10 things I wish someone had told me when I was learning to trade crypto

While I consider myself an amateur trader and a small-scale investor, over the 2+ years of trading crypto I've learned some things I'd like to share with you all, but mostly with those who are making their first steps into the uncharted cryptoland.

  1. Just as with anything else in life, trading cryptocurrencies is context dependent. That means you should remain a healthy sceptic about general truths, universal rules and things that "everyone knows". Consider the famous "buy low sell high" dictum. The definition of high and low is subjective in most cases since it depends on your timescale, goals and trading strategy. If you’re a hodler, as are many of the fellow redditors here, your high and low will differ dramatically compared to the day trader's.

  2. It is for the same reason that bulls and bears don't really matter. Whether you're 'bullish' or 'bearish' depends on your strategy and timescale. Consider this: to someone hodling BTC since 2013 a dip here or there (even a prolonged one) makes little difference because the price of BTC over the time continues to grow monstrously – you can call it one long-term bull market.

  3. At some point, you'll bump (or you already have) into something that is called 'technical analysis'. Let me save you some time (and money, probably) by telling you this: technical analysis is neither technical, nor is it very analytical. While many traders regard TA to be a scientific way (supposedly based on mathematics) to read and predict the market moves, TA has little to do with any formal science. Differently from the surrounding physical world, we are not aware of any physical laws that govern our human behavior, including markets. If it was possible to mathematically calculate and with certainty predict market moves, the big buck guys in Wall Street would have already done it. Think about the major financial crises for a moment – just like the Spanish Inquisition, nobody (well, almost nobody) ever expected one. Does it mean TA – trends, chart patterns, MACD, RSI, Elliot wave count, etc. – is a complete rubbish? I wouldn't go as far as to claim that. It is somewhat helpful – if only a little, TA still gives you a feel of the current market mood. TA also does one other thing pretty accurately: it graphically represents historic data of human behavior in the financial markets. Surely you can benefit from that? Or do you? This brings me to another point…

  4. Beware of historical analogies and 'I knew it all along' thing. As humans, we are prone to hindsight bias, a tendency, after an event has occurred, to see it as having been easily predictable. We are all blinded by hindsight bias because our brain looks for simplistic linear link between cause and effect. This way when an unexpected event happens, the brain uses the knew-it-all-along mode to cope with cognitive dissonance and make sense of the surrounding world. While trading hindsight bias harms you in two ways: a) it drains you psychologically for not making 'the right' decisions in the past, and by luring you into oversimplified historic analogies, b) it creates a false sense of investment security at the present time. Just look at everyone complaining they've sold their BTC at the worst possible time (as a matter of fact, I am no different – I still autodestructively loathe my decision to liquidate a large portion of my BTC portfolio after the BTC price hiked to 8k). It is also very tempting to think you wouldn't miss 'the next bitcoin'. The problem is, though, that it is incredibly difficult if at all possible to spot such an opportunity. You have to be either lucky or extremely well informed (and lucky) to capitalize early on such opportunity. In reality, it's very difficult to differentiate between useless information (noise) and something that truly matters (signal). Which brings me yet to another point…

  5. Stop being a news junkie and start filtering what you read/hear/see. If you don't, at some point in time the quantity of consumed news will start to impact your decisions and it will begin to negatively correlate with the net gain of your investment portfolio. Instead of reading news nonstop, better educate yourself – dive deep into the market fundamentals and the technology you're dealing with. This way it will be easier for you to spot new lucrative investment opportunities when the time comes.

  6. Accept the fact that idiots also happen to make lots of money and move on. Multiple times too, if they're lucky ones. However, the net worth of (lucky) idiot doesn't mean you should imitate him and become one. Some two months ago a Dutch father of two young children sold his family's house, bought BTC and other cryptocurrencies, and relocated his family to a rented property. After the recent spike in BTC price the guy's net worth must have increased substantially. So, is he an idiot? Absolutely! It is only a question of time before he ruins his own and his family's life with some incredibly reckless financial decision.

  7. Try to understand the motives governing your decisions and act (or don't act) accordingly. If your actions are about to be driven by extreme emotions such as fear, panic or excitement – stop immediately and reevaluate the situation. Otherwise you'll end up belonging to the FOMO buyer/panic seller club aka the money losers. If you want to stay on the earning side long term, you must keep your head cool and think clearly.

  8. Day trading is probably not for you. Consider this: evidence in neuroscience research shows that we are a loss-averse species. For this we should thank our stone age ancestors who had barely enough food, shelter and belongings to survive in a very adverse world. Losing even a little of what they had meant their existence was in jeopardy. This explains why contemporary humans prefer avoiding financial loss to making financial gain. Neuroscientists claim that losing money activates the same area of the brain that responds to mortal danger. This is why in order to do day trading you must have A LOT of self-control and balls of steel – there are many ups and downs during a single day. It drains you emotionally, you end up being addicted to adrenaline, your fiancée hates it, and the hodlers will probably outperform you in the long run anyway.

