" To the best of my understandably shaky recollection, the first time I messed up in crypto it went something like this."
- James Patterson, edited by yours truly
So now you know I'm a James Patterson fan. With that out of the way, I'm going to tell you a story. It's the tale of a crypto idiot (that would be me). Grab a drink, perhaps some popcorn and get ready to have some fun at my expense but most importantly, learn the lessons contained within my many mishaps in the world of crypto trading and investing. It will save you time, money and anguish. I promise. So here goes.
First round: Learn to use your tools (my first trading account).
August 22 - 2017, saw my Kraken account sign up process begin (I could easily stop here as signing up with them was probably my first mistake. With a verification process spanning the best part of four weeks, my nervous system was nearing breakdown by the time I was able to deposit funds with them, not to mention the fact their infrastructure has been under heavy load every single day I have logged in. Every. Single. Day. I guess business must be good for them.
(Edit, they have recently upgraded their infrastructure and I feel the need to point out so far I have not had a single issue with them so kudos there).
I deposited my first two grand into my account. I was a big believer in Ethereum at the time (not that I'm not now but I was quite big on it back then), so much so that my first two trades went into both Ethereum and Ethereum Classic. Just like that. No previous research of any market trends, the projects themselves or anything like that, because why not?
Before I start explaining to everyone how I messed that up let me show you a little something:
There you can see my Ethereum Classic buy. And now for the next mess up. See something else kinda strange? Yep, that would be rollover payments for a margin trade. Margin trade? I don't recall placing a margin trade order, or so I say to myself. So I went to check what happened. Apparently the platform had leverage times five on by default when doing that trade, so I was long Ethereum at times five leverage. Great! I said to myself, more bang for my buck. Time to take a couple of days off, one doesn't want to overtrade and overanalyze right?
Want to know what happened next? check it out:
Or if you prefer a more visual take on the situation:
The first red dot you see right at the red bottom of that big red candle was Kraken liquidating my margin position. For some reason the chart doesn't show the point at which I bought that position but I'll make it easy for you. See that market top with the quote 332.17900? see the big red candle after that? in the upper half of that candle is where I bought. This from a guy that knows exactly what a bearish engulfing pattern is as explained by Steve Nison himself. I thought it was a small breather before the continuation of the climb.
I was "lucky" enough to catch one of the retracements. Market sentiment was running low, people were screaming on the streets...well, I might be overstating it a bit but you get the idea. The fact of the matter is Ethereum dropped so much that my leveraged positions liquidated themselves and I lost the full investment on those. ETC had such a drop that I didn't think it possible for it to recover ever again and decided to sell before it went down anymore... nearly a grand and a half dissapeared into thin air in no time at all.
As for the second set of green and red dots...
Second round: I said, learn to use your tools!
I'm not one to give up at the first sign of failure so I told myself I could do better than that and deposited another two grand. Now I was ready to hit back.
At the time I read about what I thought (and still think is) a very interesting project by the name of Enjin. I could not buy it on the market because it was still in ICO stage. I wanted in on the idea so I bought Ethereum to get my tokens. The plan was to invest one ETH into it and see how it went.
The process of buying one ETH should have been fairly straightforward with all the knowledge and practice I now had with Kraken. Instead this is what happened:
You might prefer an even more visual explanation so here is that previous chart again:
As I said, I wanted to buy one ETH, only one. The platform showed an error log stating it had not done the transaction so I tried again. Showed me the error again so I tried one more time, only to find out it had bought three ETH instead of the one I was after. I tried to make the most of it by transferring a little more than one ETH to Myetherwallet to buy the Enjins as I knew I would need to pay fees and didn't want them deducted from the originally planned investment.
So lesson learned, the platform sometimes will tell you an order didn't go through when in fact it did. I also discovered other times it will tell you it did go through but you won't see it for a while in your logs. I can get used to that I guess.
To top it all off I decided to sell the "unneeded" ETH right away, at a small loss. Seriously, you do not want to look at the ETH chart form the point I sold on. Never a positive chart looked so depressing.
Third Round: my first ICO
I bought my Enjin tokens and I was a happy camper. There was some talk that there would be a big dump of ENJ because it was going to start at a very inflated valuation compared to that of ICO stage. I seem to recall reading up to thirty nine cents somewhere but I could vey well be wrong (
The matter needed investigation and investigate I did. Turns out my ETH could have given me as much as eleven thousand ENJ had I bought at the beginning of the ICO instead of the four thousand I got, hence the dump. Still I decided the project looked good anyways and I was going to stay put since I didn't have that much skin in the game and selling at a loss again would be nothing short of pathological. Saw ENJ as low as two cents at some point, thought of buying more, discarded the idea to avoid all the hassle from before and risking a bigger portion of my already limited starting capital... and then of course it exploded a couple months later.
But many fun things happened to me before that story so let me entertain you with those first. Like this one:
The green dot is me buying once more into the hype and not checking the situation rationally. I even had the gall to believe I was buying a dip...
This one is me deciding a twenty per cent loss needed to be cut before it got worse only to see BTC pick up from that point on once again...
