Cryptocurrency Rewards Those With Diamond Hands
Updated: Nov 3, 2021
We live in a world where there is an incessant desire for instant gratification. More often than not people seek to experience fulfilment or pleasure without delay; when they want something they want it now. Its interesting that this often happens with an acceptance that there will be a foregoing of a future benefit in order to obtain a less rewarding but immediate benefit, whether it be entertainment, food, sex or in the context of this article cryptocurrency investing. Such as when a crypto degen blindly apes into the latest hyped up meme coin in the hope that it will instantly 'go to the moon', rather than applying some independent research and make investment decisions based on sound fundaments and then be prepared to wait for it to evolve, grow and hopefully become profitable.
It’s a natural human urge to want things now, but you will often receive more benefits if you wait. The obverse version of instant gratification is delayed gratification, it’s easier to see the benefits of delayed gratification but we struggle daily with the temptation to give in to our immediate desire.
Instant gratification is one of the most basic drivers in humans; it is the innate desire to experience pleasure and avoid pain.
A study at Harvard University looked at chocolate consumption. The study had two groups: Group A had access to unlimited chocolates that could be consumed and Group B had no access to chocolate at all.
After the study, both groups were offered some chocolate; Group B reported a higher level of happiness, plus they savoured the taste more, and those in the group were in a better mood afterwards. This study highlights what people think will make them happy isn’t always what will, and in fact you can have too much of a good thing.
It has also been found that by slowly and strategically watching TV shows has the effect of building excitement, as opposed to being able to binge on all the episodes over a single weekend.
If we experience more happiness through delayed gratification, why is it so difficult to choose delayed over instant, and is this a problem ingrained in today’s society?
The thirst for instant gratification has seeped into every corner of society, from retailers offering same-day delivery services, to instant streaming services, yearly upgrades of our tech devices, and an internet connection that will load a webpage in seconds.
With cryptocurrency investing having now become accessible to anyone with a computer or mobile device and an internet connection it was somewhat inevitable that this short termism, get rich quick mentality would become prevalent in the space as well. New investors approaching their investment thesis' with a belief that the market is going to instantly reward them more often than not discover the harsh realities of the volatile crypto market.
The fact that 47% of internet users will leave a page if it doesn’t load in 2 seconds or less quite clearly highlights how impatient society has become. It is said the internet is making us impatient, instant gratification can even be as simple as constantly pulling out your phone to scroll through social media when you have to wait in a queue.
I am in no way advocating that access to cryptocurrency investing should be in any way restricted, or regulations be imposed that would govern who can or can't participate. To the contrary, the cryptocurrency revolution is a genuine opportunity for the masses and not just the elite to participate in a period in history where life changing wealth will be made, and I think everyone should at least consider having some skin in that game. However, sadly I think the majority will fail to reach their full investment potential because of this desire to have the market reward them with money now! What all too many crypto investors fail to appreciate is that markets simply do not work like that.
The stock market is a device for transferring money from the impatient to the patient. - Warren Buffett
Sadly instant gratification is all too prevalent in the crypto space. In fact it is quite common to see newbie investors falling foul of the phenomenon known as 'Shiny Object Syndrome' where they are constantly trying to stay up-to-date with emerging trends and buy the next ‘hot' coin or token.
Trying to jump in and out of the market and from one coin to the next based on hype and pure speculation is more akin to gambling than investing.
People always think they can do this successfully. The reality is most of us can’t. We have no edge or advantage.
It’s no different than seeing a succession of red numbers on a roulette wheel’s history and thinking it’s time to bet black.
If you want to time the market, what's your edge? Listening to a YouTuber or reading a post on Twitter?
The crazy thing is that the average retail investor has no edge, especially in a market that is as volatile as the crypto market.
There will always be institutional traders, experienced 'Whales', or those who have certain inside knowledge who will always have an edge - they're faster than the majority of the retail investors. Way faster. It's a clear advantage that they exploit on a daily basis and they know it.
Add to mix the ease at which retail investors can add leverage to their trading, then you have a recipe for disaster. Leverage trading is sold as something that appears easy, but that could be no further from the truth. The statistics are quite clear in this regard. The following statement is on the top of the homepage of the widely used eTorro trading platform which offers primarily trading access to the traditional markets:
'CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.'
Whilst crypto bull markets present incredible opportunities, choosing winning coins and tokens, particular those small and medium cap alt coins that can withstand a bear market is nigh on impossible. They may run up in price very quickly, however the average investor invariably becomes greedy and fails to have an exit plan to capitalise on any gains made. The reality is most will lose 80-90% of their value in a bear market and will never recover.
Crypto 'Influencers' are Entertainers
Then look at the so called social media expert predictions. I say 'expert' very loosely as the majority of these 'Influencers' are merely entertainers who are all too happy to throw out wildly speculative price predictions, yet always look to cover their backsides by ensuring to tell their audiences "this is not financial advice."
The reality is this is pure click bait with the intention of getting the audience to watch a video. Naivety and greed clearly helps to pump the price of coins and tokens in the crypto market.
It’s hard to determine if that hot tip you want to buy is causing you to invest in a financial bubble where the easy gains have already been made or purchasing a cheap coin that’s a “value trap” and may never reach a new all-time high during your investing career.
When the inevitable market selloff occurs, due to a lack of experience retail investors will also feel pressured to sell early. Premature selling is likely if there is a short-term mindset at play, resulting in losses being incurred.
