It takes 3 cycles to make money in crypto

It takes 3 cycles to make money in crypto.

The first cycle, you lose money. You get in near the top after hearing you could make money easily, and ride it all the way down. Hopefully, you learn your lessons and stick around; most quit. Maybe you also get caught in a an echo chamber or are a victim of clever marketing, and put too much hope in a coin that’s going nowhere. Maybe you also try to ‘trade’ to compensate for your losses; you fail, and lose most of what you put in, which was more than you could afford to lose. You remember the one time you had large unrealised gains in one of your many attempts, before you lost it all, and use it as an example to loudly tell others how easy it is to make money in crypto.

The second cycle, you make some money. You’ve learned not to buy the top, at least, and maybe you buy at a good time. But you’ve not learned when to sell. You sell far too early. You underperform drastically. You haven’t learned which coins to buy and which to let go of, so you buy everything indiscriminately; and suffer. You spread yourself too thin. You thought every coin you chose would go up 100x, and you’re disappointed to see 95% underperforming bitcoin. You still try to trade, but it’s not profitable. You try using leverage, but you always seem to get liquidated, mysteriously, even when you were ‘certain’ you wouldn’t, and ‘only’ use ‘moderate’ leverage like 3x-5x. “Maybe it’s market manipulation”, you think. You still tell others how easy it is to make money in crypto, but you’re more realistic, and include buying and selling at the right times.

The third cycle, you make a lot of money. You mostly buy and hold. You take concentrated bets, rather than ‘spray and pray’. You only buy what you deeply understand, and what you can keep track of. You don’t FOMO into anything; you really don’t mind missing out. When everyone loses their head in hype, you sell. You don’t care about the latest shiny new coin, you’ve seen them fail enough times to stop caring. You don’t get sucked into ‘trading’. You’ve learned to trade less, not more. You’ve been liquidated enough times to know that even 1.5x leverage is too risky, and not worth it. You get annoyed at the overenthusiastic newbies telling everyone how easy it is to make money in crypto. You caution your friends, tell them to stick to the major coins, and buy in the bear market with self-custody and a long-term mindset.

The fourth cycle, you’re rich.

You know it’s impossible to time the exact bottom or the exact top. You just DCA when the price is low and HODL through everything, selling only when the market is euphoric.

You’ve learned that a 100x return is not 50x plus 50x, it’s 10x followed by 10x. It’s also 5x followed by 5x followed by 4x; you realise the value of small reliable returns, rather than chasing extraordinary one-offs.

You look back on when you started investing, and realise that if you had just held bitcoin for a very boring 5x, followed by 5x, followed by 4x, you’d be so much better off.

You look back on the 2% fee you paid when you first bought crypto, and realise that it would be worth 100x now.

You’ve learned that keeping money is far more important than making money. You’ve learned that if you take a 75% drawdown, you need a 300% gain just to break even. You focus on avoiding losses, rather than chasing gains.

You’ve learned about reflexivity – that price and fundamentals have a feedback loop, and that you just need to HODL an appreciating asset.

You’ve learned that anything can happen – ANYTHING – and you are never certain of future returns. You rarely feel certain about anything, and when you do, you recognise that you’re probably missing something.

You realise you can make enormous wealth just by HODLing and having patience.