3 Ways to Increase Your Confidence in Cryptocurrency Trading
The crypto market intimidates even experienced traders, but you can assuage your fears with a different perspective.
And so there I was, hanging off the edge of a cliff with a thin rope keeping me from certain death. Does that feel like crypto investing to you?
When I say cliff, you might conjure an image of a few hundred-foot drop like you see on exotic vacation photos. Well, my cliff wasn’t that tall, but I’m sure if I fell, I’d at least go to the hospital. The ridge was about 30 feet tall, and my friends convinced me to go repelling for the first time. And let me tell you that edge fear is real. I was adamant about backing out, but my friends went through reassurances that everything would be okay. They were full of crap, but I bought their stories. So, the friend who went over the edge with me instructed me and encouraged me that they had put mechanisms in place to comfort me. Consequently, I took that first small jump over the edge. Did my fear go away? Hell no. We both had to stop for a minute as I composed myself. Then, my friend reminded me that I was in control of the descent and asked me if I could do another jump. I agreed, and we repelled another few feet. Afterward, my confidence grew, and I eventually made it to the bottom. It felt great.
You work hard for your money, and your future happiness depends on it. So, when you make a bet with it, you’re going to experience edge fear. And crypto investing increases edge fear over traditional investing. However, like my friend who helped me, I’m going to aid you as well. And when we reach the bottom, I feel like you’ll have more confidence than when you started, and you might even invest in crypto afterward. But first, let’s take a look at three things generating that fear.
Learn about cryptocurrency volatility
Tony Robbins is a well-known transformative billionaire. In his Date with Destiny events, he often preaches that humans require six things for fulfillment:
As much as people need certainty, they do want a varied amount of unpredictability. The catch is they want it within their control, which is, of course, silly. People fight daily for control by their nature, but it’s healthy for the overall experience of shaping the ego if something unexpected happens. Cryptocurrency is in its infancy, and the unique way its market works makes it seem wildly unstable compared to traditional markets. Crypto is risky. Yet, what reward do you get without risk? From my experience, not much. Therefore, you must seize opportunities instead of waiting for them to come to you.
With crypto, you don’t have to throw all your eggs into one basket. You can and should spread out your investments at first. In doing so, you can experience a bit of risk/reward without destroying your life, as you might fear. Crypto markets and traditional markets are both gambles. So, decide what kind of gambler you are and embrace it. Then, introduce a slight instability — a little unpredictability in your investing.
But why is crypto so unstable?
Government regulation, colossal investment firms, global banks, and some under-the-table dealings keep the stock market high, low, or steady. You can observe the truth of it by witnessing the stock market right now. For example, during President Obama’s administration, the stock market rose and fell over economic announcements, military actions, natural disasters, etc. Yet, the market still climbed, albeit shakily. Since 2016, the stock market hasn’t shaken as much even during the pandemic — a one in one hundred year event. It should have crashed by now, but the forces that manipulate the stock market keep it alive. Crypto doesn’t work that way altogether.
According to Marketwatch, individual investors hold 56% of the token in circulation. Thus, if applied across the cryptocurrency market, people, not institutions, hold power to influence the crypto market. That means emotional decisions, following the crowd, and HODLing. In addition, the crypto markets have no insurance in case you lose your crypto or hackers attack an exchange. However, some exchanges do offer their insurance. Yet, still, there is no FDIC insurance from the government, as is the case with fiat money and stocks. Add all these up, and you get the instability you see in the crypto markets throughout history. On top of that, traditional market swings also affect crypto markets.
Is crypto volatile? Yes. Should you shy away from it? No. Crypto is a new opportunity that carries the same risk as any new venture. It’s healthy for you to have some unpredictability in your life, but sadly you can’t control when it happens. If you could, it wouldn’t be unpredictable, and that’s the whole point. You’ve either got the stomach for it, or you don’t. And the only way to be sure is to make a little investment (always no more than you can afford to lose) and see for yourself. But before you do, you’re going to feel a whole lot better if you do some research.
Research a cryptocurrency project
According to an article published by Daily Capital, only 32% of Americans throw their money into a 401K. That’s not a bad plan considering a contribution of $19,500/year maximizes retirement funds. However, most don’t hit that number. Most deposit the minimum amount, which leaves a retirement of $200,000 on average. Now, spread that average over remaining retirement years, and you get approximately $8,000/year. That’s not enough, and you know it.
