I started my journey like most people I imagine. A friend told me that Ethereum would be the new Bitcoin in January 2016. Ethereum was $1 per coin at the time. I was young and greedy (still am) and had some money to burn. After spending 3 weeks reading about what blockchain is, what Bitcoin is, then what Ethereum is, I was convinced that I wanted to invest in it. Not because I understood it all, but because in those 3 weeks the price more than doubled to $2.20 and I did not want to miss out. Luckily, When I entered it doubled in another 4 days, so I took half my money out and kept the rest. When it doubled again I took out half again and this time left the rest for good. Now I of course regret doing that tremendously and this was one of my first major failures in crypto — being too short-sighted.
A year went by and I had forgotten about my ETH. The sum was not substantial enough for me to care back then. However, a buddy of mine wrote to me in May 2017 as I was preparing for my finals at University. It is then I realized that the insignificant sum had gone up 2300% and it was not so insignificant anymore. I started reading up on other coins like Ripple and New Economy Movement, Antshares (now NEO) etc. I was fascinated with the growth of the space and wanted to learn everything I could about where my money is coming from. So, for the entire summer, I researched, traded, invested, made mistakes, learned from them, made them again and beat myself over it, and continued to learn. I have not stopped even today.
Mistakes to learn from
This is a collection of the major mistakes I have made or have seen other people make that has cost us the most money on our crypto journey. Enjoy and learn from them so you can hit the ground running and be better than us right from the start.
Mistake #1: Selling low and buying high
I think of myself as an intelligent human being. At least I did before entering crypto. The amount of stupidity that I have exhibited in the last nine months has me stunned. I can hardly believe how I have still made so much money. By far the biggest mistake I have made was buying when a coin has topped out, and selling when a coin has either bottomed out, or not gone through its growth phase yet.
A prime example: I sold Monero in summer at $45 to buy Stratis at $10. Stratis had pumped from half a cent ($0.005) to $10… and I bought it at $10… Then, of course, it proceeded to go to $3. I sold it. Not only that but Monero then proceeded to go to $300. Let’s say I put $1,000 in Stratis. I would have walked out with $300. If I had kept it in Monero I would have made over $6,000.
Monero (XMR) coin jumps from $45 on Jun 5, 2017 and goes to $300 on Dec 12, 2017. XRM hit $467 shortly after on Jan 6, 2018. MONERO (XMR)/COINMARKET CAP
Second example: I sold NEO at $22 in September after the China FUD. And bought a micro-cap coin called Digital Price. I bought it at 10 cents, but that price had been a result of over 1000% growth in a span of a month. In the following 3 months of course, Digital Price dropped to 1 cent and I sold it. NEO on the other hand went to almost $100. Not only that, but shortly after I sold it, Digital Price sky-rocketed to 40 cents. So, let’s say I had $1,000 in NEO. If I had kept it, I would have made $4,000. If I had kept my Digital Price coins even after that ridiculous entry I would have made $4000 as well.
Instead, for that $1,000 I was left with $100.
What you can learn from this: I am not in the minority. Most people do this, and most people lose by doing so. 90% of traders lose 90% of their money in 90 days. Avoid this by splitting your portfolio into trading and investing. Investing is only for coins that you plan to hold over a year without touching them. Trading is for anything else you want to try. Investing should be 80% of your capital AT LEAST. If you can’t make $10,000 out of $100 you won’t make it out of $5,000 either.
Also, when trading I implore you, no matter how much you’re tempted to jump into something that is already moving up a lot DO NOT DO IT. Jumping on an already x2 or x3 is OK in my eyes, but anything further than that is playing with fire. Find quality coins with active development teams that have bottomed out and start accumulating them, their day will come.
Mistake #2: Not understanding what Market Capitalization means
I picked up on this one quite early but not early enough. Too many people do not realize the importance of market cap. Let’s say there are two coins that do a similar thing: coin ABC costs $1 and coin DEF costs $10. Which one is cheaper? The answer is: you don’t know until you know the total supply of the coins. That’s because the price only matters in relation to the amount of coins in circulation.
If ABC costs $1 but there are 50,000,000 coins in circulation, then its market cap is $50M. That means that for its price to get from $1 to $2, $50M would have to be added to its market cap. Note, that does not mean that $50M worth of coins would have to be bought and sold, but it would have to be a large enough amount for it to move the market cap with $50M.
The market cap of the Ripple (XRP) coin and how much it’s trading at. RIPPLE (XRP)/COINMARKET CAP
If DEF costs $10 but there are only 500,000 coins in circulation, then its market cap is $5M. That’s ten times less than ABC! So, it would take 10 times less money to move it from $10 to $20 per coin!