  9. Volatility is your friend. Over time BTC volatility makes the coin stronger, not weaker. While wild swings in price makes BTC almost impossible to use as a currency, volatility is good from the financial asset point of view. Traders and investors dealing with BTC get used to huge and sudden price hikes and dips. Unlike for any 'stable' stock of any prominent multinational corporation, even substantial and unexpected shocks will not undermine the confidence in BTC. BTW, best of luck to everyone planning to short BTC. 🙂

  10. Make small mistakes, learn from them, get wiser, err less. In your childhood days, you needed the experience of burning your hand with fire so that for the rest of your life you wouldn't need to think about the painful experience. That information is now hardwired in your brain and helps you to avoid getting harmed. If you've just started trading crypto, expect to make mistakes and prepare to learn from them. It's only after you get into FOMO, get panicked big time, take too big a risk, get out too early only to jump in at the worst possible time, ONLY and ONLY then you'll start to improve.

The Road to Wisdom

The road to wisdom? —Well, it's plain and simple to express: Err and err and err again, but less and less and less. — Piet Hein

Hope that was helpful.

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Bitcoin – The Currency of the Internet

"This shouldn’t even be a public debate. It’s like the public debating and voting on the graphite reactors that prevent a nuclear reactor from overheating and melting down. There are certain things you should let the engineers decide." – Nick Szabo (reddi

Taken from the Tim Ferris Podcast interview with Nick Szabo and Naval Ravikant. Audio Version Transcript Tim Ferris: Nick, what are the biggest misconceptions or common misunderstandings related to cryptocurrency or Bitcoin? If there’s anything where you’re like “God, this drives me nuts. If I hear…

Bitcoin

Yes the price is hypnotic to watch, but yesterday we had a Bitcoin round-table among friends and the things that were being discussed were well beyond price speculation, it was more like planning for a completely different world. This is why I enjoy Bitcoin.

With it's decentralized ledger and world-wide access, Bitcoin is not only an interesting investment, but it is also undermining every financial & political system on earth that requires us to trust a central entity to keep a record, and to speak that record back to the public for proof or decision making. Here are the things we spoke about at our round table – they give me some hope for the future that didn't exist in a real way before bitcoin.

  • The need for real life banks is gone, they can exist for other useful/different reasons, but everyday large scale transactions and most daily personal banking needs, and generally financial security are all no longer bank dependent (nor credit card/website dependent).. Just this alone could really change a lot. If all the resources and money lost to huge salaries, "legal corruption", along with a now very archaic infrastructure (right down to air-conditioned skyscrapers) and untrained staff, were all translated into savings for the common user, the world market would be very different. The amounts of profit that banks make alone is staggering. At least in the billions per bank per year in 1st world countries. Then there is the fraud… Our personal estimates of 10s of trillions of dollars saved over short amounts of times (a few years) seemed almost conservative when taking everything into consideration.

  • War resistant money! Bitcoin means that people can flee their homeland, leave their home and everything they have, get to some other safe place, use an airport internet hotspot and access their entire life savings without interruption. Also, as a whole, the public money is safe, even if taken over completely, when the military takes over, when the religious wars are waged, no money will necessarily be at risk. We wondered, if wars could not be funded by robbing the country being invaded, could they be fully paid for by taking natural resources and land alone? We weren't sure, but it would take out a big bite. There were so many different little reasons we came up with around war, but I'll move on.

  • Voting. No need to dwell on this one, obviously voting and fraud is a big conversation these days. A blockchain based voting system is surely going to shed some light on the true opinions of the nation. We were not so sure if this would be a big deal or not, but we decided its best to be sure fraud is dealt with at this level of decision making. But also, since voting could potentially be in your hands, on a phone or device, maybe we vote together on some of the simpler decisions, it could deflate the pressure on higher levels of govt to make these decisions, maybe they could spend some time on important things etc… Why spend so much time discussing things in govt when we could know the exact sentiments of the entire country very quickly and cheaply. This blockchain tech doesn't exist yet so I'll leave it alone.

  • Immutable history. I mean, this is the first time there is the potential for human history to be recorded in a verifiable way. We could actually be able to all agree on what happened and how it happened because there is a decentralized ledger. If one pays close attention to how much merit and importance we put into history and how things went…With modern education there is a constant need to show you how to feel about the world, why we are the good ones & who is bad. The internet feeds this desire to new heights of addiction. A blockchain of events, not only financial but of all events could change our relationships worldwide.

I know some of these things are blockchain based ideas, I personally believe the bitcoin blockchain is capable of doing all of these things in some way, or at least the network could power & secure these types of tech. Being the one largest, most secure, immutable ledgers on earth with no central authority, there is a reason to continue on with Bitcoin as the main blockchain. These few things I mentioned above are just a small example of the earth-changing things that Bitcoin is capable of, we have only scratched the surface.

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Bitcoin