...and this is how BTC unfolded in the weeks after I bought and sold at a twenty per cent loss. For those of you who didn't bother looking for a chart on Eth in my previous story it looks very similar to this one. Again, never a positive chart looked so depressing.
Fourth round: things can only get better, right? Right??
Can I get any dumber and still make money? Yes I can!
The first set of green and red dots is the one we just talked about. The next two was a small trade in which I simply got lucky. No matter how much I try to rationalize that trade there is simply no way I made money on that one because I'm a better trader than I was at age six.
The highest green was the day I bought BTC to stay on BTC. You can see the dates, I think you will recognize that part of the year and what happened there.
The second green dot on that red candle with the really long wick should have taught me a lesson but for better or worse it didn't. My account had ninety Euros left and i got it on BTC... on times five leverage (really). I almost wish the market had tumbled and kicked me out of that position the same day. Perhaps I would have learned the much needed lesson once and for all.
You don't trade on margin in any market or asset with the ability to drop fifty per cent in price in less than a week.
It is in fact right there in the chart for all to see; fifty per cent drop in less than a week, even if it was brief. That trade went well though and I made a whopping sixty two Euros out of it.
I also managed to somehow get cocky after that, thanks in no small part to other shots of luck:
I dare you to look at all the previous charts and find a pattern with my trading...
So although I had recovered some of the initial two grand deposit the conclusion was that I need to be more patient with my limited capital. Remember this chart?
That buy at the top of the market, followed by the small margin trade that went well and that last buy?
The top buy and the last buy was me converting to satoshis to go to another exchange. Limited pairs on Kraken, slow unreliable platform and no lambo for me here (I really, really, really wanted to insert the word lambo somewhere in my story. You know you secretly wanted me to do it).
Fifth round: looking for greener pastures
By now I was starting to think there might be something off with the way I was doing things in the crypto world. After reading all those stories of rags to riches and seeing everything moon before my very eyes it was hard to believe I was actually losing money doing this. Something needed to change. I also got the idea of exploring the Enjin experience on a deeper level.
The plan was to look for other projects that looked good and had an ICO structure like that of Enjin where an initial dump might be a distinct possibility, except this time instead of buying the ICO I would wait for the dump and buy at the discounted price. That would help me mitigate the impact of not getting the maximum possible number of tokens for my money and also to have my funds available for short term trading while I waited for those post ICO firesales to unfold. In retrospect I think I fancied myself quite a bit richer and experienced than I actually am.
So after having tried the Etherdelta exchange (not my cup of tea) I decided to go for Cryptopia since it was the only exchange listing Electroneum. It also had Enjin so I was sold. Did not bother doing some fact finding or reviews of the exchange. You know, my style of doing things (I have to say that so far I haven't had an issue with them but that does not mean one should not research where they are going to deposit their money).
After the Enjin situation exploded ( I should say mooned though, from twelve hundred to three thousand within days and true to form I only caught the first three hundred satoshis)I sat down to do some serious analisys. In previous weeks I researched Electroneum, which for a brief moment caught my attention but was left aside as I didn't think splitting my very reduced capital into more than one token was the best way to go about it. It was time to do some more digging.
I did check all the usual suspects, Reddit, Twitter, Youtube, Github, forums... My research made me think two things about this company.
Number one, the idea behind the concept might be worked out on their part but explaining it to the uninitiated for mass adoption in its current form might be a bit of a challenge, making it difficult and slow to gain traction ( I know if you have read this far you probably understand Electroneum better than the masses so don't bother pointing it out. I know how smart you are. Really).
Number two, These people knew their marketing so the initial hype for the project in a market that's basically moving by hype was pretty much guaranteed. It was definitely a buy for me.
And so I bought in. Within twenty four hours ETN had more than doubled in price. They announced a partnership granting them exposure to sixty five million potential customers. I turned smug pretty fast. My miserable seed capital now looked way more healthy and as a result you can probably imagine I thought I was a rockstar, silly as it may sound.
It didn't take me long to star looking for the next doubler. I told myself "I have the talent to find them, just need to stick with them until it actually happens". I cannot begin to tell you how stupid this train of thought is without being embarrased myself. Looking back it's like thinking because you lucked out into buying a stock that doubled overnight you were Warren Buffett.
But I digress.
Back to trading. I started looking at other trading opportunities. I'm not even going to try and lie saying I looked for investments. I wanted fast money and I wanted it even faster. I was now jobless and nothing but instant success would do. I had turned all my funds into Satoshi for a reason: I was moving trading platform. I moved platform for a reason too, to make money at lightning speed!
Sixth round: the dark side
I discovered the pump and dump groups on Discord and Telegram. Spoilers, I did not enter a pump and dump and no, it would not have been a good idea. I followed like three of the supposed pump and dumps. Leaving aside the fact that in any other financial market you can go to jail if you get caught organizing one of those, the amount of people that ended up holding the bag was really quite sad.
For those of you who don't know, let me explain to you how these things work.
In theory, a lot of people join together with a medium of communication. In this case let's call it Discord. It could be Telegram or Snapchat or even Facebook, doesn't really matter.
