2018 in Steem. I'd earned my startup capital from writing rewards there in the native crypto token and watched it grow to nearly half a million dollars at its high. Blinded by subjective bias, believing the project to be fantastic without stepping back to assess the fundamentals and its position in the market objectively, I kept pretty much the entire lot in there. Consequentially, while Bitcoin price decreased from roughly $20k to $3500 and is now at $37k, Steem crashed from $8 to $0.10 and is now sitting at $0.19.
If the math of that doesn't sink in and phase you, you might not be cut out for this game.
(Granted, I'd liquidated all my Steem along the way and at least made some of it back. Though anyone who had the smarts to convert their Steem to Bitcoin and hold until now would be 100x richer than the guy that kept it all in Steem.)
That is opportunity cost.
And while it might be tough to be 100% objective with anything in life, doing so is a critical skill when it comes to investing, for subjective bias can cloud perception very quickly to both miss information revealing weaknesses of your preferred projects and filter out details of others' strengths.
Any investment decision is ultimately multiple decisions rolled into one - not merely what to invest in, but a much larger number of what not to invest in.
To make the "best" decisions - "best" here meaning a combination of the highest likelihood of greatest profitability with lowest risk and a confidence that leaves you satisfied with your decision irregardless of which way the market goes - requires a thorough assessment of alot of information on multiple options, so as to weigh each against the others. And of course, this can be challenging, given none of us have enough time and energy to dive into all the details of every possible investment opportunity in the space.
However, this is where intuition may come in - as well as the counsel of others who really know what they're talking about - to point in the direction of which projects may be worth further due diligence.
Some might argue that intuition and objectivity are two entirely separate realms. Though perhaps they could be seen as equally valuable tools to be used synergistically.
Typically, a strong intuition will lead you correctly. Though unless you're highly attuned to the sensitivities of that intuition, it's easy for it to be distorted with belief and emotion. Sometimes an objective assessment can be a great test and validator of what intuition cannot explain directly.
And then, there may be other times where intuition could lead in one direction - though that direction is ultimately not to an investment itself, but some other opportunity or information to be found travelling that path - with the objective checkpoint being the brake and rudder to orient one to that twist in the road that'd be missed if taking the intuition alone at face value.
It is at that crossroads which your opportunity cost is found and paid.
"Don't put all your eggs in one basket."
Classic investment advice: diversification.
However, there is such a thing as over-diversifying.
I did that. T'was another costly mistake, paired with the "opportunity cost" piece - having spread myself too thin on projects that flopped rather than consolidating in the handful of solid tokens that have stood strong to this day. And in hindsight, the fundamentals were clear back then. However, I was operating from a foolish "well, I just got all this extra income from high Steem rewards, so I'll just diversify into all these new exciting projects" mindset.
Diversification can be valuable to spread risk. It is possible that Bitcoin could lose its dominance. It is possible that Ethereum could fail to scale and another blockchain could take its leading position as the primary smart-contract platform in the space. It is possible that Chainlink might not perform as hoped with other oracle projects stepping in or some other development in the space occuring that nullifies the uniqueness of its value proposition. Etc, etc, etc. Thus, the wisdom of hedging one's bets across a basket of high-quality projects.
Yet, "the Law Of Diminishing Returns" comes into play here at some point...
Personally, I found a couple significant unexpected drawbacks to diversifying too much: the energetic spreading of oneself too thin and with that, a lack of time and energy to really dig deep into the fundamentals of the projects held in a portfolio.
Yes, there are smaller, lesser-known projects in the space that could boom and 100x or more. And it may be tempting to go chase some of those opportunities when catching wind of the hype around them. However, running around trying to get an idea of what is going on with all those projects requires time - and when spreading that time thinly to only get a surface-level picture of what's being built, you don't have the time and energy left to really sink yourself into focused research on the bigger, established ventures with a wealth of detail in their fundamentals. And when/if you begin making decisions based on the emotional buzz stirred up on the surface around certain projects rather than pacing yourself through the less-adrenalized process of extended study into less-exciting fundamentals of other projects, you may be heading in the wrong direction.
Watching the price of certain projects rise while others in a portfolio crawl sucks. But what sucks about it most: you would have seen it coming miles away, had you taken the time to do your homework. Had you made better decisions as a consequence of focusing in to a fewer number of top-notch projects rather than attempting to over-diversify and consolidated your portfolio to a handful you felt 100% confident in holding as long-term investments upon investigating their fundamentals in detail - thoroughly & objectively assessed the opportunity costs - you'd have ended up with a portfolio full of winners.
