This is not investment advice
1. Every 12-24 months the number of bitcoin users doubles. Therefore, the majority of bitcoin/crypto owners have never known a bear market. This leads to recency bias and animal spirits.
2. Consider the possibility that there are unknown factors going on behind the scenes. This was the case in previous bitcoin bubbles, the housing bubble, the dot com bubble, the south sea bubble etc. Is this time different? Vinny Lingham and Chris Ellis have discussed information asymmetry before.
3. If you can break-even on your total FIAT investment and keep some bitcoin for the long term you will probably do better than most people. Don’t compare yourself to others who have done well recently, compare yourself to people like this guy who lost major amounts when MT Gox collapsed.
4. Listen to people with a strong, long term tech investment track record. Most people in Crypto have a very short track record & tend to make specific predictions. Clear vision may be comforting, but it is unlikely to be correct. It is worth reading Benedict Evans recent post on this common mistake. (TLDR; The bitcoin breakthrough is trustless value exchange. The exact applications are harder to call.) @Naval or @wences for example believe that the technological discovery is important, but accept some uncertainty in how cryptocurrency will play out.
5. When a major correction happens, there will be a rush to the door at exchanges. This will slow down processing speeds and will make you panic if you haven’t experienced it before. You will be tempted to sell at any level.
6. In moments of rational thinking, take out your initial investment capital and put it in a savings account that heavily penalizes withdrawals. It will hurt in the short term.
7. Fantasize about potential losses. Picture telling a spouse or dependent that there isn’t as much cash as you thought there would be because you thought you could call the top of the boom, even though seasoned investors agree this isn’t possible.
8. Avoid Leverage. It will work 9 times out of 10 in a bull run and you will think that you are getting better at it and put in more. You will lose the first 9 and more on the 10th go.
9. Read about the dot com bubble stories here. Many investors were too young to participate in the dot com bubble and so have no memory of losing lots of their own money on technology bets.
10. Separate your holdings into 2 or 3 pots. One small one that you will speculate with and probably lose. One that you will sell off to break even in FIAT (if you haven’t already). And a small amount that you will hold for the long term, that you can afford to lose.
11. Read other articles about common bull market mistakes. Here is one from Bread wallet. Robert Shiller recently wrote an article about how the idea of flipping houses spread like a virus. Today its 'Crypto Millionaires', trading from their parents basement.
12. Consider the timing of when you are getting involved. Is it after a long decline and partial recovery, or when Dan Bilzerian got involved, search volumes are at an all time high and the mainstream media say this time its different.
If crypto is very promising over 10 years, but highly risky over 2, the question is not whether you should buy a small amount, it is whether you are capable of buying some and holding for 10 years. If you do decide to, hopefully some of these ideas might help.
1. Every 12-24 months the number of bitcoin users doubles. Therefore, the majority of bitcoin/crypto owners have never known a bear market. This leads to recency bias and animal spirits.
2. Consider the possibility that there are unknown factors going on behind the scenes. This was the case in previous bitcoin bubbles, the housing bubble, the dot com bubble, the south sea bubble etc. Is this time different? Vinny Lingham and Chris Ellis have discussed information asymmetry before.
3. If you can break-even on your total FIAT investment and keep some bitcoin for the long term you will probably do better than most people. Don’t compare yourself to others who have done well recently, compare yourself to people like this guy who lost major amounts when MT Gox collapsed.
4. Listen to people with a strong, long term tech investment track record. Most people in Crypto have a very short track record & tend to make specific predictions. Clear vision may be comforting, but it is unlikely to be correct. It is worth reading Benedict Evans recent post on this common mistake. (TLDR; The bitcoin breakthrough is trustless value exchange. The exact applications are harder to call.) @Naval or @wences for example believe that the technological discovery is important, but accept some uncertainty in how cryptocurrency will play out.
5. When a major correction happens, there will be a rush to the door at exchanges. This will slow down processing speeds and will make you panic if you haven’t experienced it before. You will be tempted to sell at any level.
6. In moments of rational thinking, take out your initial investment capital and put it in a savings account that heavily penalizes withdrawals. It will hurt in the short term.
7. Fantasize about potential losses. Picture telling a spouse or dependent that there isn’t as much cash as you thought there would be because you thought you could call the top of the boom, even though seasoned investors agree this isn’t possible.
8. Avoid Leverage. It will work 9 times out of 10 in a bull run and you will think that you are getting better at it and put in more. You will lose the first 9 and more on the 10th go.
9. Read about the dot com bubble stories here. Many investors were too young to participate in the dot com bubble and so have no memory of losing lots of their own money on technology bets.
10. Separate your holdings into 2 or 3 pots. One small one that you will speculate with and probably lose. One that you will sell off to break even in FIAT (if you haven’t already). And a small amount that you will hold for the long term, that you can afford to lose.
11. Read other articles about common bull market mistakes. Here is one from Bread wallet. Robert Shiller recently wrote an article about how the idea of flipping houses spread like a virus. Today its 'Crypto Millionaires', trading from their parents basement.
12. Consider the timing of when you are getting involved. Is it after a long decline and partial recovery, or when Dan Bilzerian got involved, search volumes are at an all time high and the mainstream media say this time its different.
If crypto is very promising over 10 years, but highly risky over 2, the question is not whether you should buy a small amount, it is whether you are capable of buying some and holding for 10 years. If you do decide to, hopefully some of these ideas might help.
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