Crypto & Microcaps
Thoughts, experience and plea.
(All images take you to a special place if clicked)
Pump, Dump, Long & Short?
Why is everyone talking like this?
It might have something to do with internet culture.
COVID brought a new generation of investors into the market.
The internet was promising 10x on your initial investment!
The promises on discords and forums, paired with the large majority of the world having more time, meant that the markets became desirable to anyone and everyone hoping to transform their lives during our generation’s most unprecedented times.
If you’re looking for unconflicted and transparent advice, it’s hard to find.
The large majority in crypto and microcaps are not here for a long time; they’re here to make a quick buck.
The online influencers telling you to buy usually hold for pure profit, not for the belief or longevity in the investment.
Microcaps?
You’d think we would learn from historical data, and even Hollywood’s reminder of glamorised fraud, deception, and pure profit agenda didn’t stop investors.
(Great Movie, although I bet you’d hate being the victim.)
Crypto?
NFTs, DeFi protocols & currency. How do you funnel through and find the legitimate investment that will become part of your long term portfolio?
My Experience
Crypto
Late 2017 the following projects were part of my crypto portfolio. I initially invested approx $5000 collectively.
Bitcoin (BTC) $703.23
Ethereum (ETH) $94.40
Vechain (VEN now VET) 0.223
Decentraland (Mana) 0.012
Aave (LEND now AAVE) 0.0325
20-40 hours per week, sleepless nights and never-ending message threads, forums and research on how to 10-100x every cent invested.
I sold just before pre-peak 2018, exiting with a tidy profit and left $100 - $1000 in some index holdings and the larger coins just in case crypto came back.
There was also some residual leftover in everything due to trading minimums.
Fast forward to the 10th of October 2021.
I’m sitting in an Uber with the driver telling me to buy XRP and how it will change my life.
Time to login into the trading apps after 5 years.
Bitcoin (BTC) $61,888.83 - 8700.65% profit
Ethereum (ETH) $4,329.55 - 4486.38% profit
Vechain (VEN now VET) 0.130 - 41.70% loss
Decentraland (Mana) $1.35 11150% profit
Aave (LEND now AAVE) 979684.61% profit
I’m now going to share one of the biggest money mistakes I’ve ever made.
$2000 of MANA sold in 2018.
$30 leftover now worth $3345.
$5000 of Aave sold in 2018.
$.09 leftover now worth $881
If I had just left $100, I’d have $979,684.61.
You can do the numbers on $5000.
Please don’t ask me about BTC & ETH.
What did I do on the 30th of October 2021? I sold it all.
Withdrawing a touch over $15,000, knowing that if I left the money in there, I would deposit more, consuming my time and energy.
Do I regret it?
I regret not leaving all of my funds in the market as I didn’t need them back in 2018 when I cashed out, but… Hindsight is a beautiful thing.
Microcaps
It was the 31st of August 2012 and my “boss” at the time had shared the investment opportunity of a lifetime. Sundance Resources $0.32. The company had gone through some tough times including a plane crash in the republic of congo but there was light at the end of the tunnel.
My first experience of seeing someone lose after being so confident with their research, planning and knowledge of where the company was going.
I’m not sure how much money they had invested, but I saw a grown man cry.
In saying that, I have personally been able to cash initial investments out of Microcap stocks more than 10 times. RNU is an excellent example of this.
No, this does not mean you should buy RNU.
I can also share losses. Sundance is one of them.
Please note that you rarely see losses posted, documented or shared publicly.
They are a reality in life, and even the best investors will experience them in multiple market cycles.
The microcap market is turbulent and unpredictable. Of course, there are immense opportunities, but an even more significant loss potential comes with that.
What am I trying to say?
Before writing this, the intention was to provide you with an insight into how the world of crypto revolved and to help better educate how microcaps work. To offer you, the reader, an opportunity to make an unbiased decision on whether these investments suit you and your portfolio.
Crystal Ball?
Successful crypto and microcap investors know that trading is a probability business. Probabilistic thinking is trying to estimate the likelihood of a specific future becoming a reality.
The above applies to day trading and even long term holds.
To my knowledge, seeing the future is currently impossible.
We must instead predict the future by first seeing every possible future.
Where do you begin?
I am oversimplifying a highly complex task.
Estimating the future and probability is not easy. Who would have thought?
So, how do you start? How do you come up with potential scenarios, and how do you estimate the likelihood of them happening.
You start by guessing, and hope that you get better over time.
How do you get better at guessing?
Review the history and past performance.
This can provide detailed insight and reflection on markets and assets while providing hints about what might happen in the future as there were a group of people just as impatient, intelligent and irrational as the current group of people looking to invest in the NFT, Microcap Share or Crypto now.
Start by asking simple questions, such as;
How did Bitcoin perform against Solana historically in bull markets? What’s a conservative top-end price based on this history?
What happens when similar Microcap mining stocks release government backing news? How does price fluctuate once Hotcopper threads become discussions rather than strategic reviews? What would a conservative exit price be based on this?
What have similar IPO’s or ICO’s with hype done in the past? How do their charts look compared to yours?
How have other foreign-based ASX listed microcaps performed after -30% losses in a year despite promising financials and back to back good news.
Past performance isn’t an indicator of future performance, but if Usain Bolt and I ran a race, he would probably win.
History also doesn’t always repeat itself, but flared pants are back?
However, some say that pattern matching historical data can help model the future and assist in knowing when things go up and how likely a scenario is.
The better the investor, the more complex the questions about the past.
You’re still here
The large majority are bad at understanding and evaluating the value of a microcap or crypto asset. The large majority are even worse at evaluating price behaviours since you need a solid background in trading concepts, price charts and financial markets. Not a couple of Youtube videos or a course you bought for $50.
Should you invest?
99% of you reading this should not be actively trading in these asset classes.
However, if you’re already in it and if you JUST MUST buy in…
Please remove some risk; there is no get rich quick scheme. My Uber driver from the 30th of October, who sold his two properties and bought XRP to fund his yacht life, is hurting right now.
There is no link to anything above, just a very sad chart.
Do you still want Crypto / Microcaps?
The below is not financial advice. It’s an opinion. I’m sharing personal thoughts that are nowhere linked to any financial advice I provide or would provide.
Crypto
Being exposed to the fastest and most disruptive asset class in the last ten years is probably enough.
If I had just kept my holding in Aave from 2017 that alone would be worth $48,000,000.
Trying to day trade or choose what you think might be best is probably and historically not worth it.
Look at index options?
DeFi Top 5 Index (DEFI5)
Oracle Top 5 Index (ORCL5)
NFT Platform Index (NFTP)
Cryptocurrency Top 10 Index (CC10)
Degen Index (Degen)
NFTs are real and here to stay.
Masterworks has been letting investors buy Banksy, Jean-Michel Basquiat & Picasso since 2017, with annual returns of 14.3%.
The value of that random artist that blew up due to a community that's cool right now probably won’t be comparable to fine art. Choose wisely or look at projects that have a bigger purpose.
Microcaps
I get it, the gains.
Don’t allocate your whole portfolio here. Also, try not to make it your first investment.
They’re a gamble. No matter what anyone tells you or what story they have.
Use apps like Superhero or Stake, where you can buy $10 - $100 worth at a time to practice your trading or hold beliefs based on your research.
Summary
Start journaling your thoughts, questions, buys, sells, rules and everything in between.
Your investments are as good as your discipline and strategy, and when going into a new trade, you can recap on similar decisions in the past.
Alternatively, buy the dip, short the market, leverage to the eyeball and buy the Lambo.
If you’d like to discuss investment methodology and psychology further, click here.