To Frank Korba
Before I started writing about digital assets for a living, I was studying to become a mental health therapist.
In my clinical social work class, I learned a lot about the causes of depression, anxiety, and other mental and emotional disorders.
Oddly enough, every chapter in my textbook focuses on the feeling of going from having more money than I thought on paper to being bankrupt in less than a year as a joke. I don’t remember there being a chapter. Year.
I think most of these social work textbooks were written before cryptocurrency.
But now, crypto is important.
And anyone who has invested a significant portion of their net worth in the asset class will know the difficulty of managing the adrenaline flooding their system during a bull market and the sharp decline in digital asset prices that comes with a bear market. I understand the pain in your chest.
Additionally, if volatility doesn’t get to you, you’ll face the stress of avoiding hacks and phishing scams and the challenges associated with self-managing your crypto assets. Hardware-wallet It almost certainly will.
Therefore, it’s time to discuss ways to mitigate the negative impact of cryptocurrencies on mental health. Because learning how to properly and safely invest in cryptocurrencies can have an incredibly positive effect on your overall well-being. .
Here are some tips for staying sane as a crypto investor.
manage risk
Crypto risk management is multifaceted.
Not only do you have to watch out for volatility, you also have to learn how to do it. Self-manage your crypto assets Keep your assets safe and in control — ideally with a hardware wallet.
But when it comes to real investment principles, the true and proven way to manage risk is to apply dollar cost averaging (DCA) to your cryptocurrency positions.
If you’ve invested too much in depreciating speculative assets, learn how to cut your losses before they become too big.
Finally, do not use leverage with cryptocurrencies unless you are a mega-professional trader. The volatile nature of cryptocurrencies gives investors the opportunity to earn huge profits without using leverage.
Half of your success in cryptocurrency is being cautious and patient and not blowing up your account.
Playing this game wisely and managing risk responsibly can pay off.
If you don’t manage the risks, be prepared to feel all sorts of pain as opposed to the pleasure of making above-average profits.
Properly size crypto positions
The term “properly” is subjective.
For some, this may mean not allocating more than 5% of their portfolio to cryptocurrencies.
For others, your body may tell you when you’ve been exposed to cryptocurrencies too much.
In George Soros’ book The Alchemy of Finance, he describes how his back hurts when his portfolio is out of balance. When he felt pain, he made changes to his portfolio until the pain subsided.
Our bodies are more intuitive than we think.
So, if you feel pain anywhere in your body like Soros once felt in your back, don’t hesitate to trade fiat to crypto or consider reducing your crypto position size. please.
Stick to good ciphers first
If you are new to the cryptocurrency space, we recommend that you start investing in cryptocurrencies by buying fractions of Bitcoin (BTC) instead of buying hot new altcoins.
BTC is much more volatile than traditional financial instruments like the Invesco QQQ Trust Series 1, the index that tracks the Nasdaq. However, it is not as volatile as altcoins.
BTC’s volatility may decline as the crypto market continues to mature, but for now, it’s an important factor to consider when investing in the asset.
Think of your initial investment in BTC as a down payment to learn about the world of cryptocurrencies, not a quick get rich. Doing so can greatly reduce unnecessary anticipation.
Don’t put all your eggs in one (altcoin) basket
if Terra LUNA Crash It’s best not to put all your eggs in one highly speculative cryptocurrency basket.
In the weeks since the Terra LUNA ecosystem collapsed, those who suffered heavy losses from the crash have comforted each other online and posted information about a suicide hotline on the r/terraluna subreddit. The mental health of those who invested much of their net worth in the Terra LUNA ecosystem was fragile.
Not all hot new crypto projects fail spectacularly like Terra LUNA, but most will drop 80% to 90% from their peak at some point.
If you find yourself on the verge of throwing your kid’s college funds into the next altcoin, keep in mind that this is an inevitable plunge. It helps maintain relationships with people.
If you make an all-in bet and make a profit, remember the following tips.
Profit regularly in bull markets
unless you purely religious When it comes to investing in cryptocurrencies, it’s best to learn how to profit during a bull market.
Take some money from the table when your invested coins or tokens rise by 30%, 40% or 50%. And keep doing this until you have removed the principal, or more, from your investment. It can be quite liberating.
Reaching the point where you only invest your winnings is a lot less stressful.
Conduct your own analysis
The crypto market is often driven by narratives driven by crypto influencers.
Cryptocurrency influencers are not all-knowing shamans or gurus. In fact, most people do just the opposite. They are often scammers and scammers. Most are paid to promote a particular coin.
So don’t get too excited about what influencers have to say about crypto projects.
Instead, do your own fundamental analysis on why you think crypto is worth investing in.
You will also learn how to read charts. If a coin is 2 months and he is up 1000%, it may not be the best time to buy that coin.
Learning how to do your own analysis will free you from the emotional turmoil of feeling like you have to embrace every new cryptocurrency trend.
chin up
I know bear markets hurt.
I bought cryptocurrency for the first time in January 2018 (XRP month!), lost 70% of its value during the year.
Then when the 2020-2021 bull market came along, we didn’t get enough profit near the highs.
I am sharing this to show that I am fully aware that investing in cryptocurrencies can be an emotional rollercoaster.
But what keeps me going is Bitcoin is hope — at least financial hope — for myself and the millions of people around the world who invest and believe in it its worth assets are preserved.
This week marks the 14th anniversary of its release. Bitcoin whitepapera document that some hold as dear as religious texts or government constitutions.
If you haven’t read it yet, I recommend reading it. Because a deeper understanding of the nature of the crypto assets you invest in is another way to reduce the anxiety associated with holding that asset through a bear market. .
If you are only here to gamble, the negative effects of losing a large portion of your cryptocurrency net worth will only amplify the psychological and emotional challenges you will inevitably face with investing in this asset class. .
The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc.
