This Is How YOU Are Going To Get “Rekt” (Wrecked) In The Cryptocurrency Markets (Don’t Do This!)

Standard disclaimer; this post is not financial advice or a recommendation to buy or sell. Trading cryptocurrencies exposes you to considerable risk of loss.

“If you see a bandwagon, it’s too late” – Sir James Goldsmith.

You are going to hate this post. You already hate it – and you haven’t even read it yet!

Why? Because it’s going to burst your cherished fantasies of how you thought you were going to get rich in a flash with almost zero effort.

And everyone hates that guy. The ruiner of dreams. The burster of bubbles. The “Fudster”.

As if it’s my fault you lost your ass…

So go ahead, do what you were going to do anyway; and then come back to this post when you lost $10,000, $20,000, $100,000 or whatever sizeable chunk of your hard-earned cash you decided to throw at some shitcoin or NFT that looked like it was going to go up to infinity and beyond – and take you with it.

Still here?

Here’s what’s going to happen to you (or already happened to you)….

You heard about “this cryptocurrency thing” and the “tales of conquest”; people who made vast, fast fortunes. Millions, billions. You went on Youtube and got overwhelmed with information overload. Wow, what a crazy rabbit hole! Insane!

But you hung in there and did some research. You found several coins that “look good” – they have some real-world utility plus an explanation of how they “are the future”. This, although it seems complex, just about makes sense to you – and sounds good. Really good. Next level good!

So you made a shortlist of these cryptos – and decided to go in on them. You buy some. Nothing too insane – just 25% of your portfolio. What’s the point in leaving it in a savings account where it will get 0.1% interest? The banks are robbing you! Don’t wait til it’s too late, they say. Do it now, they say. Seize the day, right?

You’re IN and you are checking the charts hourly! It goes up some, it goes down some. Oh, the emotions! Don’t check the charts continuously, they said. “It doesn’t matter”, you tell yourself. “How can I be losing money just by checking?” This is of course, totally logical!

By the next day, you are up 3% overall. Pretty sweet! This is great! Let’s say you are up $150.

You just made WAY more money in one day than you did leaving that money in your savings account for a year! [except that you didn’t make the money, because it’s still on the trading platform and not back in your savings account]. But my money is going to stop making money if I put it back in my savings account, obviously. So screw the banks! Screw the boss! Screw everyone!

You love this.

And you wonder what else is going on in the crypto-sphere…….

Looking at Coinmarketcap – there is a tab for “biggest gainers”. You click to sort the list and rank those at the top. And there’s this thing that you’ve never heard of…. that (holy shit!) has gone up 30% in the last 24 hours! Whoa! *click*

OMG, this new crypto is not only up 30% in 24 hours… it’s up over 100% in the last week! Wow! It’s like a freakin’ rocket! Look at that curve!! Look at that trading volume!! And it’s still only 0.0000001 cent per token! This thing really has room to move!

It’s blown your little 3% gains out of the water.

And it’s a new project! It could still go 1000x…

Ferrari. Country house. Tropical island. Telling your boss to shove it. Hot babes. Champagne.

Imagine how much I would be up if I had put my money on that. I could have put my money on that. I should put a bit of money on that. Look at it! It’s going to the moon!

And it’s all yours for the taking – about 4 clicks away…

So you put $500 on it – just $500 – cos you’re smart. Cautious. Wise. Deliberately not going too crazy. “What’s the big deal? It’s $500. It’s not as though I am going to lose a fortune.”

And you go to bed, contented, excited… dreaming of Ferraris and naked girls and French chateaux (or whatever)…

You check it the next morning. (As soon as you wake up – of course. You didn’t even have your coffee yet).

OMG IT’S UP 20%! SWEET!!!

You just made $100 bucks in your sleep! How cool is that?!

It’s definitely cool. But it’s not exactly a Ferrari in your pocket, is it…

Hmm. If I had put more on it, I would have made more. And my other coins I bought, oh yeah, I nearly forgot. Let’s check those.

