Investing in anything that is profitable always has it's traps. That is why you have to be twice as diligent when investing into things like cryptocurrencies that have the potential for super high gains.
While everyone thinks it's Christmas because cryptos are the highest rate of return out of any investment class because we are in a the 'gold boom', you still have to be vigilant about the wider issues with making those gains.
But it's a gold boom right? You can put a blindfold on and still make money, right? So why am I depressing you and making you think about things like traps to investing? It's all gravy, right? Nothing can go wrong. Everyone who puts their time, money and energy into crypto investing is going to be a multi-millionaire right?
I don't think so.
Not when I see some pretty brainless approaches to crypto that lack an exit strategy and miss the point of the exercise. Namely, cashing out into other tangible investments and improving your lifestyle from now until the day you die.
Quick gains are very different to long term gains.
"Diversifying your portfolio" to many new crypto investors has come to me "buying some Ethereum and Bitcoin Cash to go with your Bitcoin". But buying 10 different coins to guard against potential loss is not diversification. It's still putting all your eggs in the one basket. The basket of cryptocurrencies.
So, what happens if blockchain technology fails big time or there's a massive hack? What happens to your 'diversified asset portfolio' then?
As I said, there are a variety of traps you can fall into with crypto coins. Some of them technical. Some of them psychological, which are the ones that interest me most given my actual career is in the sphere of improving how people think.
One of my favourite ( and most dastardly ) traps with cryptocurrency investing is what I call 'the *addiction to infinite profits'. ( *Personally, I'd like to know the effect of Bitcoin on brain chemistry because you can bank on those skyrocketing graphs triggering the same pleasure centers that drugs like heroin and opiates do. I wonder how many 'investors' are actually in control of themselves and their portfolios... )
So what is 'the addiction to infinite profits' I keep yammering about but not actually defining? You will know this one yourself. It's that twitch you get. That desire to keep rolling over your crypto profits into buying more cryptos. It's the desire to build the biggest snowball that will return even more profits.
Gollum from The Lord of the Rings was a great example of an addiction to infinite profits. He was a warning against excessive HODL'ing and showed the unhealthy side of emotional attachment in financial investments.
So what is 'the addiction to infinite profits'? It's an addiction to rising profits but little or no actual cash outs.
It's that thought in your mind that colors everything in investing and clouds common sense at times. It's a dominant thought. A powerful one. It's the thought that if you cash out, sell down or transfer funds from cryptos to the real world, then you are losing. Losing money. Losing profits. Losing gains that could have had if you had have left all your money in crypto.
It's the thought that keeps a count of all your investment mistakes and keeps a tally of "what you could have had" if you hadn't made those mistakes. It's the voice that tells you not to cash out when you are about to click the sell button. It's the reason why you hesitate lowering an amount of coins. Because more coins, is more profit, right? And less coins is less money...
The addiction to Bitcoin and skyrocketing profits is a real thing. And I am guessing that the brain chemistry and emotional triggers are just as real. Yes, there are huge profits in cryptos. But alongside that is the thinking and an emotional attachment to those skyrocketing gains.
The brain stuff is what will sink many people in the end.
What I am talking about is a thought pattern that divides you when you decide to sell. Distracts you from taking profits. Diverts your attention away from the actual goal of investing. I.e. Buying something real with your profits vs living on the promise of greater profits in your mind.
While rolling your profits back into new coins is a good move, it's only a good move when it is part of an overall, well thought out strategy. It's a smart thing to do when it's the smart thing to do. It's not the smart thing to do when it is an automated reflex you have because you are controlled by the desire to earn more and more and more.
Mark my words, the thought of infinite profits is a thought that gains mass and momentum in your mind the more you profit. It is a big reason why many unthinking investors will end up holding nothing.
Personally, I wonder how every crypto investor on the planet uses their coin portfolios to build themselves and their families better lives. How many people are actually winning? Despite the soaring profits to be made, I highly doubt many investors will still be reaping the rewards of those profits in the long run. Once the gold boom is over.
Getting into cryptos is easy. Getting the money out into other asset classes is the hard part. That requires maturity.
Buying sports cars like Lambourghini's and other depreciable luxury items doesn't interest me one bit, except for maybe an ocean cruise at some stage. Whereas buying rental properties, a working farm and maybe an icecream van on a beach in California does interest me. While these kind of 'slow assets' don't earn as high a rate as my precioussss Bitcoin, I really don't care because they are tangible, they are mine to hold and they will earn money once the Bitcoin gold boom is over.
To buy into tangible assets, I need to be smart. I need to be aware of the opportunities in crypto as well as the risks with it. Particularly the risk my own brain poses to my success. I need to both (a) grow my portfolio and also (b) funnel the profits from the intangible world of digital blips and into the tangible world I actually live in.
As an amateur investor in cryptocurrencies, I am sober to my brains addiction to earning infinite profits. I am well aware of distorted perceptions. But I wonder how many crypto investors are aware that their brain chemistry is slowly being stolen from them and is changing the way they think. Replacing the goal of an amazing life, with the goal of an amazing coin portfolio of blips and hash codes.
Thanks for watching,
Brendan Rohan - Indie developer of 'next gen' natural medicine from Melbourne, Australia
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DISCLAIMER: This article is written by an amateur investor and is offered purely for information purposes. This is not financial advice and you should always seek the advice of a finance professional.