4 Lessons I Learned After Losing 4 Figures in Crypto
Never Forget Rule #1
Some might say 4-figures is not alot, others feel it’s alot of money to lose on an investment. Whichever way you swing, losing 4-figures is no small sum, unless you’re a Saudi Prince.
It all began when I chanced upon a crypto staking platform, Hodlnaut. Hodlnaut allows its users to stake Bitcoin (BTC) and Ethereum (ETH), with yields ranging from 5 to 7%. Being a Singapore-based crypto firm, I thought it should be pretty “safe”.
A few months into this newly found “income stream”, the yields starting dropping to the 4% to 5% range. At this point, I was still not that concerned. After all, the reduction of yield was consistent among all crypto staking platforms.
Then, sometime in August 2022, the inevitable happened. The company halted withdrawals and there goes my crypto holdings.
I must admit I was actually happy that this happened (am I a sadist?). Every painful experience comes with a silver lining. In my case, it’s the priceless lessons gained will shape me to become a better investor.
Here are 4 lessons which we can learn from this unfortunate episode (so you don’t make the same mistake as me):
1. Not Your Keys, Not Your Assets
Where you keep your crypto matters just as much (if not more) than what crypto you buy.
The best way is to store your crypto offline in a cold wallet. Any crypto wallet that’s not connected to the internet is known as cold storage (referred to as cold wallet).
The most common type of cold wallet is a hardware wallet, which is typically a small device that resembles a thumbdrive.
Do yourself a favour and get a Ledger Nano X or Ledger Nano S. You can get yours from the official website here. Do not purchase from other third party sites (there are many fakes out there).
2. Embrace Volatility
The stock market is only open from Monday to Friday. The crypto market, on the other hand, is open 24/7. This feature in itself is a double-edged sword.
The crypto market is still in its infancy. Its volatility can be compared to a penny stock. A 50% crash can happen in a matter of minutes, or even seconds.
During a crash in the stock market, you have time to catch your breath after market hours on weekdays and on the weekends.
A crypto crash is a different beast altogether, especially if you are trading in and out. You need strong emotions to navigate the 24/7 nature of the crypto market.
3. Don’t Invest In Something You Don’t Understand
One tweet from Elon Musk can send Dogecoin to the moon. The next day, he tweets that Tesla won’t accept Bitcoin for payment, sparking a crash in the price of Bitcoin.
Is this something that can possibly be understood? Is there necessarily a correlation? Your guess is as good as mine.
People research for months and years before buying a property. Why shouldn’t it be the same for crypto, stocks, or any other asset class?
Just because the barriers to entry are lower (less capital required) doesn’t mean you should not do proper research.
Don’t invest in crypto if that’s what allows you to sleep better at night.
4. Don’t Be Greedy
Looking back, I don’t feel that I was being greedy. The 5% to 6% yields which I got for crypto staking was decent but it wasn’t anything special.
In reality, if you ever come across a yield that is unusually high, you should probably stay far away. Don’t ever let greed take over you.