The intelligent investors guide to cryptocurrency investment and trading : Part 2 - FOMO My friend, My enemy. Make fear of missing out, work for you

FOMO. Fear of missing out.
So I told you about my biggest early success which turned into a mistake. Now I'll tell you of my biggest early mistake which I turned into lots of little successes.
Bitcoin.
At the time I re-entered cryptocurrency scene I put $6.4k into ETH. The story of what happened there was told in part 1.
Well the other thing is I believed a bitcoin breakout was occurring. I watched it unfold right in front of my eyes.
Around mid May 2016 when I decided now is the time to get into cryptocurrency I thought; "lets not put all my eggs in one basket. ETH may not go up for whatever reason".
1 Bitcoin was $450 then.
It had been ages since I'd looked into buying cryptocurrency but I was serious. It took me a week to find a decent exchange to buy my ETH and BTC reliably from.
The price of bitcoin went up to $460 in that time.
I transferred my $12.8k fiat into said exchange, eager to buy my ETH and BTC in 50/50 proportions.
The damn transfer took almost 2 weeks to clear.
The price of bitcoin went up to $540 by the time the funds had arrived in the exchange.
I said to myself. "Nah, it's too expensive now. It's not going to go up further".
But it did.
Fear bit me. I placed a buy order at $580. Fear bit me again: I cancelled it immediately.
The price went up over the week.
FUCK. It's $685 now... I have to buy. It'll keep going up! But it's so expensive now I wont put too much in. 1 bitcoin bought.
1 week later on June 16th the price of bitcoin reached $760
It's going to break the $1200 high. I don't know why it's going up. Something about China and Brexit in the cryptopress. I don't fully understand it but I see a trend... It'll keep going.
I buy 7 more bitcoin. I relax and ignore the price for a few days.
I read some vague bitcoin 2016 price predictions going as high as $5000 - No reasons given but it gives me hope and makes me complacent.
June 20th, correction. Now worth $730.
SHIT. No hold. This is just a stall, it'll keep going up!
June 22nd: 1btc = $622.
Oh shit.
After several days deliberating I eventually sell cashing some my bitcoin back into fiat at a total $700 loss.
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FOMO. I hope this story demonstrates it nicely. This is the psychology of the uneducated trader. The guy who doesn't live by the minute staring at the charts. The lazy guy who doesn't learn about trader psychology, ignores the mainstream news cycle, has bad press sources and listens to endless noise without filtering it out to find out the real factors that drive price rises and falls.
The market is mostly irrational until you realise how rationale it is (i.e. you learn what factors make it tick).
Every subsequent lesson is used to address FOMO.
FOMO is a form of greed and when timed right and decisively can lead to great sudden gains.
However when FOMO is timed wrong and indecisively, hesitantly then it can lead to great losses.
Greed is good - it got you here. Greed is bad; it can ruin you.
You need enough greed to make the jump, and to make it early and fearlessly. That's how you make the most out of other people's FOMO.
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FOMO can be good... It can be bad
I have made 5 significant trades based off FOMO in my early days of trading. 3 of them went bad. 2 of them went good. Lets analyse them:
-NAVcoin-
-My friend told me about the NAV. I didn't really understand it. I read the website and whitepaper and felt unimpressed. The price was up though so I bought some anyway. I bought close to the peak price at 0.000097btc/NAV, held it a few days before it corrected to 0.000089btc/NAV. I should have sold it immediately.
It fell to 0.00004btc/NAV before I sold some. I'm still a bag holder believing some unlucky soul will someday pump this 'altcoin' to 0.0001btc/NAV at which point I will reduce my position.
To reiterate my disdain for NAV: Their website claims they were the world's first anonymous cryptocurrency at a time when XDN, Monero, Shadowcash, Boolberry and many other anon coins had been around for years. That sort of outright lie should be seen as an immediate red flag and anti-buy signal.
-Synereo AMP-
My friend who is pretty good at day trading altoins asked me about this during their second crowd sale when price was 0.00032 btc/AMP which I bought 0.24 btc of ($150 at the time).
Again I didn't really understand the technology or concept. I read the whitepaper, still didn't get it and I wasn't very impressed with what I'd read.
I ignored the fact that the tokens represented IOU's for a to be built product (with no alpha/beta).
I assumed that just because the developer had an association and working relationship with Vitalik Buterin (inventor of Ethereum) that the coin could be a good long term hold.
I was overdiversified at this point and I didn't have time to follow the AMP news cycle. The price eventually halved to 0.00016btc/AMP one day. I read the rumours of a fallout between the lead developer and CEO and instead of ignoring the real and probable possibility of that leading to a company breakdown (narcissists who air their dirty laundry so publicly are not fit to run a company unless it's into the ground).
I decided to stick to hopium and hold assuming a resolution would be reached and the team would keep working forward together.
I should have sold again when I read the transcripts of the arguments between Dor and Greg's skype and realised these guys had the psychology of little children and beyond blind hope I really didn't see a resolution was possible. Perhaps someday that AMP price would recover.
I capitulated and sold the AMP at 0.00004btc/AMP i.e. $30 or net loss of $120.
Can you see the mistakes I made there? All noob errors, assumptions and emotional hopium ignoring my wilful ignorance and lack of underlying belief. Thank god I hadn't bought more and placed FOMO money only in proportion to my belief in the project it was representing i.e. here I spent very little of my total capital pool in cryptocurrency.
