It's nice to see some green on the charts after a few brutal months. It's weird how the mind works. We're down like 90%, and get excited over a 10% increase. I'll let you guys know when I'm in bull mode whenever that is.
Today I'm Covering:
• Trading Psychology. It's more important than picking coins.
• Aave's launching a new stablecoin. Don't worry, it's not another UST
• North Korea's Hackers. They're targeting bridges in the crypto space.
Let's dive in!
🧠 Trading Psychology
It's fun and easy to obsess over finding the next 10x gems, but it's more important to think about your own trading psychology.
Let me tell you a few war stories about myself.
1) I was up a lot in 2017, but I didn't take profits.
I knew the concept of taking profits from playing Black Jack occasionally in Vegas. But knowing a concept and following it are two different stories.
When everything was going parabolic in 2017, I told myself...
"1 more month of this action and I'm going to be set for life. LFG!!!!!"
I never got that extra money, and I watched my portfolio slowly bleed in 2018.
2) I entered trades without pre-defining the risks.
Pre-defining risks means you know how much money you're willing to lose before you exit. It's important to think about this before you're clear of any emotional attachments.
I remember investing in a certain token back then. It kept losing money but I stayed in the trade. I ended up losing more money than I needed to. I relied on my emotions in the moment, instead of a system.
For example, let's say you bought Solana earlier this year at $125. You're hoping it goes back up to its all time highs of $250.
You pre-define your risks by saying..."I'm going to sell if it goes down to $100 or -25%"
Well, Solana today is at $37.58. If you listened to yourself, selling it $100 would've saved you a ton of money.
People will hold onto the bags because:
1) They don't want to admit they're wrong. Humans have this "pain avoidance mechanism" that affects our behaviors. It's also why people tend to follow cult leaders, influencers, or authority figure. If you made a bad investment, it's easier to blame them for the mistake than to take ownership.
2) They might be emotionally attached. My friend is into NFTs. He tells me how hard it is to sell his NFTs because he's so attached to them. He uses some as PFP and he's really into the Discord. He feels selling it would be the same as abandoning his friends.
3) Or they use mental gymnastics. "Well Cardano and BNB broke their ATH's for people that held!" (aka survivorship bias)
I made a ton of mistakes in 2017. Most of them weren't because I picked the wrong coins. Most of the mistakes were because of my own psychology.
In hindsight, I'm glad that I made those mistakes. I took those lessons and became much more profitable during the 2021/2022 cycle.
So don't beat yourself up too much if you didn't perform well this cycle. You learned and hopefully you'll "upgrade" your mental trading software.
If you're interested in learning more about Trading Psychology, pick up the book "Trading in the Zone" by Mark Douglas.
You can also see some more takeaways and lessons in the thread below.
📰 The Fast Five
Here's what happened this week in Crypto.
1) Fake Job Offers took down Axie Infinity. Attackers stole $540m Axie Infinity's Ronin bridge back in March. They did it through social engineering. They created a fake company, and reached out to Axie engineers with potential job posts. After a few rounds of interviews, they'd send them a generous offer. The offer was sent through email, and through a corrupt .PDF file. Once opened, it gave the bad actors access to the company's system.
Everyone assumes having a hardware wallet is the end be all of security. While it's important, I've seen more people mess up through clever social engineering.
2) Ex-Employee accuses Celsius of Fraud. There's a famous wallet called " 0xb1." The person managing the wallet revealed himself to be Jason Stone from KeyFi. He managed over $2b worth of Celsius funds and deployed various DeFi strategies. And in the process, lost around $350 million. Now he's suing Celsius alleging they owe him money.
I like how they knew things were bad for over a year, but chose to tell us now.🙄
3) Aave's Launching a New Stablecoin. Aave is the premier lending app on Ethereum, and one of the most trusted names in DeFi. They're launching a new stablecoin called GHO, pegged to the USD. It'll be decentralized and over collateralized.
Before anyone panics over a decentralized stablecoin, the model is more Abracadabra's $mim than it is Luna's $UST.
4) Facebook Shuts down Novi. Facebook wanted to create a currency called Libra, that later re-branded as Diem. That got shut down. Novi was their digital wallet for Cryptocurrency. They wanted to make sending Crypto as seamless as sending a Facebook message.
Fun Fact: Most of the team that worked on Novi left a while back. They're started a new company called MystenLabs.
5) Voyager files for Bankruptcy. Another CeFi company bites the dust. The idiots at Voyager gave a $657m loan to 3AC. Unfortunately, funds at Voyager aren't insured by the FDIC.
Remember there's a difference between CeFi and DeFi. CeFi companies like BlockFi, Celsius, and Voyager got screwed over this past cycle. Most of DeFi operated perfectly fine.
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