Hmm. A few are up a couple of percent. But ohh… a few are down!! Oh no!! Well, shit…. I just lost $20 on those.

No biggie! But I should take that off those before it goes down any more – and put it on the one that’s going up. Lose $20 or gain $100? Duh!! Only an idiot would keep it on those LOSER coins!

Come to think of it; Ethereum is never going to go 1000x from here. It’s already “done its thing”. *watches some Youtube videos about Ethereum*. Hmm. The technology has some flaws, apparently. Some are saying it’s going to go up a few x more at best. And it might be superseded by newer, better technology. They say it’s still a good investment but… let’s be honest: I’m never gonna get a Ferrari with that… and that’s my target now. I know it’s possible and I want my piece of the action!

So I could sell my Ethereum and put that on my fast-moving coin, too. There. Done. That’s nice.

But still, not a Ferrari.

How can I get the Ferrari?

Easy! All I have to do is put enough *does some mental calculations* on the one that’s going all the way…

But let’s just be conservative. Let’s say my new super coin doesn’t go 1000x. Let’s say it only goes 100x. *does more calculations*.

Ok, so to get that Ferrari, plus have some change for bills, gas etc, I would need to put $15,000 into this one.

*checks savings account balance*

Yep, I can do it.

Fortune favors the bold, they say. He who dares, wins, they say. Risk and reward are correlated, they say.

Maybe I should stop being scared. Maybe I should go for my dreams instead of plodding through this boring life that never seems to change gear…

So you decide to go for it. You take a big, brave step. The step of dreams. The step of hope. The step of all the things you want, versus that garbage life of being told what to do by someone you don’t even like.

Bam! It’s done. You are IN! You put $15,000 on it.

You check the charts almost continuously. Every few minutes! Finally you sleep….

The next day. PING. You are AWAKE – awake like never before! You check your stack before your head leaves the pillow (on your cool new crypto price app).

OMG YES!!! It’s up another 10%!!!

You just made $1500….

That’s more than you have ever made in one day before! How cool is this??

That day, you’re on a cloud. A sparkling, cyber-futuristic cloud of dreams with digital laser beams refracting from it in iridescent patterns. You put your Ethereum t-shirt and your coolest shades on (you’re a cyberpunk badass now, so you need to look like a cyberpunk badass!)… and you hit the town. You order whatever you want off the menu. You can barely stop yourself from smirking as you walk past all the losers, still doing their shit jobs. That ain’t gonna be your future… but still, it’s not their fault that they don’t know…. and so you hold the door for them nicely, smiling (while on the inside thinking “seeya, suckers”!)

You’re so content in your perfect world of bright dreams and endorphins that you don’t check the prices for a whole hour.

But as soon as you get home, you check the charts.

Hmm, it’s definitely leveled off for a minute. Whoa. No way. It just turned red!

That’s ok. It does that. Things always fluctuate. That’s crypto!

No, it’s definitely dropping. Ok, this is a dip.

It’s just a dip. That’s all it is.

And you’ve done your Youtube homework, so you know what’s up! Ride the dip, they say. Don’t react. You have to hang in there – because if you sell, then you will miss out. Just hold tight… and pretty soon, it will come back up.

No, it’s dropping more now. Ok, this is a REAL dip! Something’s going on in the markets.

Still, got to hold on. No worries. I’m still comfortably up. It’s all good.

But you are still glued to the chart….

Suddenly, a big red bar appears out of nowhere. The price dumps. The chart lights up with a frenzy of orders. Wow, look at that volume of selling! Don’t sell, you fucking idiots! You are causing it to drop more!!

They sell. It drops more.

Hmm, maybe I should sell a bit, and take some profit. Yes I will do that.

So you sell 10% of your holdings.

But that’s what everyone else is doing, too. Which means it drops even harder.

I have to hang in. I have to ride out the dip. Master my emotions.

You hang in.

But that doesn’t stop it from dropping.

