How Not To Lose 5 Figures In Crypto

Back when I was in my polytechnic days, I started to dabble alot into crypto even before I bothered to look into traditional asset classes like stocks or ETFs. The only reason I could think of was that I was simply looking for a way to "earn" passive income fast__. (I know... I know...)

Because I was young, foolish and my fingers were itchy, I threw almost all of my savings into Bitcoin that was worth almost $40K just because there was a "dip" in the price.

This happened in December of 2017 and I didn’t know anything about crypto back then. All I knew was that I came across this article about an investor who invested $10k in Bitcoin early on and became a millionaire.

“Wah damn good sia! Since I have four times the amount, that means I’ll be a millionaire four times over!”
These were the thoughts that pondered in my mind repeatedly.

At that point, the idea seemed very promising to me because my judgement was clearly clouded by the optimissm that crypto gave me. I had failed to do my due diligence simply because I didn't bother to do any research and as a result, I wasn't prepared to handle the coming volatility.

This brings me to lesson #1:

Always (and I mean ALWAYS) do your due diligence and be prepared for the worst outcome before committing to your investments.

In Dec 2017, the price of Bitcoin reached around US$20k, and I was so blinded and happy with the short term gains. But as fast as it came, it went because in just a matter of a month from January to Febuary 2018, Bitcoin crashed more than 65%.

Feeling stressed and anxiety, I decided to pull out of my investments which marked a 70% loss in my portfolio.

With only $12k left, I somehow ventured into sports betting as it seemed like the fastest way for me to recoup my losses. Well, I have to say it was a roller coaster of emotions because each bet placed were worth over 4 figures large.

I remember once, I placed a huge 5 figure bet on Italy to qualify for the 2018 World Cup Qualifiers. At that point in time, Italy had lost the first leg 1-NIL to sweden. I convinced myself that it was my go big or go home moment, because there was no way that Italy - the 4x world cup champions wouldn't qualify for the World Cup. Especially since they have never failed to do so since 1958. Anyways long story short, you probably guessed but Italy failed to qualify for the world cup.

With no more money left, I had no choice but to call it quits...

Oh and one more thing, NEVER resort to gambling for a quick fix of your mistakes. Not only does it create a bad habit which can haunt you for life, your mental health may also take a toll.

This brings me to lesson #2:

Never invest more than you can afford to lose...

Ask yourself this question: If your investments took a 70% plunge today, will you be able to stomach the losses? Will you be able to stay convicted in your investments and be prepared to hold it for the long term amidst the fears and uncertainties?

If your answer is no, you probably aren't ready to invest in a substantial amount of your savings.

Instead, use a simplistic or proven approach like the dollar cost averaging method. What I love best about this method is that I do not have to care if the markets are crashing today, tomorrow or in the future. It really takes the emotions out of investing. Also, starting small with your investments might be the best way for you to take time gaining more knowledge and exposure before committing to larger investments.

Lastly, Lesson #3:

If it's too good to be true, it probably is...

Market rallys do happen but keep in mind that they never last forever. Crashes and bubbles do burst. Corrections are bound to happen from time to time.

(Which in fact is actually a healthy thing for the market)

Just because someone got lucky and made tons of gains in the short term, doesn't mean you will be able to replicate his/her success. Going all-in when the markets are at their all-time highs is a really risky thing to do especially if you don't know what you are doing.

Come to think about it, all the signs were there back in 2018. Like previous & many bubbles, people were basing their belief in cryptocurrency on their emotions and not intrinsic value. Additionally, there was the FOMO element, which only compounded things. Essentially, bitcoin became a bubble which burst, causing FOMO to turn into fear of losing, which caused the rapid plunge.

So think twice before investing in riskier asset classes and most definitely do your own research and homework. When in doubt, consult a professional before making big decisions with your money.

I hope this article will help you avoid the mistakes I made in the past and as always, stay safe & invest wisely!