Conversely, however, these same Americans are becoming more conscious about the direct purchases they make. For example, in this piece written on Bizwomen, 22% of Gen X shop at businesses owned by Black entrepreneurs, 39% of millennials, and more for Gen Z. Overall, 58% of Americans call themselves “conscientious consumers.” Therefore, we see a disconnect. While Americans care about the spending of money they can see, it’s not so with the unseen. Yet, those same Americans could be investing their money into a company that benefits from suffering.
If this is you, it’s time to build the same connection to your investments that you have with direct purchases. But, you might ask, why bother? As an example, the same reason you don’t want to spend money with a company like Company X is that they use exploitative cheap overseas labor, and you want to limit your direct contribution to suffering in the world. It’s something that strikes hard at your moral center when you know someone unnecessarily suffered for your enjoyment. It all seems rather barbaric. Although the truth is you can never fully live an ethical life under capitalism, you can raise your ethical footprint. And the first step toward doing that is researching who and what you are investing in.
When it comes to crypto, it’s easier to see the “who and what” of your investment because crypto runs on blockchain technology which is well documented and transparent. Along with that, each crypto has a website detailing its mission and affiliates. For example, The Cardano Project’s mission statement:
“A platform built for a sustainable future, to help people work better together, trust one another, and build global solutions to global problems” — cardano.org.
Another example is Helium (HNT), which seeks to create decentralized connectivity for IoT devices. And yet, this isn’t enough. If it’s worth your time deciding where your direct spending goes, it should be the same for your investments. In summation, all these components should help you understand clearly where your investment is going and give you greater confidence when choosing a cryptocurrency to invest in. Yet, there’s still more to the story. What about all that technical gobaldy-goop shown on all the market boards, such as market cap? Will understanding any of that build your confidence in crypto investing? Again, I’m not going to pull punches, but if you care about the influence of your money, you’ll have to make time for research. So yes, the more you know, the better — even the technical stuff.
Discover what backs cryptocurrency
As human society grew more extensive, it needed a way to trade labor beyond verbal agreement. It required precision in accounting for who sold what for how much value. And the coining of precious metals was the first representation. Afterward, we would see the promissory note, or dollar as we know it now. America’s fiat currency is a physical representation or notes that you performed work or labor benefiting someone else. In other words, you traded your labor for a note you can use anywhere else in the country to exchange for a product or service that benefits you. However, the amount of work produced can jump up and down wildly at any given time, and it’s nearly impossible to account for in a society as large as America’s. Therefore, the government decided to back the dollar with precious metals. It made sense. We used the metals directly, so there’s no reason we can’t issue a promissory note on its behalf. Although precious metals no longer back the dollar, the world excepted the value of the dollar, based on the American government’s word to make good on its debts.
Big players at Wall Street claim something backs the U.S. dollar, but the truth is, there is no physical representation of the dollar’s value. Yet, those same zealots of the dollar rally against crypto for having no backing. And that claim couldn’t be farther from the truth. In fact, you can easily track the value of crypto back to its source of labor. Those sources are called proofs or algorithms. So, for example, Bitcoin and Ethereum use proof-of-work, which means an individual or institution used its computers to solve hashes on the cryptocurrency’s respective networks. Then, the algorithm compensated those people (miners) with rewards. I.e., they were paid for their labor.
And that brings us to the other part of what backs cryptocurrency: its usage. Crypto’s success depends on your participation. There is no central authority giving its word and good value. It is by your labor and your activity that crypto lives or dies. That’s also why it’s so volatile. It rises and falls with our sentiment. Therefore, if you’re looking to invest in the future, consider crypto at least in part and add it to your portfolio. Once you understand how it works, it becomes less scary. Or, at least, only as frightening as fiat currency.
Investing is an excellent option for increasing your wealth. However, saving your money in banks is a losing game. For instance, the average bank account earns little to no interest, and inflation hits 3–4% year-over-year. As a result, every year, your dollar loses value. So, you must take action to beat inflation and perhaps have your money make you more money in the process.
Cryptocurrency investing can be scary. It looks more volatile than traditional investing, there’s a learning curve, and nothing backs it. However, you now know why the volatility exists, how you can learn more about the different currency’s missions, and what gives crypto its value. So, with that knowledge, you can make a more courageous decision when investing in crypto and maybe enrich your life in the process.
I wouldn’t talk the talk if I didn’t walk the walk. I invest in crypto. I have a small holding right now, but I plan to build a more substantial cryptocurrency portfolio. I see great opportunities in crypto and the causes they represent. Therefore, I hope you have a new outlook on crypto to at least investigate it further.
Do you already invest in crypto?
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