Ok, this is now officially insane.

But insanity doesn’t stop it from dropping either!

Crap, it’s turned negative. I am now losing money. This sucks! $50, $100, $200 down now!

If I sell now, I will have lost money! NEVER buy high and sell low. Never! I have to hold on! Diamond hands!

$500, $1000, $1500 down. Damn, it’s dropping like a stone! But I have to hang in. It’s just weak hands, panic selling. The diamond hands will hold on and it will come back up. If I sell now I will be a loser!

You are, of course, diamond hands. So you hold on.

But it keeps on going down…

Suddenly, from being a cyberpunk badass riding on a cloud, you are a cyberpunk badass holding a burning coal. And the longer you hold it, the deeper the burn. The pain intensifies. You have to hold on! But it’s starting to hurt now. Starting to really fucking hurt.

The pain and the loss are becoming unbearable.

Then a terrible thought hits you. It’s not going back up.

FUCK!!! You need to get out NOW – before you lose everything!

Now, now, NOW! Pain, pain, pain!!! Eject!!! Sell!!! Abort mission!!!

You sell.

You just lost $10,000.

What the hell just happened?

Take Away / What Can You Learn From This / Why Did This Happen?

The entire scenario that just happened to you is completely typical.

It’s called “emotional trading” – and it’s what newbies do.

Now of course, you had the emotion of wanting to make money and live your dreams. That’s the whole point of trading, right?

Yes, but as the saying goes, “hope is not a plan” and all of what you did was based on hope.

And you were a victim of the bandwagon effect, from start to finish.

You never truly had a strategy. A strategy is mathematical, not emotional! Remember that!

It was your emotions that brought you to the table – and it was those same emotions that got amplified at the table (because that is what the table does) and caused you to abandon your original trading idea. Your emotions caused you to recalibrate your target, which is what made you feel “fully justified” in abandoning your original target.

When you see a crypto that is blasting off like crazy – but doesn’t seem to solve any real-world problems – you might want to avoid that one.

It’s what’s called a pump and dump.

They will always be there, outperforming your chosen course of action, luring you like sirens onto the rocks..

If you see it blasting off, it means that lots of other people have noticed it blasting off, which causes FOMO (fear of missing out) and this emotion causes them to put some money on it, which causes it to go up. It also causes VISIBILITY. i.e. just like you saw it at the top of the daily gain rankings, which means even more people start to pile in… it might even hit the news, which means even more visibility, even stronger emotions and even more money piling in.

The cumulative effect of this is a snowball of irrational trading. This thing might be an absolute pile of shit in terms of real intrinsic value – like cypher punk NFTs, SHIBA INU coin or whatever other new “fad” people are having massive emotions about. But when the FOMO hits, rational perspective disappears in a puff of smoke.

The ONLY reason so many people buy those things is because they see the surge in price and think “I am going to miss out if I don’t get this”. Pure FOMO!

If you see a bandwagon, it’s too late…

By the time you heard about this thing, the early movers (or scammers, if it is deliberate market manipulation) have already made big money. Pretty soon, they are going to be pulling out. Yep, right after you got in! They went in at the outset at a level way beyond what you are trading at, made the millions, ejected… and their big selloffs cause the price to drop.

And then when the price drops, all the fools who bought in, start to think “it’s peaked! Time to pull out” and they cash in while they are ahead – which causes it to drop harder.

And then, all those other people who piled in, start panic selling, which causes it to drop like a stone.

There’s no longer any incentive whatsoever for anyone to buy this crap, and it will just fade away into obscurity.

Think I am exaggerating? Here’s a classic example of one of these from the past: Egretia Token (EGT).


(Source: https://coinmarketcap.com/currencies/egretia/)

Take a good look at this chart and let it sink in. This really happened. This is what a pump and dump looks like “after the fact”. 250x – all the way up – and then all the way back down again.

But when you first noticed your “Ferrari coin”, it was probably in this stage here:

Same coin, zoomed in on the peak growth phase… doing 250% gains in 10 days in 2019.