Do You Need to Be a Full-Time Investor?
Clearly most retail crypto investors have a full-time job not related to crypto investing. If you’re a hobby investor who has a belief in the technology and acknowledge that the space is going to revolutionize many aspects of business and finance in the future, being successful is quite simple, all you need to do is ensure that you stay in the market.
Crypto bull markets can exacerbate the very worst in human traits and emotions. When the speed at which prices rise are metaphorically tearing the skin off of people's faces there is immense greed, impatience and irrational decision making. People get caught up in the euphoria and forget that bull markets don't last forever.
If you fail to stick to a clearly defined investment strategy and plan but instead adopt a scatter gun approach constantly trying to chase the next shiny object that you hear about on a YouTube video or as a hot tip from a friend, the chances are you will fail. Unless you are prepared to find free time to research potential alt coin projects, simply relying on watching YouTube videos for that purpose is a recipe for disaster.
Do you have enough extra time and energy after juggling life’s other demands?
Professional traders live and breathe the crypto market performance and anything that is industry related that makes the headlines to make educated investing decisions. If you’re expecting full-time results with part-time effort, you’re dreaming.
Keeping Your Diamond Hands
With that being said, if you don't have the time to dedicate to researching and understanding the fundamentals and technical aspects of particular alt coin crypto projects all you have to do is set up a portfolio that you are happy to hold for years into the future; anything less is basically gambling.
Due to the extraordinary gains that can be achieved in crypto all you have to do is protect yourself from yourself. In the space this is seen as someone who has 'diamond hands', meaning they won't sell easily.
Consider this; if you had taken a $100 punt on Bitcoin in 2011 you would have been able to buy around 100 Bitcoin. If you then just put the Bitcoin to one side and had forgotten about it for the next 10 years, at todays price of $54,000 per Bitcoin you would have turned that $100 into $5,400,000.
I am sure that there were some extremely savvy investors who were able to keep diamond hands and resist the temptation to sell their Bitcoin and consequently they have been rewarded handsomely for their delayed gratification. However the chances are the vast majority of people who held the asset simply didn't have the patience to hold onto their coins for this extended period of time.
The infamous Bitcoin pizza purchase comes to mind. About 11 years ago one of the early adopters of the cryptocurrency coin purchased a pair of Papa Johns pizza pies using 10,000 bitcoins....which at todays price is $540,000,000!
In order to make a meaningful difference in just about anything consequential, the work you put in needs to persist long enough to break through inevitable barriers and plateaus. What seems like a static period may not be a static period at all—perhaps you just aren’t seeing the effects of your efforts yet.
Intellectually, this all might sound good. In reality, however, plateaus in a market, can be especially frustrating particularly if you are the type of person who is constantly glued to your phone looking at the price action. They expose all kinds of hidden motivations when money is involved.
Are you doing what you’re doing because you are addicted to external results?
Can you keep going without the constant dopamine (the feel-good neurochemical) hit that accompanies observable progress? i.e. selling your crypto because you feel that it has gone up in value and you therefore want to buy something nice with it to reward yourself.
Can you largely tune out the crypto consumer and influencer culture trying to take you off course with endless promises of 100x gems, unrealistic price predictions, and other enticing fads and shams?
How you answer these questions is key to your ability to experience long-term success. Sometimes you need to pound the stone over and over again before it breaks. That doesn’t mean your prior pounds aren’t working. The tension may very well be building, and you just can’t see it yet. A breakthrough might be right around the corner.
The stone that you pound in crypto investing should be consistently showing up and participating in the market. I am not suggesting that you over trade; simply adopt a disciplined approach whereby you are buying on a periodic basis.
Dollar Cost Averaging
One of the most simple, yet tried and tested strategies for long term investing is the Dollar Cost Average (DCA) strategy. Simply put:
Determine an amount of money you are not going to miss
Pick a timeframe - be that weekly, bi-weekly or monthly
Choose a particular coin or token you are going to buy
Without fail invest that money, on that chosen day each week, every 2 weeks or each month, buying that particular crypto
Using this method you effectively ignore the price and simply buy regardless of what the price action is doing. Over time the price you buy at will fluctuate and will become averaged out. Any stress or anxiety is removed from the investment decision.
Lock up your coins?
Another way in which you can save yourself from your own silly actions and ensure you keep your diamond hands is to consider locking up your coins for an extended period of time by using a DeFi platform or protocol.
By committing your coins or tokens means that you are not only earning interest regardless of the market conditions, but you are also unable to succumb to the temptation of either selling or exchanging them.
The fact that you would have to engage in a series of meaningful steps in order to unlock the tokens, which could incur a penalty in the process, allows you time to think about the decision and consider whether it is rational or not.
In the gold course I talk in depth about a particular product that I have found to work extremely well and I now regard it as my very high interest savings account.
There’s also this: practicing patience is also an important input to fulfillment. I’ve never met someone who described the best times of their life as “rushed.”
Based on my own experience in the crypto space—giving up on something that is fundamentally sound too soon is far more common than waiting around too long. This isn’t surprising. Humans suffer from what behavioral scientists call the commission bias, or the tendency to err on the side of action over inaction. If we don’t see results, we get impatient and feel a strong urge to do something—anything—to expedite our progress. But often the best thing we can do is nothing—staying the course, tweaking as we go, and letting things unfold in their own time. Instead of always thinking, Don’t just stand there, do something, we should at least consider thinking, Don’t just do something, stand there.