The past few days were crazy in crypto world. We saw FTX, one of the largest centralised exchanges, biting the dust. Binance considered acquiring FTX, yet, at writing time, word goes that it's not happening.
I was going to give an account of my Web Summit experience and the wonderful women I met last week, yet I can't ignore what's going on so I thought to share some hard lessons I learnt during crypto bear markets.
It was 2010 when I first heard about Bitcoin but I was finding my feet in the UK, life got busy and I ignored it all. A year later, first crypto bear market happened, with BTC crashing from $32 to $0.01. Second bear market came in 2015, with BTC falling from $1000 to below $200. I can't say much about first two cycles because I wasn't invested yet, I lost that train.
Lesson number one: Invest your time before you invest your money. Learn, research & try.
My crypto journey starts at the beginning of 2015, on the back of the long crypto winter that followed the hack of Mt. Gox echange, and the general negative sentiment towards Bitcoin. My other half had already dipped his toes in crypto waters a year prior, and we had regular conversations about Bitcoin & crypto. As a family office, we took and we still take decisions together when investing, whilst I maintained a small personal portfolio on the side. There's no better way to learn than doing it yourself, thus this is an account of my personal experience. I fell into a rabbit hole that changed my life and my perspective on money and existing financial systems. I started attending local events, meet-ups and conferences. I got hooked!
Lesson number two: Set aside a small percentage of your income/savings for potential investment during bear markets.
Deciding to invest hard earned savings into an asset slammed all over media is hard to do and you shouldn't go all in. Start with small amounts, something that you can afford to lose without impacting your livelihood. Average your entry price by adhering to a buying schedule. It can be weekly, monthly, or whatever works for you. I was still running my IT management consulting business at the time, so I took a more buy to hold approach. I kept buying BTC and ETH whilst learning more about bitcoin and blockchain.
Lesson number three: Concentrate on major assets (remember to DYOR*).
It pays off to enter any investment market when prices are low and everyone else is selling to minimise losses. It's true that prices can go lower short term, but in the long run it can go back up and you may see profits. How long? Hard to tell. It took a lot of conviction to believe BTC will perform. I am saying conviction because back then there was no data or very little of it to be able to make sound decisions. With hardly any economic correlation and no past performance to look at, all you had was understanding its purpose. I invested in Bitcoin's value proposition: decentralisation, financial inclusion, transparency, self sovereignty and self wealth management.
Lesson number four: Bear & Bull market is a normal cycle that will come and go.
On December 15, 2017 came the third crypto bear market. BTC touched $19,497 and fell 29% within six days. It wasn't the bottom though as BTC reached $3,300 by December 2018. That hurts if you bought at peak! 2017 was the year of the ICO** boom, with hundreds of projects built on Ethereum platform, promising decentralisation and profits if you invested in their tokens. Yes, that't right, tokens, representing a digitalised version of shares disguised as utility, in most cases. This crash wasn't only about Bitcoin, but about the wave of Dapps*** built on top of Ethereum platform. All sorts of ideas, from tokenised real estate to radiators that mine cryptocurrencies whilst heating your home were pitching at blockchain conferences.
Lesson number five: Sometimes it pays to hodl :-)
I admit that both as an individual and a family office I won some and lost some in every bear market cycle. It's inevitable and you can't win all the time. But one thing is for sure, I didn't sell assets of projects that I believed in. They had valid use cases, good teams, and actual utility. Some were good, and they kept building regardless of market conditions. It took several years of wait but profits came. Other projects went to dust or changed course. I learnt resilience and patience. Not selling when your portfolio value goes down 80% is tough. If you haven't invested your entire wealth, took loans or done other crazy shit like that it should be ok to hold during bear markets.
Lesson number six: Don't invest money you don't have.