Which one has the biggest growth potential? DEF of course! But new people too often fall for the “cheap price” trap. That’s why at the end of 2017 we saw the growth of “cheap” coins with high market caps like Ripple, Cardano, Tron, Iota etc. The quality of these coins does not matter, they were overpriced as soon as they went up 20 times for no apparent reason apart from being “cheap” (with market caps in the BILLIONS). Don’t fall for this trap, learn what market cap is and use it to your advantage when hunting for quality coins to invest in.
Mistake #3: Not focusing enough on Bitcoin
In the beginning you will think “Boy, Bitcoin is very expensive, I have more chance of making money from altcoins”. Valid observation, but that only applies to the short-term. Bitcoin leads the market in the long-term.
The point of trading should always be to acquire more bitcoin. If that was my focus from day one I would have had 10 times more money now. In 2017, only a handful of altcoins outperformed bitcoin, a few kept up with its growth, and 95% failed to give the same returns. This is a trend that does not show any signs of going away.
When you trade, trade for bitcoin, not for fiat currency (dollars), and you will do well. Use dollars only if you anticipate a market crash like the one we’re in right now and you plan on buying the bottom. Otherwise it is pointless to keep your money in fiat apart from bare necessities.
You will either learn this the easy way by taking my advice, the hard way by losing money relative to bitcoin, or you will remain ignorant and think “I’m still up 20 times in USD” even though you’re down 50% in bitcoin.
Mistake #4: Overtrading
You will almost certainly make this mistake and lose a lot of money even if I am telling you not to. It’s just TOO tempting! But for those few disciplined souls — overtrading will kill your portfolio. There are fees involved in every trade. There is also no way you can be right a bit more than half the time. Statistically, highly improbable. So, do yourself a favor and make 1–2 trades per week maximum. I would suggest per month but try too hard to not do it and you will end up doing it even worse. So, start off with 1–2 per week, and look to reduce it to 1–2 per month. While you’re waiting for trades to realize, you can: look for other opportunities; read up on the amazing technology that will bring you freedom; post memes on twitter with the OGs; listen to your family telling you how lucky you are when prices are going up or how stupid you were when they’re going down; work on yourself.
Mistake #5: Not being honest with yourself
This last one is extremely important. For you to be a successful investor and/or trader in crypto (or any other market) you must be brutally honest with yourself at every step of the way. You should assimilate what you’re feeling when things are going well and when they are not going so well. You should see if you are one of the many thinking in maxims (I am either all in or all out) or you can be disciplined enough to spread out risk and entries. The few people that have gone all in and have made a lot of money by not cashing out are so extremely rare, there is no point trying to emulate them. Nor is it healthy for your wealth and health. Step in gradually — more when things are down, less when things are up; and you will do just fine. But be honest about it and be honest about the mistakes you make. You cannot learn if you turn a blind eye to your weaknesses.
These are the main mistakes that have caused me to lose the most money. I hope this helps you avoid them or at least recognize that you’re making them early on and stop yourself. In the end, you will lose some money, that is inevitable. But if you have a solid plan and can stick to it through the hard times, you will be rewarded greatly.
Image illustrating the strength of a padlock. UK/LOCKSHOP WAREHOUSE
There is not enough space in this article to cover the vast amount of information there is on security, but in very basic terms:
It is imperative that you take out any coins you don’t plan on trading away from exchanges and into secure wallets where you have control of the private keys. I recommend to everyone that if you do not have more than $10K then an interface like MyEtherWallet for Ethereum and ERC20 tokens is fine, and personally I used a BTC wallet interface called CounterParty for my BTC storage.
Make sure to book-mark them and NEVER click links on Google taking you to them.
If you hold above $10K get yourself a cold-storage wallet. I recommend the Ledger Nano S — that’s the one I am using, and I have no complaints. I know people who have had $10K-50K in crypto stolen just because they logged into public Wi-Fi and had their information leaked. Once, I almost lost my entire stash of NXT due to a phishing email that had me click on it and give it my wallet private key under the guise that I was logging into my account to check if my coins are there (ironic). I reacted within seconds and moved the coins to another wallet. It was stressful, and I would not wish the feelings I felt during those few critical minutes upon my worst enemy.
I hope this has been a useful article. Take control of your future, your money, and your freedom, and take the time to learn — ESPECIALLY if you are just starting out. This has a high probability of securing you for life, do not miss it by being lazy or brushing things off too easily. For any questions, you can find me on my twitter @Crypt0_Borat. Welcome to your path to freedom. May it be a successful one.