It seems like exchanges responded to Mayer’s suggestion for Proof of Keys. It’s January 3rd and everyone is anticipating something.
Terms: to simplify things trader, traders, and trading will be used to include investor, investors, and investing and so on.
Disclaimer: this article is written by an independent writer for The Flipside of the CryptoCoin. The contents of this article therefore reflect only the author’s opinions. This is Not financial advice and there are no endorsements made in this article.
Proof of Keys
An innovative movement that calls for traders to “take back the keys” on January 3rd is very intriguing. This is to test exchanges and make sure they are being responsible with traders' money.
Implications of this Project
Mayer’s intentions are great, but is this really what the bear market needs? While a legitimate concern, what concerns me more is if you need to test exchanges, then what does that say about your investment in them. Simply put: if you do not trust your exchange, why put your money in it?
Trust, Trustless, and Distrust
Most exchanges are centralised. Among them, some have insurance. There are some decentralised exchanges, where by definition you hold your keys. Then there are the rest of the exchanges.
Logic dictates that people who are educated enough to use cryptocurrencies would not trade with an exchange that fits into the latter category. However, perhaps greed or lack of alternative would rule over logic. Lack of alternative being: Trader Anon wants to play the market, but cannot get an account with an exchange in either of the former 2 categories, so he or she risks his or her investment and risks the exchange. There are probably plenty more reasons, but I fail to understand the logic. More of this a little later in the article.
Fundamental Flaw
Who forewarns exchanges, by the way we are pulling out our keys in a co-ordinated fashion? Obviously freeze accounts. Surely it would be more effective to educate people about the risk of investing and trading in exchanges. Perhaps it makes more sense to call for a random test date to withdraw your keys? However this goes back to logic: If you do not trust, do not invest?!
Greed: Trading Psychology’s Worst Nightmare
The difference between successful traders and everyone else is their mental health. A successful traders is defined as a trader who makes a consistent profit. Noteworthy: not necessarily a big profit nor a professional trader by the way.
So what is trading psychology? Great question. Just like other fields, not everyone is cut out to be a trader. While you need to know how to trade and learn about trading as much as possible, you need the mental health side. That is, you do need to gain the expertise and knowledge about trading, and in some cases the licence to trade. In addition you need cryptocurrency knowledge and skills to trade cryptocurrency. However what makes you a successful trader is your ability to keep on track mentally. This is where trading psychology comes into the picture. There is a lot of research in this field.
On one foot though, trading psychology comes down to discipline and mental health. You have to stick to your trading rules, almost no matter what. Sticking strictly to your risk limits and not investing more than you can afford to lose are vital.
Again on one foot, greed and fear can be said to be the 2 enemies of mental health in the trading sphere. These can basically throw even the most seasoned trader off balance. Discipline is the key really, but it is hard to be disciplined when trades and profits are threatened.
This is a simplified overview of trading psychology, but it will do for this article. My point is that greed (and fear) can overthrow logic. Without logic, trading is very risky, maybe even volatile to borrow a cryptocurrency term (LOL)!
My theory, then, is that if you are a successful trader (even if you are new to trading and trade cryptocurrency, even exclusively), you probably are already set up on an exchange you trust. So why would you need/want to do Proof of Keys?
Summary
It seems likely that the point of the Proof of Keys movement is much more valuable than Proof of Keys in action. Also I would suggest something that will drive the message home: do your research, only invest what you can afford to lose, and for this article at least, manage your risk including where you trade. There is more to trading than meets the eye. Caution: while trading on computers and mobile devices opened trading to the masses, it suffices to say that this opportunity would not have been created if it did not help improve already existing infrastructure improve its bottom line.