Oh wait. That was me. Of course, you won't make the same mistakes... so long as you heed this advice.
There's serious money to be made in these markets.
However, it'd be wise to clarify before making: what exactly are you going to do with it?
While not everything in life can be planned and there's certainly something to be said for "going with the flow" in regards to many aspects of one's experience, failure to smartly plan when it comes to this type of investing is pretty much guaranteed to be costly. A single decision made (or not) at the right (or wrong) time can be the difference between a secure financial future or not. So even though it may not be possible to accurately determine exactly what the market it going to do, it is advised to put together some sort of dynamic blueprint of a strategy to adapt according to what it ends up doing within a spectrum of possibilities - knowing how to most efficiently & effectively manage the growth that's bound to come if you've chosen your investments correctly.
So let's play out a hypothetical scenario...
Let's say two people make a million dollars this next bull market.
Mike chooses to live the fancy crypto-bro dream - buying a Lambo, celebrating with champagne showers at the club and a Rolex, takes a world tour flying first class and staying five-star, taking a mortgage on a mansion, and sticks firm to the HODL dogma with the rest of his earnings. What he takes out to pay for his toys, he ends up owing 30% tax on because he was trading and ends up with a six-figure tax bill - yet because he didn't put that money aside right away and the market dropped by the time taxes were due, it required selling an even bigger chunk of his portfolio to cover it. Two years later into the proceeding bear market, his portfolio is back down to five figures, he needs to liquidate the bulk of his portfolio and sell the Lambo to maintain mortgage payments until selling the mansion at a loss. The Instagram models he picked up at the club leave his broke ass, and he's back to answer to a boss.
Steve takes a very different approach. No Lambo, as he's content with his Prius. No parties, extravagent spending and high-class travel. He reallocates half the profits into secure life-insurance investments that provide him with a tax-free monthly income of $2500/month. Since he was holding long-term and not trading, his tax obligation was half that of Mike's - and having consulted with a great financial advisor / tax accountant, he structured himself as a business, wrote off the bulk of his expenses, bringing his tax bill down to practically nothing. And given he created the passive income to pay his bills during the bear market, he was able to keep the remainder of his portfolio untouched - growing it to over $5 million the next bull market.
The whole Lambo meme is a critically important one to grasp.
As fun as it's been in the crypto community, it's also been an exemplification of significant foolishness.
A $300,000 car may look good in your garage. But know what's even better? Lifetime financial freedom for your family and generational wealth.
You might get a big adrenaline rush driving the Lambo. But that won't exactly help with the stress that comes with having blown money irresponsibly in buying toys and ending up in a serious crunch needing to liquidate assets because you hadn't first secured a steady income to cover basic living expenses, having thought markets would keep climbing indefinitely and the car was cool.
For me, it wasn't a Lambo... it was the dream of a $4.2 million condo on the hill.
With the $1.6 million at my disposal, I could've bought a house. And reallocated to have secured a passive income covering all living expenses. (Or simply putting into savings to cover costs for a few years.) But I wanted the extravagence and completely unrealistically thought the market would moon to make my dreams come true in fairytale-esque time. The result: not only huge financial loss, but an accompanying stress that was destructive emotionally, physically, and to my marriage.
I was reckless. My priorities were twisted. Even though I had been aiming for the long-term stability, my greed and desire for over-luxurious living sidetracked my focus from ensuring the basics of a solid foundation.
And this is the critical error I've observed being expressed in the Lambo meme time and time again.
(And of course, feel free to substitute "Lambo" with the multi-million dollar dream home or any other high-priced item.)
Again... opportunity cost.
The $300k for the Lambo may get you some hot, fake, golddigging bimbos and likes on Instagram from dumb kids enticed with images of material success. But that same money could be also be grown into millions over the next few years, securing a comfortable future for you and your loved ones.
Cliché investment advice: don't risk more than you can afford to lose.
And to add: "what you can afford to lose" is not merely referring to the obvious dollar amounts (i.e. leaving yourself without money to pay rent if the market were to crash), but also the emotional/psychological side of the equation.
In my own case, I'd taken a pretty reckless approach with a belief of, "I began with nothing in this game, so if I were to lose it all, I'd just be back where I started... and am willing to risk that." Not exactly an attitude I'd recommend by any means.
Nor would I necessarily advise keeping 100% of one's wealth in crypto, as I've done the last 3.5 years. Though it has paid off, to put oneself in a position to have their entire financial nestegg at the mercy of such extreme market fluctuations is probably the type of strategy suited only to a masochist. While I still came out the other side of the bear market six-figures richer than I began, going through a 95% drawdown with one's entire savings is not an experience I'd care to go through again or wish upon anyone. Though, "live and learn."
