Hodling on to your crypto underwater always feels comfier than realizing a loss.
Feeling confused about what decision to make?
Well, both of them are incorrect.
Here are 10 CRYPTO BIASES to avoid making such mistakes again:
- 'WAGMI' BIAS:
- 'I AM ALWAYS RIGHT' BIAS:
- 'ONE BIG WIN' BIAS:
- 'BEGINNER' BIAS:
- 'COMMUNITY' BIAS:
- UNDERWATER BIAS:
- INFLUENCER BIAS:
- RELATIVE PRICE BIAS:
- 'I LIKE THE COIN' BIAS:
- ALTERNATIVE PATH BIAS:
You are constantly bombarded with success stories from the people who 'made' it in crypto.
People share their screenshots and convince you that you can be rich too!
As a result, you severely overestimate your odds of success in that domain.
When I made my first 1500$ I felt euphoric.
I was sure that I was going to be a millionaire very soon.
No surprise, markets punished me.
I realized that there are so many smart people competing against me in this field.
And that it takes time to get some SKIN IN THE GAME.
Unsuccessful people don't share their stories online.
@Forbes doesn't write articles on people who failed at their craft b/c the reality is there are so many of them. The failure stories are everywhere but buried deep, making them invisible to us.
REMEDY: Dig into a lot of people's blunders and failures to estimate your RATIONAL ODDS OF SUCCESS.
80% of traders lose money, so the odds of success is only 2 out of 10 tries.
Be ready to put in the RELATIVE work for YOUR estimated odds of success in that respective field.
You tend to hold on to your 'PRIOR CONCLUSIONS' regardless of any credible opposite views.
You think that you are right and others are wrong. It's of no surprise that $BTC maxi's fall for this bias.
They strongly hold on to their beliefs that $BTC solves everything, and tend to FILTER out any new information that contradicts their existing views. They are not ready to accept any new suggestions or to do changes to make $BTC more usable. Ex: Smart contracts.
REMEDY: Always be curious in finding out DISCONFIRMING evidence for your favorite protocol.
But our mind FORGETS it after a short time b/c of the abundance of information. So write down the contradicting views and FORCE yourself to think whether it is a valid argument or not.
It is the tendency for extreme events to REGRESS to the average value. Something very successful will REGRESS TO THE MEAN by performing bad the next time. The events will always fluctuate around a 'mean value'.
But you can only avoid this over a long period of time, as you accumulate wins and losses. The more extreme the event is- You found a 100x potential
The more you will regress the next time- Your odds of finding the same potential is very low the next time.
REMEDY: Look out for the overconfidence in you. The moment you make a 100x is when you have to be very careful in protecting that gains.
If you want the regression to act in your favor, you have to practice HUMILITY & RISK MANAGEMENT.
HUMILITY: Know that you are more likely to be wrong the next time. Be humble enough to accept failures despite your big wins. Have the patience to win and regress over a long period of time in order for COMPOUNDING to do its magic.
RISK MANAGEMENT: All of your 100x gains can be wiped out in 1 bet.
Knowing this, you continually bet only small amounts regardless of the protocol you are investing in.
Observe how @thedefiedge does not bet all of the gains in one protocol:
Whenever you are new to a sector in crypto, you are susceptible to beginner's luck. You get lucky a couple of times & it deludes you into thinking that you have mastered it.
You are convinced that you are a pro and you increase your stakes in the game.
Little did you know that when the probabilities REGRESS TO THE MEAN, you are going to get hurt.
This is where people quit crypto, thinking that this is all a Ponzi. The reality is that you must continue to play the game until the probabilities are in your favor.
REMEDY: The way to spot the difference b/w LUCK & SKILL is to see whether you are profitable over a period of time. Nailing one good decision is easy, nailing a couple of good decisions is hard. But you can make bad decisions and still be profitable over time.
Example: Out of 9 trades, 8 were losses and 1 was a win. Take a look at the remaining capital.T hat is the power of RISK MANAGEMENT.
Don't risk too much of your GAINS in the beginning. Have the patience to analyze whether you have an edge over others in the long run.
UNTIL THEN SMALL BETS ARE ALLOWED.
You feel you are behaving correctly when you act the same as other people. The more people who follow a certain idea, the better you deem the idea to be. This strategy is great for a forager b/c he has to think the same as his herd or he'd be left out.
If a forager needs food and wants to learn how to hunt he has to abide by the HERD. But in the modern economy, it acts against us.
So many people out there are in pursuit of building a so-called 'strong' community by using subtle manipulative practices.
REMEDY: You should always be cautious of the data that you absorb from the internet.
If you see an emoji next to their Twitter name that's when you should consider their opinions with a grain of salt.
CHOOSE who you follow and what ideas you inculcate in yourself.
