I don’t need to tell you how rich you would be had you invested $1,000 in bitcoin early in the century. Or how the NYT columnist Kevin Roose thought he was selling a gimmick by turning his column into an NFT for 0.5 Ether ($800) and ended up selling it for $560,000.
With the revolutions coming around in DeFi, you will stand witness to more of such theatrics. It must excite you because the financial bubble has burst, and now you can also participate.
But before moving forward, let’s get a few things out of the way.
I am not going to ask you to invest in bitcoin, ETH, or any other altcoin. There will be no speculation over the emerging trends in crypto and why it should be an investment bet. This discussion is going to be more fundamental. First, you should know all the basics of crypto investment, human nature, and what you should not do as a crypto investor.
- Don’t jump into an investment
Crypto growth, at times, has been unconscionable and, simultaneously, appeared to be at its bitter end. Why this volatility?
Any emerging technology in history has had to go through its ups and downs. The reason is simple: user adaptability. Volatility in crypto is synonymous with emotional oscillation — it’s a mix of excitement, fear, and influence. This is still a financial system that is at a nascent stage and you are its primary driver. Your trust forms the core of DeFi, apart from cryptography, of course.
- Don’t be fooled by influencers
The age of blockchain and crypto is bigger than any other due to its excellent interconnectivity. It is decentralised, global and yet hyperlocal. It connects us all.
E.g. DeFi can alter the future of transactions. The decentralised and immutable protocols are just brilliant. You can do financial transactions without needing a third party.
Why does that matter?
Firstly, it will generate a great deal of wealth in the entire world, regardless of who and where you are. I have to say, it’s going to be challenging for the banks. That said, you don’t need to scrape for updates about where you can spend your money because you think everything out there will make you money. This is not Amazon shopping, even though it may look quite similar.
Secondly, you must take expert advice with a pinch of salt. Nobody knows your financial status better than yourself. Investments are personal decisions, and you cannot let influencers or leaders decide your future. Ultimately, it has to be your call.
- Don’t invest before vetting the company
One of the simple rules of investing is to know whether the brand or company you are investing in is going to bring disruption. Astronomical changes can happen within days, but behind them is a company that delivers new technology, efficiently changing the industry’s dynamics.
In simple words, a company will succeed when it creates a technology that alters the functioning of a large industry dominated by a monopolist. A company that envisages disruptive innovation is where your money should be! Keeping this in mind, DeFi is going to make the biggest dent, and it may happen sooner than you would guess.
The world has waited quite long for a more egalitarian future, away from the financial divide. And crypto brings us exactly that — an economy of the people. Do you know what’s even more amazing about crypto? It is free from border restrictions. A simple example is mining. Whether you are in Ethiopia or a Scandinavian country, you will get the same financial result. Here’s what I mean:
You should invest in the fundamentals of a company. You cannot rely on rumors and gimmicks. Every time you lose on your investments, you have lost an opportunity. If anybody says they know the future of certain crypto, then please, I implore you to stay away from them. That’s a career cozener right there. But that shouldn’t prevent you from keeping your eyes and ears open for the next best thing, i.e., the probability of guessing.
But how should you guess? Logic!
- Don’t invest without understanding the business
You may have noted the increasing number of Initial Coin Offerings (ICO) coming up in the market. What you may have missed is that many of these ICOs fail to deliver.
Growth Marketing Specialist Adriana Belei has published an interesting research on her medium blog listing down various reasons for their failure.
With the above context, you will have to treat the company you are investing in as your own. Scrutinize every aspect of its growth. Does it have vision and scaling power? Is it investing in talent? How is it funded? What happens to it on a rainy day? Is it profitable yet? Is it fulfilling the promises or hiding its delays? Can it cheat you?
You can get most of the answers in team discussions, comments, and leadership meetings. You can always catch a vibe. Read between the lines when they talk about what’s on their plate next. Another important point to ponder upon is where will the company be in the next five years.
- Don’t invest until you trust the leadership
Search men’s governing principles, and consider the wise, what they shun and what they cleave to.
Answer these questions to yourself:
- Do you trust the business?
- Do you trust the leadership?
- You don’t necessarily have to invest in the company’s charts. You need to invest in leadership. Successful leaders are driven by core governing principles. Read upon any leader you find successful, and see what drives them. Research and compare it with the leadership of the company you are investing in.
- Make yourself part of the process. Don’t jump the gun. I see people running around without patience for a quick buck. After all, FUD never did well to anyone.
- Great founders are the key. Do you associate yourself with the vision of the founder? Ask yourself, “Can I work for this person?” Another question you may ask is whether you see them taking over their industry.
- Eye for formidable founders. They may seem scrappy; geniuses usually are. A founder has to be mission-oriented, obsessed with their company, determined, and relentless on the path of growth. Great leaders are decisive and fast-moving.
- Creators should be courageous, adaptive with high conviction, even at the risk of being misunderstood. An excellent communication skill is a massive plus.
The biggest difference between a stock market and a crypto market is their participants. Crypto investors are highly driven, knowledgeable, and know what they are doing. They are confident to revolutionize.
I will end with two short points:
- There is always an opportunity, have an eye for it.
The burst bubble (crypto crash to be precise) in 2018 was a scary time for many. But, an investment firm, Paradigm, invested $400 million in Bitcoin and Ethereum. Needlessly, they made massive gains. That was a great opportunity, and many more will come your way.
2. Sometimes patience pays off.
India’s ‘Crypto COVID Relief Fund’ sold 50 trillion SHIB coins for $463 million. Had they waited a bit, they would have made over $1.6 billion. Nonetheless, they won for their cause anyway. So, patience can get you a sweeter deal than any aggressive move.
After a certain point money is meaningless. It ceases to be the goal. It’s the game what counts.