ionicXBT
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35) Crypto psychology lessons no one shares.
🕑 Added 2023-06-03 15:03:29 +0000 UTCBefore we start let me get this point across:
I am not your average Crypto Educator, and I want to make this very clear from the get go.
Nothing I teach here is ‘conventional’ Crypto knowledge.
I’ve been in the Crypto space for many years, and:
- Have networked with several Crypto Billionaires.
- Have seen the deep, dark secrets of how the Crypto industry works.
- Spoken directly with many of the big influencers of the Crypto world.
- Spent years full time in Crypto, deep diving to find only the most accurate and credible sources of information
- Trade with people who have 15+ year experience in markets, 8 figure traders.
And what I’ve learnt is that there is a clear divide in the QUALITY of knowledge that the 90% of investors are learning VS the top 10%.
My goal is to bring YOU from that shit 90%, into the top 10%.
So let’s begin.
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- All markets are largely the same.
Want to know the one thing in common between EVERY market, regardless of if it is stocks, bonds, commodities, Crypto, Real Estate?
Every market is traded by HUMANS.
And what do all humans have in common?
All humans have the same base level programming, a set of biases, of emotions, of instinctual triggers, and survival mechanisms.
This programming is what defines the majority of our decision making in crypto.
Only a small % of people are able to act DIFFERENTLY.
The reason WHY our programming is so tough to overcome is this,
Humans evolved into who we are today through MILLIONS of years of hardwiring and adaptation.
The reason we follow the herd is because those who went separate from the herd hundreds of years ago would DIE.
The world was built through collaborative TEAM effort, and interconnected belief sets and action taking.
This is the EXACT thing NOT to do in Crypto; If you do what the majority do, you will LOSE money.
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- Supply & Demand.
Supply and demand is an absolutely crucial concept to understand in Crypto investing.
SUPPLY refers to the amount of an asset that people want to SELL
DEMAND refers to the amount of an asset that people want to BUY
When you go into a supermarket, the supply = the food, and the demand = the shopper.
The changes in supply and demand are fundamental to predicting where the prices of the Crypto market will go.
In simple terms:
Supply increasing + demand decreasing = falling prices
Supply decreasing + demand increasing = rising prices
We want to buy Crypto, when we expect demand to increase, supply to decrease, OR both.
We want to sell Crypto, when we expect demand to decrease, supply to increase, OR both.
Bear markets are caused by the demand decreasing for people to buy, and the supply of coins being sold increasing.
And thus, vice versa for when bull markets begin.
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Now, what determines the supply/demand of Cryptocurrencies?
Stuff that causes supply to rise:
- Inflation of new coins into the market.
- Investors losing hope for their investments and deciding to sell.
- Hacks that lead to hackers selling coins after they’ve been stolen.
- The macro economy getting weaker.
- Totally separate new coins being created, spreading the attention span of the current investor pool.
Stuff that causes demand to rise:
- Either the decrease in new coins being inflated into the market, or total stopping of inflation.
- Investors becoming more bullish on a Crypto investment.
- The macro economy getting stronger.
- ‘Buy back’ programs, where the coins buy back their own tokens off the market.
- New partnerships, new team brought on, project updates, exciting narratives, adoption of new investors using their platform, etc.
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- Bear Market Yields Don’t Really Exist.
You’ve probably seen the yields that are available for simply lending your coins to others.
You put your coins on the platform, you lock them up, and in return, you receive free money!
There are projects out there, offering 50%, 200%, 500%, 1000%+ yearly yield on coins if you lend/stake them!
What could ever go wrong??
Well, here’s the problem:
In the traditional world, the yield you receive is a function of the supply of money, and the demand for that money.
In the Crypto world, this is NOT true!
Let me tell you why these projects don't survive:
In bear markets, the demand for borrowed money is VERY low, as people don’t expect to really make any money from the borrowed money.
An individual will only borrow money, for example at a 20% yearly rate, if they expect to make more than 20% on that borrowed money.
In bear markets, investors don’t expect to make ANY money, and thus they aren’t willing to pay exorbitant amounts for extra capital.
