Thoughts on the crypto market, and its effects on mental health
Since the onset of the Covid pandemic, mental health has become a much discussed topic (and rightly so). While I’m no mental health expert, it helps to pen my thoughts on this matter.
In the last 2 to 3 years, many people dipped their toes into the financial markets (including crypto). The joy they experienced during bull run in 2020 were soon followed by the crash in late 2021 till now. For those new to the market, it’s been a long and protracted market dip (for both stocks and cryptos).
The Crypto Crash
Here’s a chart of the recent performance of the big 2 cryptos.
Bitcoin (BTC)
Dropped from $69k at its peak to below $18k at its lowest (74% decline).
Ethereum (ETH)
Dropped from $4.8k at its peak to below $900 at its lowest (81% decline).
It’s not easy seeing such steep drops for 2 of the biggest and most established crypto assets. People who are heavily invested into cryptos can get mentally affected.
Crypto is still a young asset class, as compared to traditional assets like stocks, bonds and real estate.
The last crypto winter was in 2018, where the crypto sell-off started in January 2018. After an unprecedented boom in 2017, the price of bitcoin fell by about 65% in just 3 months.
We’re seeing a similar sell off this time. Whether a crypto winter follows remains to be seen.
Is The Crypto Market a Casino?
If you own a crypto that goes to the moon, it’s natural to feel over the moon. The feeling is the same as winning a lottery ticket. It is akin to gambling, and the thrill that comes with it. That dopamine kick and the chance to win the jackpot are some of the hardest things to resist.
While there are some altcoins that are more speculative, in the long-term, you won’t go wrong sticking to the Big 2.
Crypto Platforms Going Down
As if having to deal with 70% to 80% drops is not enough, crypto platforms are going bust one after another. Celsius, Voyager and 3AC are some of the more prominent names that have gone bankrupt.
Most recently, Hodlnaut announced that it is halting withdrawals. I personally have some Bitcoin (BTC) and Ethereum (ETH) which I have been staking on Hodlnaut. Fortunately, thanks to proper portfolio size, the loss did not affect me too much.
What’s Next? How Can We Invest Safely In Crypto?
The number one lesson here is: Not your keys, not your crypto.
Store your crypto offline. This can be done by investing in a cold wallet.
A cold wallet allows you to store your crypto offline. 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 looks like 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.
Emotional Management
Crypto is a highly volatile asset class. Similar to getting on a rollercoaster, you have to be prepared for the steep drops that make you feel like you have your heart in your mouth.
Breathing is the easiest and most instrumental part of the autonomic nervous system to control and navigate. The way you breathe strongly affects the chemical and physiological activities in your body.
When faced with a 70% to 80% paper loss, it is easy to start panicking. One way to calm you down during this volatile ride is through deep breathing, more specifically the Wim Hof Method.
Try it out for yourself here!
Conclusion
If there’s anything to be taken away from the recent events in the crypto world, here’s the most important one:
Transfer your crypto to an offline wallet
Seeing a 70 to 80% drawdown beats a 100% permanent loss of capital (when the crypto platform goes under).