12 Months on Steem and 15 Months into Crypto. What have I learned?

Hello everyone! Last Christmas, I wrote my first post on Steem. Time flew by and one year has past. Like many others, I started out on Steem hoping to earn some money. At that time, Steem was the first and only social blogging platform that rewarded content creation. I still remembered 1 STEEM was about $3.20 back then and getting a 1 STEEM reward on your post was pretty decent.

My journey on Steem is also a representation of my crypto journey. I read the Bitcoin whitepaper around July 2017 and it caught my attention immediately. Then I read up about Ethereum. The idea of smart contracts fascinated me. And in the same month, I bought my first Ethereum. It was around $250 back then. My interest in cryptocurrencies gradually picked up and I began to read about the top 100 currencies on CoinMarketCap. And the rest, they say, is history.

On 31 October 2008, the Bitcoin whitepaper was published. On 3 January 2009, the Bitcoin genesis block was mined. Embedded in the block was the following text,

The Times 03/Jan/2009 Chancellor on brink of second bailout for banks

Being just involved in cryptocurrencies for slightly more than a year, I am still considered a newbie in this space. There is still much to learn. However, there are still many valuable lessons I have learned after going through one of the wildest roller coaster rides in cryptocurrencies history. Today, on Christmas day, I like to share what I learned with everyone

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It is Difficult not to FOMO

I invests in many other asset classes, such as stocks, options, commodities and REITS, and I consider myself a rather seasoned investor. Usually, when there is a 20% gain on a trade, I will take some profits. However, in my crypto investments, I did not do so. At the peak of the crypto market in Jan 2018, my portfolio was almost 10x. For a normal trade, I would have taken profits long ago. But at that time, there was so much FOMO (fear of missing out), and I too was blinded by greed.

Even after the crash started, I continue to dollar cost average into the market. What made it worse, was that I FOMO into several ICO projects that, on hindsight, made me look rather stupid. At that point, the ICO market craze had not subsided. Many ICOs that took place late in 2017 were making insane 10x to 20x gains. I allowed greed to take over and bought into some of them. Now, they are mostly at more than 90% losses.

Looking back, having the FOMO seemed rather dumb. However, it was really difficult to think rationally when you are in the thick of the action. Hence, the first and most valuable lessons I learned was not to FOMO. Though it is going to be hard not to, haha...

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Technical Analysis

Being an investor focused on fundamentals, I never really was interested in technical analyses. Warren Buffett joked about TA (technical analysis) in 2005. He said,

I realized that technical analysis didn't work when I turned the chart upside down and didn't get a different answer.

I used to have the same mindset and did not believe in TA. It was only after I am involved in cryptocurrencies, that I started to understand why there are so many people who believe in reading charts.

In my opinion, TA is essentially a self-fulfiling prophecy. When enough people believe in it, it will happen. Hence, despite TA leading to diverging outcomes as fundamental analyses most of the time, it is very useful to use it to understand market sentiments. As much as we want to think that the market is optimal and rational, it is not. By reading up and learning about TA, I think I am now better equipped to detect market sentiments and therefore being able to get better entry prices in my investments. This applies to both traditional and crypto investments.

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Fundamental is Still Key and Technology Adoption Takes Time

Although TA are useful to understand market sentiments. In the long run, market still goes back to its intrinsic value. And the cool thing about intrinsic value is that it is only determined by the fundamentals. Market sentiments move prices but it does not change the underlying value. This is something I believe in from the start and it was reinforced after I started investing in cryptocurrencies.

The current crypto bear market, much like any market crash, is largely due to prices deviating too far from the intrinsic value. The key challenge in crypto investment is the lack of proven method to valuate the underlying asset. Is the current $66b Bitcoin market cap fair? And is the $84m STEEM market cap overvalued? There is no easy way to measure.

Until we have a proven way of valuating cryptocurrencies, there will be a lot of guesswork. Fundamentally, for any cryptocurrencies to be successful, there need to be adoption. In order to gain adoption, there has to be a reason for users to use the cryptocurrency. In my opinion, speed, scalability and reliability are important. However, the ease of use and the fun/cool factor cannot be neglected as well and a killer app/feature is usually what triggers mainstream adoption.

Today, we are still building the infrastructure. Bitcoin and even Steem are considered as layer 1 solutions. More layers will be built to improve the infrastructure. I am confident that eventually, a killer app/feature will be produced, leading to mainstream adoption.

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Start Early, Fail Early

Despite the painful lessons, I am fortunate to be still relatively young (I supposed early thirties is still reasonably young). Even though I have substantial losses, it is not going to cripple me. Hence, I am glad that I started early and failed early.

My advice to those who are young, is to have the courage to take some risk, learn more and experience more. Investing in cryptocurrencies is one of the ways. Of course, do not invest blindly. Take your time to find out more about finance and economics. Appreciate the value which cryptocurrencies can bring and make a judgement.

When I started to invest in cryptocurrencies, I did a simple valuation of how much I think the overall cryptocurrencies market can be. I still have it saved as a note in my laptop. Here is what I wrote,

Total Wealth in the world:
$250,000,000,000,000

Broad money supply in circulation:
$80,000,000,000,000

Stock market valuation:
$69,000,000,000,000

Cryptocurrencies can be adopted as a store of value and liquid currency. Assuming they collectively take up 10% of current circulating broad money, then the target overall market cap for cryptocurrencies = $8,000,000,000,000

The current cryptocurrencies market cap is $130,000,000,000. Seems to me that we have still a lot of room to grow.

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Conclusion

Overall, I think cryptocurrencies are here to stay. It is simply a much better form of money than fiat. Many people like to compare cryptocurrencies like Bitcoin to current banking systems. That is unfair because Bitcoin should be compared with fiat currencies. The banking systems and services are layers built on top of fiat currencies. Likewise, layers can be built on top of Bitcoin to make it better. Examples are the lightning network which is making Bitcoin transactions faster and cheaper. RootStock which is enabling Smart Contracts on Bitcoin. These are all layers that are in works to make Bitcoin better.

I like to draw lessons from failures so that I do not commit the same mistakes twice. I hope my lessons are useful to you. Thanks for reading and I wish everyone Merry Christmas and a Happy New Year!

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