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So how do these projects pay you 500% in a bear market?
The answer is simple:
Instead of taking your money, lending it, and giving you a slice of the pie, they do something else.
These Crypto projects pay your yield in newly inflated tokens, instead of in the interest payments from the borrowers.
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For example:
Coin XYZ has a supply of 100,000 tokens at a price per token of $1.
90,000 tokens are locked, receiving a 500% yearly return.
Coin XYZ PRINTS 100,000 new tokens to pay the holders of the existing tokens a yield.
Because there is 100,000 new tokens added to the total supply, this causes a 100% inflation of the market cap of the project.
Everyone just got twice as rich!
Good right? No
There is one problem:
Each token is now worth 50 cents, so even though you have twice as many tokens, these tokens are worth half of what they were before, meaning you made zero dollars!
So during this ENTIRE process, you made NO money, and took on the huge risk of the project being rug pulled, and you losing ALL your money, for zero upside.
This is why, the aim of the game is SURVIVAL, and why we say everyone is here to take your money, because they are.
When trying to identify if a yield-bearing opportunity is a worthwhile investment,
You ALWAYS need to consider who is paying for the profits I will be making?
Where is the profits coming from?
What is the psychology of the person losing money in this ecosystem while I am able to make a profit?
If you cannot identify who the person is who pays for your profits, it’s YOU.
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- Shiny Object Syndrome.
The probability of an old coin ‘shining again’ (outperforming the market significantly and going to ATH’s) is less than 2%.
That means, if you buy 100 old coins, only 2 historically performed as well as the new frontier.
They will still do well (10x), but not better than a NEW coin.
Why is this?
There are a series of characteristics which define the new and old projects as I will describe below.
Old Project Characteristics:
- Has been pump and dumped before, with a sea of bagholders waiting for price to rise to exit.
- Likely built around an old narrative in Crypto, e.g. Exchange token, DeFi 2.0 protocol, DEX governance token, etc. No one cares about old narratives.
- Project has likely failed to deliver its huge promises of adoption, meaning investors have less conviction.
- A large prior decline makes it much harder for the coin to enter ‘price discovery’, which is where all the action takes place.
- It’s easier to convince a first time buyer, then a second time buyer. If everyone has seen your shit coin for years, and still achieve little, they’re
- gonna be MUCH harder to convince.
- Token emissions increase typically as the project goes on = more inflation
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New Project Characteristics
- No bagholders, as the coin has not had a huge retracement. This means investors don’t have the mentality of ‘I will exit when I recoup my losses’, they have the mindset of ‘I will HODL this to the moon’.
- Built around a new, and promising narrative of mass adoption such as AI. The coin is shiny because the potential upside is HUGE, this is the new paradigm.
- The project is new, no one is clear what they’re actually capable of, but the hype and potential is huge, so hopefully it pays off.
- No large prior decline, price only needs to rise slightly to enter price discovery, where every single holder is in profit, and anything becomes possible in their minds. (It’s much easier to HODL a winning position rising in price, then a losing position rising in price)
- It’s easier to convince a first time buyer, then a second time buyer. New projects have the ‘new to town advantage'.
- Token emissions initially are typically smaller = less inflation.
All of these characteristics RELATE back to the key concept of supply & demand.
How?
Old coins suffer from supply issues (lots of people wanting to exit + more inflation) and demand issues (less people are interested to buy).
As an investor, you need to focus on finding the NEXT promising coins that haven’t experienced a full Pump & Dump market cycle.
This is why I like NEW coins such as
- $VXV
- $IMX
- $EJS
- $NAKA
- $VR
So take a moment to examine the charts of these coins.
You'll notice that they are all relatively NEW and have experienced a decline after their initial listing.
This presents an opportunity for us as investors.
The ideal time to buy is when the market structure shifts from bearish to bullish, signaled by a bullish divergence on a higher time frame.
Simple.
If you enjoyed these exclusive lessons that you won't find on the internet, just like this post, and I'll create a part 2 for you.
See you at the next post.
@ionicXBT
Comments
Fire !!! Looking forward to part 2
Super interesting for me!
