10 Insider Crypto Secrets to get an Edge!
I consider myself a graduate of Crypto crash from the class of 2022. 1 year in crypto is like 7 years anywhere else (interstellar). I hope you can learn from my experiences..
🚨Disclaimer: This is not investment advice. I am not an investment advisor. This information is meant to be for educational & entertainment purposes - DYOR(Do Your Own Research).
Let’s dive into the 10 insider tips in full Crypto Humor using Memes to help us
1. Crypto is highly correlated i.e. things move together
External Correlation - BTC moves with SPX, Bond prices, inverse to Dollar index. When crypto was a small asset class, it could exist in a vacuum from the rest of the world. That has changed with an inflow of hedgefunds, family offices and other financially minded players. They view this as a high-risk asset, which ties to whether the market is “Risk-on” / “Risk-off”. So when the US Dollar was pumping and US equities, Tech stock were going down in a “risk-off mindset”, it was hard to think that Crypto would be spared from this carnage. Crypto is now tied to Powell and his view on Fed monetary policy tightening.
Internal Correlation - All coins move with BTC - The 15k to 20k tokens that exist in crypto (half of which are down 90-98%) move broadly in the same direction (up or down) as Bitcoin(BTC). Till this correlation lasts, alt coins are simply a higher beta play to BTC.
Action: Watch the broader markets for signs of a reversal before jumping back in and don’t hope to catch the bottom.
2. No one really knows the true price of any crypto - its basic Demand and Supply at its best.
Should BTC be worth $1, $1k, $20k, $70k, $100k??? Depending on who you speak to, there is a justified answer for each of these valuations.
But one thing is true - when more people want something and are standing in line to buy it, the prices keep going up. Why is that - we get a double kicker - 1. those who hold it don’t want to sell it anticipating higher prices, 2. new entrants want to buy it, hoping it will go up more in future. However, there is a pivotal moment when this price auction process reverses, and suddenly, the first set of cracks appears. The few sellers who are in the market for the first time can’t find buyers willing to pay the current price(OMG, blood is on the streets). Now buyers step back and wait for lower prices. Damn, prices are cracking. Sellers hoping for higher prices start to panic seeing prices falling, they flood the market with supply, prices drop, and more buyers stay on the sidelines waiting to get more discounted prices. This can continue until there is true capitulation - with a bunch of bear market rallies to suck in bottom fishers along the way!
Its amazing - so simple and obvious - but most of us miss seeing it for what it is.
Action: When your taxi driver and barber are talking about crypto, and it is on the news, sell everything. When your friends hate you for talking about crypto coz they finally could not deal with the pain and sold everything - it might be a good time to re-enter.
3. Liquidity is King - If you don’t know what it is, you are the liquidity.
Market Liquidity - Having explained the market auction across buyers and sellers leads us to the core concept of Liquidity or money. When it is injected into a market in the form of buyers bringing new cash to buy up assets, it leads to an increase in prices. It creates a strong move up, and when that is taken out of the market (and cash is put under the mattress), it sucks out the life & blood from the market - creating the vicious downward spiral of collapsing prices.
Action: Watch this closely to understand when the party is starting and when it is getting over - coz as the liquidity drains out, prices will start to fold
Personal Liquidity - Reflects how much cash you have available to capitalize on opportunities when they emerge (when prices drop). If you are fully invested and have little cash ready to re-deploy into the market, you will miss out on many opportunities.
Action: More money is made by waiting on the sidelines for the right time. Don’t try to time the tops. Sell to lock in profits and keep cash available to be able to redeploy when opportunities emerge.
Exit Liquidity is covered in the Shillers/Scammers section below
4. Make a plan & Stick to it
Let’s say I set a goal to climb Mt Everest. Then 2 years go by, and one night as I am finishing my 2nd bottle of wine, I wonder why I still did not make it to Mt Everest.. ehhh - obviously - no plan, no progress tracking, no honest assessment of where you are going wrong and what you need to improve. Climbing Mt Everest is a dream and it will stay that way unless I really put in the hard work to make it happen. No plan, No Prep, No training - NGMI
Why do we think making it in Crypto or investing will be any different?
Action: Spend some time to think about your goals and develop an action plan to work on it - ideally with an accountability partner or someone you can trust
5. Beware of Shillers & Scammers
Twitter is the hub of crypto. There are people who have built a huge following on Twitter and Youtube, touting themselves as experts who have “made it” and are talking about projects that are the next 100x Gems.
