This one gets my goat every time. I love emerging tech and investment options ( honestly was born in the wrong century) but being in the “innovators or early adopters” cohort can come at a price. When tech goes mainstream, it can go two ways: really good or really bad. In the case of Crypto, it hit the wall over the last year as more laypersons learned about it.
Theoretically, gaining knowledge of other currencies outside the main TraFi system we’ve been using so long is good. It means there may be change coming but it also opens a whole can of worms for people who understand very little to stick their noses in it and mess it up/get burned. WallStreetBets tends to come after my YOLO picks a few months or years behind and is a top signal to exit (yes, I troll their Reddit in attempts to curtail loss when they get their hands on my picks). While it was great for a hot 24 hours and they turned my $10 into $1300, I ultimately exited with the profit because all good things must eventually end.
If I could go back and have a do over, I’d have gotten into bitcoin back in 2012/2013 when I’d considered it but was too poor. I would have figured it out if I knew what I knew now. Same for twinky flipping across the boarder. Some of those boxes were going for $3000+ on Craigslist.
Instead, It took me until 2020 to get into mining which moved into just investing with a DeFi platform that returned a pretty 8% when the markets were down. Was only in about 8 months before pulling out because we could all see the crypto crash looming. It’s better to give up some potential profit and move into a more stable investment TraFi strategy (like dividend stuffing which I’ll cover soon) than risk it all.
One of the biggest pitfalls of crypto investing is the extreme volatility of the market. Cryptocurrencies are usually NOT backed by tangible assets, and their value is entirely based on supply and demand. Even the Stable coins that are supposed to be pegged 1:1 against the US Dollar are not fully 100% stable – don’t let the name fool you. It just takes one slip of the algorithm to mess up the pricing. A run is possible with these as we saw with USD-C and USD-D. This means that their prices can fluctuate wildly in short periods, leading to significant losses for investors who don’t have a clear understanding of the market.
Emotions play a significant role, especially during market crashes. People tend get caught up in the hype of the market and invest more than they can afford to lose, hoping to make a quick profit. However, when the market crashes, fear and panic set in, and these investors may be tempted to sell their assets at a loss to minimize their losses. This cycle of fear and panic can lead to even more significant losses, and it’s essential to approach investing with a clear and rational mindset. Check out how to move past emotions to make stable decisions for your financial future.
Crypto exchanges are also unregulated and can be vulnerable to hacking, scams, and other security breaches. This means that investors’ funds are not always safe, and there is a risk of losing everything in the event of a security breach. Take for example the Coinbase leak which is still impacting effected users.
If you’ve been considering crypto investing, you owe it to yourself to educate beyond the basics. Personally, I will not touch it any time soon. Taking risks is part of life but thinking them through and having solid contingency plans is an important part of the process. Plus there are better returns out there!
