6 Lessons From The Last Crypto Bull Market
As the crypto markets settle down after the 2021 bull run, now is a great time to take stock, get properly informed and make an investment plan so you can profit when prices next take off.
When it comes to staying up to date in fast-moving spaces like crypto, Twitter can be a great place to get informed.
This article is inspired by a thread by Twitter user @cryptoPothu who explained the biggest mistakes they made during the last bull run.
1. Being too risk averse
People are often reluctant to get involved in new things in the early stages, especially ones with as much uncertainty as crypto.
However, sometimes listening to your gut feeling and investing in something innovative can enable you to reap immense rewards in future, as @cryptoPothu’s experience with Ethereum shows. You could end up regretting not having invested more into an up-and-coming asset and make less substantial returns by settling only for safer bets like index funds.
2. Getting too greedy
While being too risk averse can hold you back, it’s all too easy to get over excited about outsized gains, particularly in high risk areas such as NFTs.
As the recent decline in NFT values has shown us, investing in assets that are driven only by hype on social media and short-lived trends can be costly. If an asset’s value is largely contingent on online hype, it may be best to get rid of it before it stops trending, or at least shed some of the asset so that you can lock in a profit.
3. Not having a plan
Without a clear plan it’s easy to find yourself buying and selling coins on a whim. This can make it difficult to keep track of your investments, hold for the long term, and mitigate risks.
Having a clear plan, such as carefully researching coins and using dollar-cost averaging to regularly buy amounts you are comfortable with over an extended time period can help you minimize your losses and stop you from panic selling when the market takes a temporary turn.
4. Investing in the wrong projects
Not doing adequate research and giving in to fads on social media can result in poor investments and heavy losses. Not everything going viral is destined to be the next Bitcoin or Ethereum.
Always be sure to carefully analyse up-and-coming crypto projects to make sure they are rug-proof and ensure you’re confident that they’re a worthwhile investment. Having a systematic research framework to determine whether or not an asset is worth investing in can be helpful, as well as avoiding over-hyped projects with creators looking to benefit from short term virality, rather than real innovation.
5. Trying to time the market
As the old adage goes, “time in the market beats timing the market”. It’s easy to get caught up trying to find the ideal moment in the bear market to pump money into crypto. However, if prices start to surge again, you could lose out and end up with little or no investments.
Furthermore, it might be tempting to invest into unpromising projects (like low-utility NFTs) with the hope that they might return to their original value in the next bull run. This can be costly because some assets may not return to their original prices.
Instead, the money that you have may be better spent if you make sure that the projects you invest in will stand the test of time, as prior research about a particular asset might indicate (like Bitcoin) and using dollar-cost averaging to reduce the impact of timing.
6. Not learning about the market from the get-go
The basics of on-chain and technical analysis is useful knowledge for anyone looking to invest into crypto assets. Knowledge of the stock market alone is difficult to extrapolate to such a volatile and constantly evolving asset class as crypto, which is why it is important to keep stride with developments in the field.
Twitter can be a helpful guide, as long as you don’t fall prey to the hype and misinformation, but also be sure to subscribe to newsletters, blogs and trustworthy sources so you stay well informed.
As always, this article does not constitute financial advice and you should be sure to do your own research and consult a professional financial advisor before making any investment decision.
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