Let’s follow a typical cycle. The price of a token is ranging around $0.8 to $1. No one is talking about it or buying much of it. A few crypto influencers start talking about this as the next biggest coin with a 100x potential. As they tweet, price already starts to move up from $1 to $2 to $3 to $4.. People are FOMOing in to buy this next best Altcoin. “ABC” is such a nice guy to share this amazing thing with all his followers.
See anything wrong with this? Lots → The influencers loaded up on a big bag on this for around $0.7 based on some inside sales from the project team.. Shared with a few of their close friends who bought it for around $0.8 to $1. Then released the info to their wider audience who pumped up the price with their sudden buying. What happened next, the influencers and the project team started selling out their bags around the $3 to $4 range - effectively dumping on their followers (late buyers). As the buzz settles, given no real catalyst for the price to have risen, its slowly grinds down from $4 to $1 and then keeps dropping to $0.2.. Buyers on the top -EXIT Liqduity for the shillers!
Many examples of this around
6. Learn to take profit and manage your greed!
This can be a hard one. Sell to early and watch it going up as “every one” is making profit. Sell to late and see it keep dropping in price!
Action - When you see life-changing money or profits in front of you, take it and stash the money away. Its not your unrealized gains but realized gains that matter
7. Investing is not about buying lottery tickets
Looking for tips and random project names from influencers without any research or understanding of the nature of the business, founders, roadmap, and execution capability is like buying a lottery ticket and hoping that you win.
Stories like this create a negative feedback loop in our heads to promote taking unmanaged risk.
8. Metaverse is not around the corner - don’t FOMO in on projects at any price!
Q3/Q4 2021 saw a huge surge in metaverse projects with all the buzz around Facebook → Meta. While I don’t doubt the potential of what Metaverse projects or Gaming crypto could create - for now, that pipe dream is quite far away. Most don’t even have a working product, let alone think of an active user base and recurring revenue to generate cash flow.
I have interacted with founders who were just interested in a cash grab and looking at making something really basic and dumping on their community.
Valuations went crazy and since then have crashed and burned. There will be a next wave which will catch the imagination of people - but be careful and practice appropriate portfolio diversification & risk management.
9. When you hear yourself “Hoping” for something to go up - it’s already game over!!
We get emotionally tied to outcomes.$5k investment goes to $10k -100% profit and we don’t take profit. Then as it slips to $9k we vow to sell it next time it comes to $10k. Keeps sliding well past our entry price - with a few bounces along the way. So now we have a profitable investment that is now loss making $4k value and we hodl it down all the way $2k wondering why we did not sell at $8k or $9k - sounds familiar.
When the direction changes (ie. it starts to go down) sell it and get out - it’s that simple.
Action: Your goal is not risk avoidance but risk management: to mitigate risk and have a significant degree of control over the possibility and amount of loss. And when you learn to realize profit.
10. You need to stick around to make it to the next round
If this (Mad Max Fury) is what the world of crypto really is like, you need to grind it to get OG status and build your strength. If you took your beating and leave to come back in a few years - you are a tourist who might get it handed to them next time when you come back.
Action: Use this time to develop a game plan, build a network with those who are truly interested in the space, build a business, learn new skills and help the space move forward. You would be surprised how well-prepared you will be for the next wave.
Bonus Tips: Read till the end for my 2 bonus tips
Bonus 1: Buy the rumor, sell the event
If crypto is really driven by a lot of hype, most participants overestimate the impact of something happening on its price e.g. Ethereum Merge, New partnership deal, or new staking capabilities. Most actual events get priced in (or over priced) quite quickly when the new comes out. NFA - Best play is to buy it in the early days when there is rumor / news but don’t hold it past the actual event - definitely in a bear market.
Bonus 2: Most of crypto is a ponzi, spend time to find the real gems
Real wealth will be created if you can spend time doing research to find out which projects & teams are actually building and delivering new products & services. Stop treating it like buying a lottery ticket - put in the hard work to find the real gems. Have a few small well-research investments vs. a spray-and-pray approach.
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🚨Reminder of Disclaimer: This is not investment advice. I am not an investment advisor. This information is meant to be for educational & entertainment purposes - DYOR(Do Your Own Research). Please do your own research before you decide to invest your hard-earned money. If you are unsure seek help from a professional financial advisor who can understand the full breadth of your financial needs & commitments to advise you on what you should do.
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