By frank corva
Before I started writing about digital assets for a living, I was studying to become a mental health therapist.
In my clinical social work classes, I learned a lot about the causes of depression, anxiety, and other mental and emotional disorders.
Interestingly though, I don’t remember a chapter in any of my textbooks that focused on what it feels like to go from having more money than you ever thought (on paper) to being broke as a joke in less than a year. . year.
My guess is that most of those social work textbooks were written before cryptocurrencies existed.
But now crypto is a thing.
And anyone who has invested a substantial portion of their net worth in the asset class understands the difficulty of managing the adrenaline rush that floods your system during bull markets and the gut-wrenching feelings that come when digital asset prices plummet during bull markets. bear markets.
Also, if volatility doesn’t bother you, the stress of avoiding hacking and phishing scams, as well as the challenges associated with self-custodying your crypto assets in a Lastedwallet almost certainly it will.
So, it’s time we talked about ways to mitigate the negative effects that cryptocurrencies can have on your mental health, because if you learn how to invest in cryptocurrencies properly and safely, it can have incredibly positive effects on your overall well-being. .
Here are some tips to help you stay sane as a crypto investor.
Manage risk
Risk management in crypto is multidimensional.
Not only do you need to be aware of volatility, but you also need to learn to self-custody of your crypto assets — ideally with a hardware wallet — to keep your assets safe and under your control.
But when it comes to real investment principles, a tried and true way to manage risk is dollar cost averaging (DCA) on your crypto positions.
If you invest too much in a speculative asset that has gone down in value, learn how to cut your losses before they cause you too much pain.
Lastly, please please please do not use leverage in crypto unless you are a mega professional trader. The volatile nature of cryptocurrencies gives investors the opportunity to earn outsized returns without leveraging themselves.
Half of being successful in crypto is not blowing up your account while being cautious and patient.
Profits will likely come if you play this game sensibly and manage your risk responsibly.
If you don’t manage risk, be prepared to feel all sorts of pains, rather than the joy of above-average profits.
Size your crypto position correctly
The term “correctly” is subjective.
For some, it might mean not allocating more than 5% of their portfolio to crypto.
For others, your body could tell you when you have too much exposure to cryptocurrencies.
In George Soros’s seminal text The Alchemy of Finance, he shares how he would feel pain in his back when his portfolio felt out of balance. When he felt the pain, he made changes to his folder until the pain subsided.
Our bodies are more intuitive than we sometimes realize.
So, if you feel pain in any part of your body like Soros used to feel in his back, you may want to hesitate to make a fiat-to-crypto trade or consider reducing your crypto position size.
Stick to blue chip cryptocurrencies at first
If you are new to the crypto space, the best thing to do is start your crypto investment journey by accumulating sats, or buying fractions of Bitcoin (BTC), rather than buying a hot new altcoin.
BTC is significantly more volatile than a traditional financial product like the Invesco QQQ Trust Series 1, the index that tracks the Nasdaq. But it is not as volatile as altcoins.
As the crypto markets continue to mature, the volatility of BTC is likely to decrease but, for now, it remains a notable factor to consider when investing in the asset.
Think of your initial investment in BTC as a down payment to learn more about the crypto space and not a way to get rich quick. Doing so can save you a great deal of unwanted anticipatory anxiety.
Don’t put all your eggs in one basket (altcoin)
If he Terra LUNA crash taught us something, is that it is better not to have all your eggs in one highly speculative crypto basket.
In the weeks after the Terra LUNA ecosystem collapsed, those who lost badly to the accident comforted one another online and posted information about suicide hotlines on the r/terraluna subreddit. The mental health of those who had invested much of their net worth in the Terra LUNA ecosystem was fragile.
While not all new crypto projects fail as spectacularly as Terra LUNA, most fall 80-90% from their peaks at some point or another.
Be aware of this almost inevitable nosedive if you find yourself about to dump your child’s college fund into the next altcoin that some influencer (we’ll get to them in a bit) proclaimed will go to the moon. If he does, he can save him from a stomach ache and help preserve his relationship with his partner.
And if you make an all-in bet that pays off, keep the following tip in mind.
Taking profits regularly during bull markets
unless you are totally religious about your investment in crypto, it is better to learn how to make a profit in a bull market.
When the coin or chip you have invested in increases by 30%, 40% or 50%, withdraw some money from the table. And keep doing it until you’ve eliminated your principal, or more, from your investment. It can be quite a liberating feeling.
Getting to a point where you are only investing with your earnings can significantly reduce your stress.
Do your own analysis
Crypto markets are often driven by narratives driven by crypto influencers.
Crypto influencers are not omniscient shamans or gurus. In fact, most are just the opposite: they are often charlatans and swindlers. Most of them get paid to promote specific coins.
So, don’t get carried away by what an influencer has to say about a crypto project.
Instead, do your own fundamental analysis of why you think a crypto asset is worth investing in.
Learn to read graphs, too. If you see that a coin is up 1000% in two months, it might not be the best time to buy that coin.
Learning to do your own analysis insulates you from the emotional whiplash that comes from feeling like you have to buy every new crypto trend.
Cheer up
I know the bear market hurts.
I made my first cryptocurrency purchase in January 2018 (XRP to the moon!), and proceeded to lose 70% of its value over the course of that year.
Then when the 2020-2021 bull run came around, I didn’t make enough gains near the highs.
I share this to illustrate that I am well aware of the emotional rollercoaster that investing in cryptocurrencies can be.
However, what keeps me going is the notion that bitcoin is hope — financial hope at least — both for myself and for the millions of other people around the world who have invested in it and believe in it. The values the asset retains.
This week we celebrate the 14th anniversary of the launch of the Bitcoin white papera document that some cherish as much as a religious text or a government constitution.
If you haven’t read it, I suggest you do, because having a deeper understanding of the nature of the crypto assets you’ve invested in is another way to mitigate some of the anxiety that comes with holding those assets in a bear market. .
Because if you’re just here to gamble, the adverse effects of losing a significant portion of your net worth in crypto will only amplify the psychological and emotional challenges you’ll inevitably face when investing in this asset class.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
