Everyone is a genius in a bull market. You are only as strong as the bear markets you’ve lived through.
– Anish K. Mitra
Terra (Luna), the crypto that promised to power the next generation P2P payments has come to a screeching halt, along with its dollar-pegged stablecoin, UST.
How could a crypto once valued at over $100 now traded for pennies?
Well, that is the swinging bust that comes with investing in cryptocurrency.
The crypto world is a gigantic metaverse of opportunities. Just like a movie, you could be worth millions of dollars overnight.
But as much as there are chances for exponential earnings, there are even more chances for investors to drown in a financial cesspool.
You could literally go from nothing to millions and then from millions to nothing.
Here are five lessons I learned from the crash of Terra (LUNA) and what it means for today’s crypto investors.
Pump and Dump is real
The crypto world is filled with speculators and opportunists. If you don’t know that already, then you may just be part of the naive bunch.
On a daily basis, people are scheming and planning to exploit the crypto market to their advantage.
And many of them are succeeding.
You shouldn’t stay naive for so long, else you’d be among those losing money.
Instead go with a mindset of generating cash flow on a daily basis and investing in stable cryptos.
Avoid the bandwagon and do your due diligence before investing.
Invest in the Intrinsic value not just extrinsic value of an asset
If you want to avoid losing money, then you shouldn’t invest based on Intuition or by following the bandwagon.
Forget about the aesthetics and look into what a crypto is offering its investors.
What is their trajectory? Which team is behind the project? What is their mission and vision? Is their plan feasible considering current realities?
Make your investment based on sound judgement.
The Crypto World is Ephemeral
The crypto world is Ephemeral. Don’t live there and make sure your investment doesn’t either.
A mentor used to say, “don’t fall in love with the investment vehicle, instead fall in love with your financial goals.”
And he was right.
Use the crypto world to make money, but diversify your investment into more stable portfolios.
Withdrawing your Profit is a Hedge Method
I know many crypto exchanges give you the chance to set parameters to stop loss and take profit.
But most investors still leave their investments on decentralized platforms that could cancel their portfolios overnight.
That is why I believe that taking profit is not enough. Withdraw it. Feel your cash, smell your gains.
If you make substantial profit from crypto, withdraw part of it and put it into some other more stable portfolio.
That’s the kind of hedge you need against volatile markets like that of crypto.
Invest what you can Afford to Lose
I’ve always preached this, and I’ll continue to preach it.
Don’t invest what you can’t afford to lose, especially in an unstable market like crypto.
The market doesn’t have emotions, and it wouldn’t consider that you need to pay hospital bills.
Let me put it clearly for you.
Invest what you can give to a road side beggar. That will help you invest without emotions.
The plan is to invest sparingly and consistently.
Use the Dollar-Cost Averaging method to invest long-term in assets you believe in, and you’d see that investing isn’t as hard as many people make it out to be.