Authored by: @hetty-rowan

A truth we all should know

Yes, this title says it all, doesn't it? It's just a letter, but an all-important letter. That letter L before the word “EARN”. And what a truth it is that we should all know, and especially apply. LEARN before you EARN.

That's just a given with any financial investment you want to make. Before you invest, learn about the project. What is it? What does it do? And so there are many more questions that you should have answers to BEFORE you decide to invest in a project. After all, it's about your money, and you don't want to lose it! You want to earn more from it than you have now. And because that is the goal, it is also important that you learn first before you invest and earn.

Human Brains

We are dealing here with the human brain, and we are affected in many ways. We all know the success stories of people who have made big profits. As an early adopter of cryptocurrency, you have been able to make a lot of profit in recent years just by holding your Bitcoin! If you ever bought Bitcoin for 10 USD, and you still have it now. Yes, then you are talking about a profit that you probably did not expect yourself.

But right now it's not so easy anymore. After all, we are talking about a lot more money to start with for your investment. And Bitcoin is not just going to do a 10x right now. In fact, because it currently takes so much money to buy 1 Bitcoin, and the cryptocurrency market is very volatile, you are dealing with emotions here. And not just any emotions, but intense emotions can come into play here. And let our human brain not be so resistant to that now. We can be very rational, but once those emotions kick in, our rationality usually leaves very little.

Crypto is becoming more mainstream

At the moment we see that Bitcoin is becoming more and more mainstream, and the big profits are no longer available to most people at this point. But just now that it is becoming more and more mainstream, you see that there are people who jump in blindly because "The neighbor has made so much profit with it, he even bought a new car from it". What these people don't do is first learn how cryptocurrency works, they don't learn how the crypto markets work, they don't know that corrections of up to -40% occur with great regularity, and they don't know that there is a bull market and a bear market.

So what you see is that they blindly buy their 1st Bitcoin at a time when Bitcoin is at or close to an all-time high. Chasing the green candle but not realizing that the market will soon have a correction. And those corrections are necessary to keep the market healthy. Only it is not healthy at all for the people who confidently bought their first Bitcoin ... because they suddenly see their hefty investment drop by many thousands of dollars. The emotions kick in, they get scared, and they try to limit their loss.

Disappointment

The neighbor can say more but “This is the end of Bitcoin, I have to save what can be saved”. As a result, they sell at a loss and turn their backs on the crypto dejected. “That was once, but never again.” And then jump in on the high again the moment Bitcoin starts to climb again. This time they think they are prepared for the correction, and are holding their Bitcoin. Bitcoin continues to fall and panic strikes again. But they hold on, I have to get through this. He'll probably go up again tomorrow. Cryptocurrency is volatile. Unfortunately, the next day is dramatic and Bitcoin continues to fall. The news reports that Bitcoin has breached a key price barrier on the downside and the experts are forecasting a further decline. There is no mention of an increase. The panic takes over and again Bitcoin is sold at a loss. “Now it's really done!”. Only $25K of the original $55K remains. The disappointment is great and people don't want to know anything more about cryptocurrency. Could this have been prevented?

A lack of knowledge

I seriously think that many novice investors have a complete lack of awareness of WHAT they are investing in. They have no idea what cryptocurrency is and they also usually have no idea that there is no regulation in cryptocurrency. They don't know what decentralization means and that ignorance also makes them 'the perfect victims' for this market. There is nothing or no one to turn to for a wrong transaction, even if the price suddenly tumbles. Exchanges do have some form of centralization, but that can also be a problem. We all know the stories of shady exchanges who have been lurking their customers. Something that can never be completely prevented, but that you have to be prepared for in crypto. Then we have the DeFi piece. How many projects did we have who have done a rug pull?

Learning about what can happen, learning about what you invest in, learning who you trust your money to can significantly reduce the risk. And that's something a lot of people don't see, don't want to see and just don't think about when they step into the 'money-printing cryptocurrency world'.

Risk management

Often only the success stories are shared. Of course, no one is going to brag about how much money he or she has lost by making unwise and reckless decisions. And when they invest, they do so without any form of risk management. First, it's important to know that whatever you invest, you can lose. Therefore, only invest with money that you can afford to lose.

It is also important to have good risk management. Not setting goals causes emotions like greed to take over from your rational approach. You can have big profits one day, if you can't control it, you could end up with losses the next day.

Don't take your winnings

You may hear more often 'I buy 100 euros worth of crypto, and I'll look again in a few years'. It can be perfect that you make nice profits in the first months, maybe you double your bet or you can even turn this 100 euros into 1,000 euros. In the world of crypto, all this is possible. But what do you do if your initial value of 100 euros suddenly becomes 1000 euros? We then suffer from greed and leave it alone and assume that it will sometimes go x10, hasn't it happened before?

But then you haven't taken your profits and the market crashes. The price is plummeting and it doesn't look like it's going to recover. Of your current investment of 100 euros, you will only have 40 euros left at the end. That is a net difference of 960 euros. Basically, you lost 960 at that point, by not having risk management and not taking your profits in a timely manner.
Too good to be true
Using common sense is sometimes forgotten when we think we can earn a lot of money in a short time. The promises of crypto projects that guarantee that you have earned back 10x your investment within two weeks. We've all seen it pass and can only say one thing about it: if it seems too good to be true, it probably is too good to be true.

The world of crypto is a very beautiful and interesting market that offers a lot of possibilities. Besides the blockchain technology that can mean a lot for everyday life, investors are mainly looking for financial gains. We are often guided by success stories and by the ideology that if someone else can do it, you yourself are also able to make nice profits. But to achieve these nice profits, it is important to learn first and then invest.

Knowledge is power!

Without this knowledge, there is a good chance that you will lose your investment sooner because you have a lack of knowledge and are not aware of the crypto market.

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