A group of people (or perhaps a single person) decides on a coin in which the entire group is going to buy at the same timeand when the price is very high, sell for a profit.
Really.
Where to start on this? let's begin. For one thing it is illegal in every other regulated financial instrument in the world. Price manipulation. You get caught and bad things happen. Of course this is crypto land, still no regulation so nothing happens in legal terms, at least for now.
Perhaps moral grounds? You artificially inflate the value of an asset and people outside of your group see a chart with a pattern that indicates it is a good buying opportunity. Except it's fake. Now those same people will have boght said asset at a price that does not reflect its true value. In these groups jargon that is commonly know as "holding the bag". So you have tricked someone into paying you more than the fair value of something. One could argue that this is free market and no one is pointing a gun at anyone to buy anything and those buyers should research better and because this is a growing market they eventually will recover their investment, yadda yadda yadda.
I'll buy that one just for the sake of argument, but we all know there is no argument about what has happened there. Some small guy has done to other small guys what everyone has been complaining for years the corporates have done to retail investors. Whatever.
Ok so at least that other group entirely profited from this thing right? wrong. That's what'sreally funny about it, even most of the people in the group will lose out through that specific action in which they have participated.
And how is that possible?
A couple of reasons for that. First and foremost information assimetry. Not everyone gets the same information at the same time so not everyone can act on it at the same time. It gets even worse. In the same group there will be ranks, just like in the military. The higher your rank the sooner you get the tip. How do you acquire rank? by signing up more people to the group.
I've seen such thing as having four or five different ranks with a planner stating openly how much sooner you get the tip. If you are the general you give the tip so you are invested first, people with the rank of Colonel will get the tip at x time, the next rank (let's say Captain) gets it one second after the Colonels. The Lieutenants get it one second after the Captain. Sargeants get it one second after lieutenants and Corporals one second after Sargeants. In one of the groups they went so far as to reduce those times and make half a second per rank.
Remember, you acquire rank by inviting more people to the chat that will get the info last of them all unless they start inviting people fast to get rank themselves. See where this is going? The math doesn't add up. If no one outside of that group invests a cent during the pump at least half the group is by definition handing over money for free to the other half, which is actully a very generous assesment because it implies everyone is "investing" the exact same amount of cash and/or buying the exact same amount or tokens (can't be bothered to run my logic programs to see which is the correct one but you know what I mean).
Which bears the question, why would you willingly put your money in a scheme in which it is plain to see you start with a serious disadvantage? It gets so bad that they put a price target on the pump, the move doesn't even make it half way through to the "target" and you see them congratulating themselves on achieving the pump ( I personally believe they congratulate about achieving the dump but what do I know?).
If you are lucky (and slow) you will get to a group that talks a lot but doesn't make anything happen. Which is most likely good in the grand scheme of things. Come to think about it part of the thrill for the organizers might be the sense of power you get when you can make a chart move.Must feel like a Gordon Gecko of sorts, even if it is done in a micro exchange with a total volume of les than half a BTC.
I was going to get you a snapshot of one of these groups and even some dark conversations but I can't be arsed getting in again so I'll give you a cat pic instead.
So what's next?
Seventh and last round: I win, for now anyways
Next is recap and self intervention time. You need to understand who you are. You need to know your character and your flaws, to see things for what they are. If you haven't noticed yet ( answering the question of whether you see a pattern in my trades), after my first trade in which I lost over half my starting capital most of my trades have been either very short or literally day trading (I've also done minute and even seconds trading).
I've gotten entry points wrong, read market trends badly, sold too soon, bought to late, been a victim of FOMO (that's fear of missing out for the uninitiated), over traded, changed plans and strategies even when they were working well, jumped into positions without doing any research, looked for shortcuts and cheats to avoid putting in the time to learn not only the basics but how to get to the next level.
Even so, I left Kraken with .17 BTC and joined Cryptopia with .21BT (After adding the Enjin tokens). As of this writing the valuation of my holdings is at .46 BTC (it has been as much as 0.61BTC but you will have to wait for both that story and my secret crypto ability, very recently discovered).
You need to understand that you are making mistakes before you can correct them. I'm now reading a book called The One Thing by Gary Keller and Jay Papasan. It talks about finding the one thing you can do at any given time or any given situation, be it at work, in a personal relationship, in business or in anything really that will make everything else easier or downright unnecessary. The Pareto principle of the Pareto Principle of the Pareto Principle if you will. It is a great read and I thoroughly recommend it ( I should plug an affiliate link for this or something, right?).
So what would be that one thing? What one thing could I possibly do that would make everythingthing else easier or unnecessary after listening to this story? I think you know the answer. If you don't, you'll have to wait for the next installment in this series.
Feel free to give me your opinion on what you think is that one thing.
PS: I just survived seeing my holdings go down a bunch after the big crashes with futures, China,South Korea, the Bitconnect fiasco and whatever else was in that plate. And I didn't sell. This is the beginning of my coaching career in cryptos. I will soon be selling Bitcoin courses like that guy from the Youtube ads. Mark my words.