Looks familiar? Yep, that’s your 30%-in-one-day gainer you saw ripping its way up the Coinmarketcap top 100 – the one you put your life savings on!

If something is not coming back up, then diamond hands will not save you… If you really do have diamond hands (but no brains) you are still going to be holding this crap 3 years later when it is worth almost zero.

It never did have any real VALUE. It just had price action caused by FOMO. People saw it going wild and so they piled in.

This is how the majority of the world trades – especially now that the majority of the world has access to these markets.

People are only buying utterly ridiculous pixel “art” that looks like crap because they have stars in their eyes about making easy money. They will even tell themselves that it’s good art!

Its only real “value” is in people’s belief that it is going to go up in price. Once that belief is gone.. it is worthless. It doesn’t solve anyone’s problems – and so the price will reflect that. It will crash, and the further it crashes, the less faith people have in its value, which causes the price to drop even more.

Egretia token ain’t coming back. It’s a known pump and dump. Why would anyone bother buying it now?

It’s sad that crypto has now become synonymous with “taking your power back”; but for the majority of people will result in even more of their money falling out of their hands and going to big players and early movers who already know how this game works. Once again; “taking your power back” is a compelling narrative. But compelling narratives are emotional trading…

A great trader once said that when something hits the news, right there is the top of the market. Wise words. By the time your taxi driver and hairdresser are talking about “this new magic internet money”, the smart money has already taken their winnings and are pulling out.

Leaving the suckers holding the bag.

Another thing: That shitcoin you were thinking of buying. Who invented it? Oh really, they are anonymous huh?

You fucking better bet the people that created it remained anonymous!! Why do you think that is? Because when they dump their 30% of the total holdings of this coin and disappear off the map with YOUR MONEY, nobody will even know who to be mad at!

This is a space in which the nerds win. Can you write blockchain code? Can you do complex mathematical equations? Are you a trader with years of experience and a strong track record?

No?

Then you are going to get rekt.

If you assume that as a newbie you WILL get rekt, and that this is the “cost of your education”, and only put in a small amount, and control yourself absolutely, and not change your plans half way… then you will not be too far off course.

“Never put in more than you can afford to lose”.

And to cure the fear of missing out – remind yourself that there will ALWAYS be opportunities to make money – so long as you can provide some kind of value that people are willing to pay money for.

Remember the old saying: “Opportunity is missed by most people because it is dressed in overalls and looks like work.”

Crypto Knowledge Drop 10/2/21

Been bingeing on study of the blockchain space. Voraciously searching for and assimilating the best info, education, knowledge that I can.

Here’s a study list – basically a share of the some of the great resources I have found in the last few weeks. Not financial advice, not pumping anything, just sharing info that I believe is worth sharing. Soak it up and enjoy.

Trading Tutorials

Top 6 Cryptocurrency Trading Strategies – this is a really good trading primer going over many of the core concepts.

Market, Limit, & Stop Orders For Cryptocurrency

Averaging, Scaling And Laddering

What Is Proof Of Stake, Liquidity Pools And How To Stake Your Crypto Holdings

Explanation Of Grid Trading With A Bot on Pionex

Scott Melker on London Real, Aug 19th 2021. Scott is a trader who has been in the game a long time and had incredible success. Tons of insight in this interview.

Interesting Projects – Deep Dives / Analysis

Algorand

A Deep Dive Into IOTA

Coinmarketcap Deep Dives (202 Articles So Far)

Angle. “Angle will be the first decentralized, capital efficient and over-collateralized stablecoin protocol”.

Polkadot, Cosmos, Tezos most likely to follow in the footsteps of Solana

ALTCOINSMATIC, ENJ, WAVES: What this trio brings to your long-term portfolio

Leveraged Yield Farming On Solana | Francium Protocol Review

Qortal Blockchain Project: “A completely unique (written completely from scratch) blockchain-based infrastructure platform capable of eventually rebuilding the internet entirely, as well as establishing the framework for a worldwide economic system based on individual input for gaining of influence in the network.”