It doesn't matter how small the amount you can afford to invest. It's better to start low and keep accumulating than spending money you don't actually have and risk losing everything. Before the 2017 bubble popped, I bought mining equipment (ASIC) and that saved me in 2018 because I could recover some losses mining Dash, Litecoin and few other crypto. I am not saying bear market didn't affect me. Hell yeah it did! I had moments when I thought I won't be able to recover my portfolio. 2017 & 2018 were still good to mine crypto so I managed to make enough money to diversify and invest in few start-ups. 2018 was the year both my husband and I went full time in crypto.
Lesson number seven: Moderate your risk and take profit.
Holding is good but you have to learn to take profits too. Nobody can perfectly time the market. If anyone guarantees you continuous profits without fail is lying. No human, bot, strategy or algorithm can be that accurate all the time. Crypto market is not only volatile but it can be also unexpected. You only have to look at the past two years alone to realise human factor is responsible for most hacks and frauds crypto market suffered. A moderate risk approach may not make you an overnight millionaire but you will weather market storms. Whenever I got greedy and I said to myself, let's wait a little longer, I lost momentum and money. I learnt that a 20% profit is better than nothing, and doing it consistently, you'll build up your portfolio.
Lesson number eight: Don't buy into the hype or personality cult.
I mean ... look at FTX and Sam BF. OK, I agree, this is not strictly a bear market lesson, but I'll keep it because it can be the precursor of one. Hype can range from a team's educational or professional background, to which projects VCs invest in, or what coins influencers are shilling. Meteoric rise to fame of founders or crypto celebrities are no better in my opinion. Most times it leads to inflated egos of people who forget they're human too and prone to failure, like the rest of us. Working with people that have deep traditional finance roots is not always a recipe for success. You will not be on the same wavelength, or they may not understand the value proposition of crypto. If their mind is not open to change, or they see crypto purely as a speculative asset, then it can be difficult to build a successful business together. I was the co-founder of a crypto hedge fund and I learnt this lesson the hard way, failing.
Lesson number nine: Bear market is not the end, don't give up!
The onset of pandemic brought everything to a halt and Bitcoin fell to $4,970 on March 10, 2020. That day a BTC futures position I had open got liquidated in seconds. Between trying to keep the hedge fund alive and seeing most of my savings gone, for a few moments I wondered if this was the end of my crypto journey. My family office was in no better position. Consulting again looked more and more attractive as days went by. Nonetheless, past bear markets and portfolio ups and downs taught me that if I stick to my values and I don't give up, I will survive this too. And I did :-)
Lesson number ten: Not your keys, not your coins.
Here we are in 2022, another bear market, another BTC fall from its all time high of $63,314 on April 14, 2021 to $16,543 where it is today. We are drawing close to a year riddled with scams, hacks and scandals. Terra and Luna failed, Celsius filed for bankruptcy, Wormhole and other crypto bridge hacks happened, crypto game Axie Infinity lost $615MM to hackers, many NFTs stolen and of course, FTX is dying of a slow painful death.
What most (if not all) these events have in common?
CENTRALISATION - centralised decision making, centralised wallets, centralised protocols, centralised platforms.
Bitcoin, cryptocurrency and the technology that backs it has a main purpose, decentralisation. As long as we keep building centralised and opaque solutions for the sake of money alone, we will see bad actors taking advantage. Any platform, from wallets to exchanges or protocols that are not adopting transparency as their mantra are less worthy of trust.
Don't keep your assets on platforms that manage your private keys and funds, move it to hardware wallets. You can trade or invest using an offline wallet and you minimise your exposure to hacks and other malicious incidents.
Don't blindly trust people with your money because they have followers. Do your due diligence and see if there's any truth to their claims outside of being featured in media articles. Tame your greed, and resist playing into other people's greed when deciding to invest. These are the people who hurt the industry, who give crypto a bad reputation, who prey on retail investors. I know crypto community can get over this phase just as I have survived three bear markets and several failures. Let's learn our lessons and keep building transparent applications of this technology.
If you had the patience to read all the way here, I am grateful and I hope you're keeping well in these testing times.
*DYOR - do your own research
**ICO - initial coin offering
***Dapps - decentralised applications