The last bull market was a very exciting one. Many people were attracted towards crypto and a lot of exciting projects were happening. But wherever there is a big hype about something there is also a lot of opportunities to lose a lot of money. Whether it is by being trapped by a scam or just select the wrong time to invest into a project, there are several options to lose your money. This is why in this article I want to talk about some important lessons that I learned and that I will try to follow for the next and upcoming bull run after the current bear market.
Tokens Are Not Safe Investments
The first thing that I want to mention is that Tokens should not be regarded as safe investments. In fact, there is even a case to be made that tokens should not be investments at all. Especially, Liquidity or Governance Tokens should not be regarded as Investments. I think that this is the whole discussion from the SEC side. In many cases a token is not representing a share of a company compared to the actual stocks of a company.
A good example could be Ethereum or Cardano. There are big foundations and organizations behind these tokens but the Tokens definitely do not represent the company’s value. In fact the Token should more be seen as a utility in order to make your life easier. In the example of Ethereum the Token would maybe even make your life harder because of all the Gas Fees :P
Nevertheless, I think that these Tokens are worth having. In order to participate in all of the exciting projects that are building on these projects. I point here is to view these tokens more as a ticket to participate in an exciting and emerging economy. It is like Oil that is needed to run your car. You are being the Oil or the gas to fuel your car in order to participate in real life. You are not buying Oil or Gas to keep it in some barrels in your garage so that you might sell it one day for more.
Security Is Important
Another very important lesson is that your security should always be first! The famous saying “Not Your Keys, Not Your Crypto” is still very much valid. Many people are forgetting that the crypto space is still a young and emerging industry where there are still not many regulations. There are enough people out there that are trying to grab a quick buck by scamming people and it should be your number one priority to protect yourself against such people.
This is why I would always advise new people in this space to secure your valuable coins and tokens and use your own Hardware Wallet! Especially for Bitcoin, this method of storage is important. With a hardware wallet you can be sure that your funds will stay in your possession rather than being dependable on the security mechanisms of a centralized exchange.
Do Not Fall For High Yields
If the yield is too high, you are the yield. This is a very interesting lesson that I learned over the past months. With DeFi coming up, many projects tried to attract investors and people with very high, and partly astronomical, yields. While I must admit that I have fallen for these high APYs of 100% or more, I must admit that these yields are just unsustainable. In many cases the amount of tokens will get paid out, but the actual value of the token is falling quicker than the actual yield can pay you back.
In a nutshell, if something is to good to be true, it probably is not. This is why I am now staying away from these high yield paying projects. On top of that it is also very important to do your own research on the projects. In many cases the whitepaper can already tell whether this project is worth investing into or not. Furthermore, if the team behind the project is staying anonymous, it is probably a good thing to stay away from this project.
Simplicity Is Key
Whitepapers is the key word that brings us to the last lesson of today. Simplicity is always key! Whether it is in your current job or in the crypto space. If somebody is throwing around big technical terms and you feel like you are not understanding any of the stuff he is saying, there is a very high probability that the person has no idea what they are saying. This means that not you are the problem for not understanding it.
If somebody knows his stuff, he will make sure to explain things as easy as possible and for a new investor understandable. In the end, the smart investors are only investing into stuff that they understand. At least this should be the case. This means that the pitcher of the project should make sure that his potential investors should understand what they are saying and what the project is all about. If the whitepaper is full of formulas and unnecessary long, you could be almost certain that somebody tries to hide something behind a massive block of text and complexity.
Conclusion
All in all, I must say that these lessons helped me to understand the crypto world more and more. It might sound like some sort of resignation towards crypto but it should be the complete opposite. In fact my aim was to motivate people to be more aware whilst navigating through the crypto world and make sure to select the right project to invest in. Especially during the bear market we have the opportunity to select some winning horses that might bring us closer towards our financial goals.
Published by ga38jem on
LeoFinance
On 5th June 2022
Posted Using LeoFinance Beta
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High Yields are definitely something to be wary, especially if one hasn't done the proper research and falls for the magic numbers without being certain the project is legitimate.
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Posted Using LeoFinance Beta