Only accept valid & rational opinions, don't fall for biased views such as: 'X coin is the best in the world'' X solves everything' These ideas are not information-dense. They have no credible value in them. Imagine the people who strongly believed in YAHOO & BLACKBERRY!
This is common in crypto traders who don't use a stop loss.
You too would have experienced a great deal of optimism when your coins were underwater(below your entry price).
You have this unlimited HOPE that your coin will go up in price in the near future.
Influencers delude with more CONFIRMATION BIAS that you are right, and it's wise to have diamond hands. So you keep hodling the coin only to see it go to zero. You would have been left with some DRY POWDER if you would have CUT your losses a long time ago. But you didn't.
REMEDY: Always plan your EXIT strategy before your ENTRY. Answer the important questions such as why, when & how much. Keep it written and ready, to act immediately during uncertainties. Don't just sit and hope that the market is going to act in your favor.
Don't listen to anyone who gives you REASONS that it will appreciate in price, they are just using you as EXIT LIQUIDITY.
If your prior listed reasons to SELL are satisfied, then it's time to sell the asset. Take the L.
Congrats, you managed your risk earlier & have dry powder.
You value the views and opinions of TikTok influencers more than the principles written in the whitepaper. TikTok and YouTube have essentially made us lazy to a point where we want everything to be spoon-fed. Don't know something? YouTube it!
But crypto markets are a ZERO-SUM GAME.
One has to lose in order for the other to win.
So it's clearly intuitive for people in power to manipulate you so that they can win.
This is the cruelest PVP game I have ever seen!
REMEDY: If you don't want to get manipulated by the 'powerful' people then learn HOW TO THINK FOR YOURSELF. Start reading whitepapers and come up with your own arguments. Fundamentals & principles>>>>Opinions & Views Share your views with open-minded people online. Be humble.
Be very careful of who you follow online.
Either they are helping you not to become a exit liquidity or they are using you as exit liquidity!
Bonus: Here's a beautiful thread by @TaschaLabs on how to think:
This comes in when you are deluded by people posting memes about BTFD. You quickly go to TradingView and measure the drawdown from the top. You say to yourself it's already down 40% from the top, so it's improbable for a DOWN ONLY SZN.
If you don't have a good RISK TOLERANCE, then you are going to panic sell as the market bleeds more. Your intentions matter when you go into the market. The intention here is it's already down, so it has to go up from here. But what if it doesn't? Haha, there's no way right!
REMEDY: Humans are very bad at absolute judgments, we always judge something relative to something else. Just b/c the price is down 50%, it's not a good time to invest. That shouldn't be your primary reason that you are going into the market.
Have an EDGE when compared to others.
Some are good at reading the charts.
Some have a strong fundamental reason to continually invest every month.
People like @thedefiedge have a high-risk TOLERANCE :
Just b/c you like a coin or founder doesn't mean that it is going to be successful. An Indian friend of mine asked me 'Are there any coins that have Indian founders?' I was startled by the fact that he made his investment decision based on a country.
REMEDY: The more you like someone or something, the more you are inclined to invest your time, money, and energy into it. Always judge a product independent of your LIKES. See if you are buying the coin b/c your favorite influencer has it in their portfolio.
Don't go and invest in $DOGE b/c you like @elonmusk or dogs.
That is not even closely related to the development or success of the protocol. (except if @elonmusk decides to!)
Be constantly SELF-AWARE of your likes & the influence they have on you.
Our minds are very bad at holding multiple scenarios at once. It's easy to see only one side of the coin. Alternative paths are all the outcomes that could have happened but did not.
Just b/c you made a 100x on $DOGE by going ALL IN with @elonmusk's tweet doesn't mean that you have made a good decision. You should never risk that has a bad alternative path(ruins your financial stability). Alternative paths are invisible, so you contemplate them rarely.
REMEDY: To a rational mind, 10M $ that comes through a huge risk should be worthless .Alternative paths>>>>>>> Profits. Always focus on the downside & the maximum hurt it can cause in your life. YOU NEED TO SURVIVE. KEEP THAT IN MIND.
Example: A lot of people get scammed in crypto, that's b/c they fail to see the alternate paths.
They only focus on GAINS and they give their SEED PHRASE to the scammer.
Only if they knew about the alternative path!
NEVER GIVE YOUR SEED PHRASE. NEVER.
Some people go ALL IN in a bear market, b/c they want to be financially free. ALTERNATIVE PATH: They don't have an emergency fund during tough times to protect their family. Hence they panic sell in the future to fund their expenses. NEVER GO ALL IN!
Thank you for spending your valuable time here. Please play this game wisely, there are some cruel PVP players competing out there. (including me)Kindness is a POSITIVE SUM GAME-WAGMI Market is a ZERO SUM GAME-NAGMI