Why you shouldn’t actively trade crypto & what to do instead

There are a number of reasons why you – yes, you, the person reading this – should not actively trade crypto. I think it's not unusual to get your start in crypto through trading crypto… Maybe you even watched some YouTube videos on technical analysis and charting (aka astrology for traders). But it probably didn't take you too long to notice that you were losing money. And if you were smart, you stopped.

But why is it so hard to be good at trading? Well there's a number of reasons…

First, the psychological ones. There are a few psychological phenomenon relevant here – a cognitive bias toward avoiding loss called loss aversion, the famous FOMO (fear of missing out), and the sunk cost fallacy (our tendency to throw good money after bad – think doubling down). Notice that all of these cause our judgment to be irrational…loss aversion will drive us to make irrational decisions to avoid loss, FOMO makes us make irrational decisions just to avoid missing out, and sunk cost fallacy will make us irrationally decide to put more money in when we should cut our losses.

All of this comes to bear when you're staring at a trading screen and trying to make decisions about whether to buy or sell. And these cognitive biases can be very strong and you won't even realize it. To be a good trader, you need to be aware of all these psychological phenomenon and be able to counter them. Not everyone is capable of this. There are some strategies you can use like planning when you will cut your losses or take your gains in advance before you make your trade. You can even program this when you put the trade in so you aren't tempted to change course.

But let's say that you bought some token and you planned to take profits at 30% and it starts going up and up right after you buy… Ask yourself honestly would you cash out at 30% or would you be greedy and think it might go higher so I want to let it ride? I've made this same mistake through 3 bull runs and never cashed out 😂. Then of course at some point it comes crashing down and you lose not only your unrealized gains but probably some portion of your initial investment.

Next, the realities of the market… In every trade there is a winner and loser. Really good traders might win like 55% of the time, maybe. If you're an average Joe trading, you are at a big disadvantage because you are up against a lot of people and institutions who are more skilled at trading, have more information (including insider info), may have access to algorithms (btw: don't pay for a trading bot… anyone who has a trading bot that is any good isn't selling away their edge which means only bad trading bots are available to the public), and sometimes are just flat out cheating (like when exchanges mine the data they have to make profitable trades themselves)…oh and I forgot market manipulation as well.

Given all that, your likelihood of making winning trades is greatly diminished. It's possible to be a winning trader as an average Joe but it's very very unlikely.

So what drives people to trade? It's basically the fantasy of the moonshots, getting rich quickly with relatively little work. But that brings me to my final point: the amount of money you will make getting crypto is heavily tied to how much you put in. Sure some people put in $1000 and make $1m but that's incredibly rare. Most people who make $1m are putting in at least that much if not more. The dream of getting rich from the relatively small investment that most average people make is exceedingly low. And the people who try mostly end up losing their shirts.

So what should you do? Honestly, take an amount of money you are completely comfortable losing and put like 90% in BTC and ETH (split it how you want but id do more ETH) and then you can put 10% into moonshots or NFTs or whatever is fun to you.

Thanks for coming to my tedtalk