Interviews With Thought Leaders

Alex Mashinsky On London Real, Oct 1st 2021. Alex Mashinsky is the founder of Celsius Network and evidently a genius. Super inspiring.

Stani Kulechov On London Real, Sept 10th 2021. Stani is the brilliant founder of AAVE, a DeFi lending protocol that has had phenomenal success.

Ben Armstrong (BitBoy Crypto) on London Real Sept 21st 2021. Watch out for the part where he calls out the corrupt system.

Raoul Pal: Introduction To The Exponential Age:

This must-see video is something of a ‘cult classic’. Look at the rave reviews from the people whose minds were blown in the comments!

Raoul Pal Interview On Bankless:

Another brilliant interview – super smart interviewers asking sharp questions!

DeFi, Layer 1 Wars & the Supercycle | Predictions with Qiao Wang (Blockworks):
“The most important question to ask yourself if you want to know the future is where are the developers going.” Qiao goes into why developers are choosing Solana over Ethereum, Avalanche and many more things.

Michael Saylor interviewed by Tom Bilyeu, 10 Jun 2021:

Michael is a serial entrepreneur and tech innovator who has been in the game a long time. Another must see; he brings is engineering mindset into the space. Great stuff.

Crypto Market Cap Could Hit $40T In 5 Years (Sept 2021 Digital Asset Summit, NYC):

They ramble a bit but the notable takeaway here is that these 3 being interviewed are macro hedge fund capitalists whose investments are now predominantly or entirely focused now on digital assets / crypto. This gives you an indication of the current onboarding of “big money” into the space and their thoughts on the next 5 years. It’s still early days… The guys being interviewed are forward-thinking relative to “old school” trad investors, many of whom resist change or even still think crypto is some kind of hoax. Tearing into the FED and the way the public is getting screwed within 3 minutes; the devaluation of global fiat currency, gold, petrodollars… Mark Yusko firing on all cylinders.

Crypto Will More Than 30x | Dan Tapiero, 10T Holdings:

Dan Tapiero interviewed by Scott Melker. Fantastic stream of consciousness from Dan T.

Serum the Future of DeFi (FTX Official, 11 Aug 2020)

Crazy to think that this is over a year old. These are some heavy hitters in the space discussing the way things are going – CEOs of FTX, Solana, Genesis Block. These guys are creating the future.

More:

Decentralized Autonomous Organization (DAO) – wikipedia

Crypto Insights 9/27/21

Stream of consciousness thoughts and ideas. Enjoy.

1) Blockchain is the future. More than people even realize. This is a bigger technological revolution than the internet and is the DNA of an entire new ecosystem. The potential is beyond immense. But don’t take my word for it; learn how it works and contribute your ideas and your concerns, both of which have real value.

2) This is a space in which early movers are rewarded. It’s crazy to think that if I had put my first flush of money that I made from internet business into crypto in 2014, it would be worth hundreds of millions now. I simply didn’t know. There are still massive opportunities though – you just probably don’t know about them. SHIB went 2000x, briefly, in less than 2 months earlier this year (before settling back down at around 300x the level it was at in early 2021). By observing the exponential adoption rate of this technology and these ideas, we can interpret that there will be more (and bigger) opportunities to come – and overall we are still in the early phase. But you can’t be an early mover unless you are on the edge of the wave of knowledge and understanding how this all works.

3) This is a space in which knowledge and ideas essentially become a form of capital. We are seeing capital migrating towards mindshare and out of other structures. Study and knowledge will become prime drivers of value – as they well should!

