Why You Won’t Make Money in Cryptocurrency and How You Can Turn it Around. Five Lessons You Can Learn Right Now.
Debt and Investment lessons we all seem to learn the hard way.
When I first started buying into cryptocurrency, I was lucky. I’d been hearing about the hype for years, but always thought it was too hard to get into, it took too much money, the gatekeepers would keep me out — I’m not welcome.
Then one day I actually tried. And I found it was very possible. And I could take part in the market with as much legitimacy as any crazy guy on YouTube.
I’m not the kind of person with an IRA and a stock broker on call. I’m barely the kind of guy with more than $25 in a savings account. I grew up poor. Upward momentum for us meant lower middle class. So I was never in a place to “grow my investments.” For most of my life, I’ve been in a place to “grow my debt.”
But I did manage to get myself through college with a small scholarship. I did manage to land a series of decent jobs, even build myself a half-way decent career. I’ve since established myself firmly within the desperately shrinking ranks of the middle middle-class. Yay.
But I wanted something more for my family. I wanted to pull myself out of the vortex of debt that pulls so many of us closer to the bottom. How many of us stare into the eye of that vortex every day, waiting for it to suck us down into financial oblivion? Where will we live? we ask ourselves. How will we eat? How in the hell am I going to pay for preschool?
Debt comes in many forms. Student loans, housing, medical, groceries, the damn plumber, the list goes on and on. Not all of us sunk our future buying Escalades and vacations in Mexico.
When you have a good job, but you’re still relying on the local food bank to feed your family, you know you need to make serious changes.
You have got to pay your bills on time. You have got to pay your taxes. If you can manage these, then there’s still hope. After years of struggling to bring my credit score up by just another five points, I finally found a company that would take a risk on me and help with a low(er) interest rate debt consolidation loan. That was the key to a new way of life.
If you’re in a similar situation, I suggest checking out www.payoff.com. They really seem to be a different kind of loan company, and were the only company out of literally dozens willing to take a risk on me for less than 30% interest. I found them by chance, and it was probably the luckiest break of my life. I’m not affiliated with them in any way, they just helped me out.
Anyway, on to the actual subject of this article.
I decided to put my little stash of birthday and Christmas cash into cryptocurrency. It wasn’t much. It was a quantity you might consider “dozens of dollars.” Here’s where I was lucky. The market was going up.
I saw my little dollars grow. In a state of euphoria, I added to the stash. I skipped lunches, I held back at the grocery store. I did what I could to save $50 this pay period, $60 the next. My little cryptocurrency stash grew into the “hundreds of dollars.”
I thought well heck, maybe I could save up a down payment on a new car this way. Maybe I don’t have to drive this sixteen year old Corolla the rest of my life. I could maybe get a newer used Corolla. Life was looking up.
At this time, I was just buying the big three cryptocurrencies: Bitcoin, Etherium, and Litecoin. Things were going great. Then I had the bright idea to act like a day trader.
I’ll sell high and buy low! That’s what people do isn’t it?
That’s what some people do. Turns out they know what they’re doing. Turns out I didn’t know what I was doing.
The market had a nice uptick. I decided it was surely going down next. I didn’t know anything about technical analysis, how to read charts, what a trader looks for before making a move. I just went on gut feeling.
Lesson one: Don’t go by what your gut says. Your gut is for digesting lunch. Use your brain to made financial decisions. Use knowledge and analysis.
The market dropped by a couple of percent. I sold everything — paying the fees to do so. The market shot back up. It blew past the point where I sold. I thought, Well huh, it’ll drop. I just know it. My gut told me so.
Think it dropped? It did not. I lost out on hundreds of dollars worth of gains over the next several weeks because I refused to buy back in, fearing it would drop the second I did.
Lesson two: If you don’t know what you’re doing and the market is generally going up, just hold. Even through the dips. Just hang on and ride it out.
In the world of cryptocurrency, you hodl. That’s not a typo. Some people say it means Hold on for Dear Life. It doesn’t really mean that. Years ago, some guy in a crypto forum mistyped the word “hold” and it became a meme. Now it’s a thing. But the phrase Hold on for Dear Life is still appropriate. Just hold on. Diamond hands — weak hands sell while diamond hands hold.
So buying and selling didn’t work. Eventually I did buy back in. Obviously it dipped right after and I was down. The market went up a billion percent, but I managed to lose money. What should I try now?
I’ll flip coins! I’ll ride up one massive pump, then switch to another coin and ride it up too. Surely that’s the secret to success. Massive gains! Yay!
I tried it. It didn’t work. I sold one coin after it went up, and switched to another smaller coin that seemed like it was about to pump ever higher. How did I know it was going to pump? It had been pumping already. By the time I moved my money, it had peaked and I bought in just too late.
It dropped, and there went my gains from the previous coin. I had FOMOd in. My Fear of Missing Out on the gains of that other coin caused me to buy in without thinking. Again, I followed my gut. Stupid gut.
Lesson Three: Don’t buy in after a coin has already gone up. Be patient, buy the dip, as they say. It might take several weeks or more, but you’ve just got to stay strong. Wait for your opportunities to buy, then pounce.
So now what? I hear there’s tiny new coins I could buy. 1,000 X! To the moon! Let’s go go go!
I moved my money around and randomly bought smaller coins that my gut told me would go up next. If you don’t know what you’re doing, this is a great way to take your money to $0. I was lucky enough not to go to zero, but that’s just because the market is up. What I didn’t do was make money.
Lesson Four: Don’t buy random coins. Know where you’re putting your money. Do some research. Find something you’d be proud to tell your family about. Don’t just buy a coin, buy into its mission. Buy fundamentals. This takes some work. Do your research.
So after all this, what did I do? I educated myself. I found news sources like www.coindesk.com. I watched YouTube videos on technical analysis, how to read a Japanese candle chart. I stopped using charts that are just a squiggly line. They tell you nothing but what has already happened.
Lesson Five: Educate yourself. Don’t operate blind. Be smart. Use your brain. Do research and think about what your next move will be well before you make it. Create a strategy based on your knowledge. Investment is inherently risky. The only way to reduce that risk is to make educated decisions.
So that’s where I am now. I buy coins I research and decide have good fundamental reasons to increase in value. I keep my portfolio relatively small and manageable. I hold the coins I have unless I have a very good reason not to. I buy in when there’s been a good market correction, or after a coin has been moving sideways and is signaling a new move up.
My little stash is now in the “thousands of dollars.” Not really that much yet, but now I’m thinking I’ll maybe not just have a down payment for a car, but I’ll be out of the rest of my debt soon. Maybe I have a future after all.
But you know what? The market doesn’t owe anyone anything. It could all change tomorrow. Again, I have to keep my head on and plan for that eventuality. Always have an exit strategy in mind. Always use research and knowledge. Don’t trust your gut, and don’t let your emotions drive your decisions.
Good luck, and I wish you financial success.
JW Womack