The "buy low, sell high" maxim is the ideal, however it's near-impossible to time exactly when the lows are. And there's always the chance that no matter where you buy - especially in markets as volatile as crypto - there's a likelihood of price dropping 50%+ before rising.
Buying Bitcoin at $30k might still be a relatively decent price - if you're planning on holding for years and aiming for a six-figure price target. However, do you have the cahonés to see the price drop back to $10k before price goes parabolic?
And if regulations were to come in, economic wars hit China's mining farms hard, market conditions totally changed, and BTC price were to tank without a recovery, would you be mentally & emotionally okay with that outcome?
If not, you'd better revise your strategy.
On the other hand, if you were to diversify in a number of tokens each with their own distinct fundamentals, such that factors negatively-impacting Bitcoin might not affect - or even benefit - others, and you felt comfortable with the risks... you're good.
Certainly, there are people who've liquidated most of their assets and are living on instant noodles, having put everything into tokens like Ethereum, well-aware of where it's price is heading the next couple years... and they're ok with the risk. For some people, it's fully worth it - because they've done their homework, understand the fundamentals, know what their price targets and exit strategies are, and have a high degree of knowledge-backed confidence it's an investment that'll change their lives. For others, even if grasping the fundamentals, there may still be some degree of uncertainty which makes it too uncomfortable to put all those eggs in one basket and risk the house on - and the stress of proceeding, even with the reward being the same, would not be worth it. They may prefer a more conservative approach, content to take things slower and more steady.
Neither path is inherently right or wrong. Only custom-fit to each individual's temperament, preferences, strategies, and conditions.
Crypto represents more than just a means of making money. Ultimately, even the money is but a vehicle to come into sovereignty.
As in, independence. Non-reliance upon any other person, institution, organization, or factors outside oneself for security & wellbeing.
And with all that, comes responsibility.
The waves of the market provide many opportunities to surf and reap profits. Though to truly seize these opportunities and manage their fruits in a way to create sustainable financial freedom requires diligence in the decision-making constituting that management.
And to the degree one wishes for that end outcome of sovereignty, so must the path be walked in such a spirit of the sovereign soul.
And here, we may identify two fundamental pillars upon which such a state of independence rests:
If you happen to keep everything on one computer and it crashes... there's no bank to go to. You need to ensure you'll have access to your wallets in case of computer or hard drive failure. You need to be the one to ensure passwords and recovery phrases stay private.
There's no one to bail you out, should you have left room to be hacked in any way. There's no forgiveness or wiggle room should you have fallen for phishing scams, enabled yourself to be hacked, etc.
You are in charge 100% of your security.
While it sounds rather obvious, one needn't spend too much time on social media to find countless people lazily asking others for advice what to do - rather than seeking high-quality, objective information to inform their own decisions.
While it may be invaluable to consider and weigh in on the perspectives of others in the space who are experienced and well-informed, you must inevitably take the reigns of your ship and be the one to call the shots determining where your destiny goes.
Asking for the biased opinions of random strangers on the internet what to buy or sell when is sheer foolishness which does absolutely nothing to further one's self-empowerment, but only reinforces dependency upon external voices which know nothing about your personal circumstances & psychology and care little about your success. And why should they, if you were to not even have enough self-respect to invest the time & energy in doing your own homework as a grown adult and making your own informed decisions?
To simply expect someone else to tell you what to buy and when to sell without accepting the responsibility for conducting your business like a professional is akin to casting your wish list to Santa as a child, hoping for the universe to bestow mythical rewards upon you - versus diligently building the foundation of your own kingdom through the work to equip yourself to assess solid opportunities through a cultivated understanding of trends, market conditions, and forces at play moving through high-quality projects.
Granted, you might still luck out enough to profit on someone else's suggestions or a mere matter of good timing. But eventually, reliance upon anything or anyone outside of yourself for counsel is bound to backfire as it is pretty much impossible to be refined to your individual path and evoke your innate capacities for sovereign strategizing and decision-making.
And that about wraps this up for now.
Take what you will, integrate what resonates, and dare to throw away the rest should you opt for trial-and-error instead.
You now have in your awareness a handful of key fundamental principles with which to guide your progression into the crypto game.
While not everyone reading this may have enough money to invest to make a million bucks in this next bull market, a proper investment of time in knowledge to grow and manage a portfolio wisely could realistically get you there over the course of two or three market cycles.
Read through this as many times as needed.
And one last thing:
Amidst all the seriousness... have fun with it!