4) In the new token ecosystem, money can be whatever you want it to be. Literally and directly. The boundary between tangible and intangible assets is removed. Anything can be “tokenized” so we have the incredible opportunity to attach authenticated monetary value directly to intrinsic value, emotional value and even to ideas – rather than to “fiat currency”; which by monetizing one thing (gold, bills, whatever) effectively demonetizes all other things and people and excludes them from participation, thus creating an “unfair” and centralized architecture of power. That may have gotten us to where we are today, but it’s not unreasonable to say that it’s obsolete. With NFTs and “memecoin” tokens, marketplace value is driven by the collective perception of value alone – and the size of the marketplace is dictated directly BY THE PEOPLE participating in the marketplace, rather than by an authoritarian structure or body. This is the essence of decentralization and it informs and ennobles autonomy, participation and innovation. Big stuff!

5) Growth is exponential and moves in cycles.

6) Volatility will be immense for the foreseeable future. Why be scared of that? Again, knowledge is power and helps to eliminate ‘bright shiny object syndrome’ and differentiate projects that have real value from those that don’t.

7) Scams are rife, so do your due diligence. It certainly is the wild west – but that is not necessarily a bad thing. But for God’s sake. If someone – anyone – asks you to send them some crypto and they will send double back… it’s a scam. If someone DM’s you out of the blue claiming to be an admin from a platform, asking for information, passwords, etc – it’s almost certainly a scam. If you see a video on Youtube purporting to be from Cardano, click the channel icon to see if it is the real channel or an impersonator. In general, anything that offers you a large gift, but requires something from you first – personal information, money, etc – is a scam. My wish is that the regulators would focus their energy on catching scammers and into educating the public about scams to help them avoid them; rather than attempting to decide whether or not something “is a security”. Let’s hope they do that.

8) Blockchain is a new system of governance. This is not just a fancy phrase but has deep meaning which requires a full understanding. This understanding tends to take a while to sink in and you will ‘get it’ in stages; at least, that’s what happened to me.

The old structures are toast. Literally toast. Why do you think China is banning cryptocurrency? It’s because they are shit scared, they know it’s going to eat them for breakfast. I like to think it’s too late and that they cannot stop the future… but they will try – and they are dastardly. We cannot afford to underestimate the dangerous, bladed tail of dictatorship as it convulses in its death throes. Same goes with all the legacy structures but it’s starting to look as though blockchain literally undoes and eradicates them. It creates the potential for participation in power that is possibly unbreakable; and flips the script on a macro level from a top down power hierarchy into one where if people opt out, the system loses value – which precipitates the creation of consensus structures and the dismantling of elitism. This is what they are scared of.
I do think that by moving against it they are only hurting themselves. As we saw with mining; which simply made all the miners go elsewhere. China didn’t “ban crypto”… China banned themselves. Fucking stupid, but quite nice in a way: Let the corrupt old structures exclude themselves from the new world and fizzle out in their miserable little redundant shell. Poetic justice! Although I feel bad for the Chinese public, if you can even call them a public at this point… but things have huge potential to turn around.
So it will be interesting to see what happens as authoritarian structures attempt to muscle in and take over, which is what they are doing right now; attempting to recreate the only thing they know, which is systems of enforced participation rather than those of voluntary participation.. that’s exactly what is at stake and I like to think that the technology itself is robust at its core and incorruptible due to its nature and essence. What a fascinating point in evolution where technology and ethics may be able to merge for the first time. It makes sense when viewed from a macro level: Entropic structures have decay at their heart and are therefore ultimately doomed to fail. Once a synergistic structure has been birthed, it is logical that it will disassemble the old, by its nature. “You can’t keep ’em down the farm when they’ve seen gay Paris…”

9) Distributed architecture creates a new form of identity and a new type of permanent record – which has potential benefits that have barely even begun to be envisaged.

10) The pace of growth and of potential gain is off the scale of anything seen before. We are seeing billionaires created in timescales measuring months rather than decades! This exponential acceleration will only continue.

Fasten your seatbelt and prepare for hyperspace… 🙂

I will be posting a “knowledge drop” shortly with a study list of the good things I have been feasting on.

(Note of course, none of this is financial advice or a buy/sell recommendation.)