-XAURUM-
My friend who is really good at pointing out shitcoins during FOMO asked me about this. It billed itself as, "the golden blockchain".
I read the whitepaper and went, "what the fuck, this doesn't make any sense, they talk about exchanging their coin for physical gold but don't explain where they get the gold from or how they can afford it." - It was the worst white paper I've ever read and sounded really scammy.
I buy some anyway thinking it will probably get pumped at some point, and maybe because the team are Eastern European that there is some EE language whitepaper somewhere that better explains how this coin can increase it's gold value over time. Once again I was hooked on hopium.
3 month later it loses 33% it's value and I sell all at a 33% loss. Again thank god I bought 0.15btc worth
-MONERO/XMR-
I got really lucky with this one.
I liked the idea of an anon coin and got in <24 hours of the announcement their currency would be endorsed and used by Alphabay and Oasis (darknet markets).
I could see the value of a truly anonymous currency in darknet market trading.
I held through the pump to the peak having bought a decent stack at $2 and $4 with ecstasy to see it reach $15 per XMR. This trade combined with my next cancelled out almost every loss I had incurred.
I figured I'd hold this for the long term. I downloaded the monero simplewallet as I heard of issues with their 3rd party wallets and was not happy leaving assets on a exchange if I did not have to.
It took me a 2 days to synchronise the network on first go. I hated using a command line interface and realised that the average DNM user would not use monero to transact with until an integrated GUI was released.
I had second thoughts when I realised that Darknet markets get taken down or 'disappear' (usually as an exit scam with all their customers money) all the time. Silk road may have built bitcoin's fiat base but even it went down after 3 years via the FBI. I resolved to take profit then at around $13 per XMR before the shit hit the proverbial fan.
During this time my XMR node crashed and I had to resync from scratch just to access my funds. From the point of transferring from exchange to wallet and back, my funds had been locked out for almost a week.
I wasn't going to spend 10 XMR to use their rumoured to be buggy on-line wallet either.
I finally sold a bunch at $11 and again at $8.80 not long before the Oasis Darknet market decided to exit scam with a bunch of their customers bitcoin and XMR and crash the price down to $4 again.
In hindsight holding it would have been fine. But going back to lesson 1; always make sure you sell to earn back your principle first; In cryptocurrency 100% plus return should always make you consider selling half your stack.
As the XMR trader sub once stickied: "making money in cryptocurrency is easy. Keeping it is the hard part".
-Shadowcash-
-Once again, I got really lucky. I was in the right place at the right time.
I noticed this one shooting up whilst looking at the charts and decided to buy a bunch. My entry was $0.70 per SDC. It went to $1.30
My only regret was not committing more bitcoin to it with my gut feeling especially when the trend chart was pointing out the obvious (a bloody rocket up in price).
I subsequently read about the Shadowcash project. Learnt about Umbra. Downloaded, used and really liked Umbra and decided that there is real potential for a fully anonymous, double escrow marketplace with private chat client that exists integrated to and is secured by it's own blockchain.
The Umbra client worked like a dream. It synched in <2 hours, transactions were almost instantaenous and the whole thing was very easy to use. It was easy to see how a marketplace platform could be integrated and very easy to see how this could become the de facto marketplace to replace traditional DNM models that existed on centralised servers (and were thus that much more vulnerable).
I bought more SDC (a lot more) at $1.30 and decided to hold and stake it.
I read more about the economic PoS model and SDC's supply dynamics and decided to hold even more.
I am very happy holding SDC to this day. The reasons why I will elucidate in further articles.
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Lessons:
When you are in the right place at the right time, commit fully.
As soon as other people say FOMO, it's already too late.
As soon as you feel FOMO lasting more than an hour it's too late.
You can lose BIG with FOMO so if you don't understand what you are buying and why, but merely following a chart then always buy small to minimise potential losses and maximise reasonable safe gains.
If you don't understand something or don't believe in it never blindly hold it after you've bought it regardless of whether you are selling at a loss, or a smaller gain than you desire. Sell those altcoins sooner rather than later to buy altcoins you do understand and believe in and you'll regret it way less further down the line.
There is always opportunity elsewhere or at another time if you are looking or willing to be patient.
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I no longer join FOMO rallies. I've seen them end too badly, suddenly and unless I know the coin well I often time entry too late. Most of the time you will too.
Yes you might get lucky but it's better to know when to buy a cryptocurrency coin early and why. It's far better to know what makes a cryptocurrency work; what gives it value for the long term; what makes it worth holding in spite of price corrections.
When Warren Buffett talks about buying something and holding it, never forget he also means buy it at it's intrinsic value or less. Once you've bought anything above it's intrinsic value (i.e. more than what it is truly worth), you are subject to risk of loss and the subsequent fears of loss with panic selling, anxiety, panic buying and missing out on golden opportunities being a consequence.
With this in mind the next lessons will deal with cryptocurrency valuations, price metrics and identifying coins of value, worth holding. We'll eventually talk about crypto strategies that allow you not to worry about screen checking the exchange every minute as well as one's that do.
By the end of this I hope you'll know enough to pursue any mix of trading/investor strategy you want with improved success!
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