5 Lessons the Cryptocurrency Market Taught Us About Investing

This article highlights important lessons we learned about the cryptocurrency market in both 2017 & 2018 and educates us on how we should evaluate the market moving forward.

Most ICO’s that have launched over the past 2 years have completely, and utterly failed. Yes, I’ve written about why this doesn’t matter – and it may still not really matter. We’ll get more into that in a moment.

But a lot of people – including myself – have lost money in the market.

It’s worthwhile to take a look at the past 2 years and see what the cryptocurrency market has taught us about investing.

Here are 5 lessons that every cryptocurrency investor can take into the future.

Understand What is Cryptocurrency

This seems like a basic point. Naturally we all understand what is cryptocurrency. But I think it’s worthwhile to dive into this a bit further.

The industry is changing so rapidly, that unless you’re trading on a daily basis, working in the industry or are really truly only looking at cryptocurrency on a daily basis it’s very easy to overlook the fundamentals of what is cryptocurrency.

As an application layer that sits on the blockchain there are many many nuances that true traders will dive into and understand – that can give you an edge if you’re going to be investing on a regular basis.

Yes, Securitized Token Offerings, Initial Coin Offerings, and coin market caps are easy enough to understand, but if the past two years is any indication on true clarity about the market – it’s that we are all still learning.

As any great investor in markets, bonds, commodities, foreign exchange or otherwise will tell you – they truly know and understand the core of the markets they’re working with.

Cryptocurrency is no different. My feeling is that re-visiting basics – despite the hype, the speed, and the chaos that surrounds a $5-billion dollar Bitcoin and Ethereum market cap increase in a single day – can only help an investor strengthen their market edge.

Look Beyond the PR and Marketing Hype

We are all human. As such we’re all predictable. Looking back on the investment lessons of 2017 and 2018, this is hugely apparent in the massive bull-run and spike of cryptocurrencies. It provides us with a valuable lesson.

As Dan Ariely of Predictably Irrational shares in his book, as an individual we may be unpredictable, but as a segment of a larger population or group (programmers, tech enthusiasts, crypto currency traders, etc.) we are very predictable.

One of the things that we have fallen for ages is the storytelling hype that connects to our inner core drives.

It could be the fear or missing on a huge opportunity. It could be the need to feel liked. Or the want to impress your peer group. It could be the drive to a higher calling.

It is these psychological traits that have driven marketing and PR for decades. You only have to look back at the father of PR – Edward Bernays – to realize that immense psychological power that went into developing PR.

Edward leveraged the insight of his uncle at the time – none other than Sigmund Freud.

These psychological concepts are at the base of what pull at us in the cryptocurrency investment arena. Companies leveraging massive discounts on tokens if you only invest now. Urgency – private sale is almost sold out. Potential for gain and success – this cryptocurrency will be the next Bitcoin or Ethereum, you’d better get in now.

The media adds to the flames, sparking your curiosity, your concern, your excitement.

But underneath all of this is the core investment – the core of what you’re putting your money towards. This is what we need to constantly remind ourselves of. Myself included.

A few questions to consider:

Are the underlying fundamentals of what this company says possible?
Are the underlying fundamentals of this team sound? Are they a good team?
What about this company is verified VS non-verified?
Is the market signaling hype?
Does it seem too good to be true?

You’ll Lose 8 of 10 “At Bats” & Core Startup Fundamentals Apply

The number may actually be more. Investing – from my limited experience – in early stage tech startups (which is what cryptocurrency is all about) is a very risky game.

We literally take bets on the potential outcome of a team and their ability to deliver something to market, in the time frame they say they can, how they say they can, and hope that our insight about the market at that time will prove to be right. Right enough for us to get a return on our investment.

There’s no product. There’s no service. There’s no revenue. There’s nothing but an idea and a team of people looking to work on that idea.

And while the cryptocurrency market is designed to look (and feel) like a stock market, it’s really nothing more than an early stage, unregulated angel investment market (minus the part where you get to own a piece of the company).

Thus taking regular startup vernacular into play, looking at the failure rate of most startups will tell you that 9 of 10 startups fail in the first 5 years of operation.

We’re 2-years in and have already seen 60%+ of previous ICO’s get completely wiped out. As an example, this company raised an astounding $74-million and has lost 94%+ of it’s value in just a couple of years. There are countless others that have done the same. $30-million down to a $100,000 market cap. Exit scams and the like.

The lessons from the past 2 years can be looked at as follows:

You’re investing in tokens from early stage startups (9 of 10 of these will fail)
Look for companies that have secured some type of traction before betting on their tokens

DYOR – Due Diligence

Investing is hard.

No one is going to do it for you. No one is going to give you all the right insights. No one has the crystal ball of clarity on where the market is going.

You need to take time to do research yourself. To dig into a company and truly understand what you’re getting into.

It takes time.

If we’ve learned anything from the Bitconnect, Bitcoiin, and recent QuadrigaCX scandals it’s that every investor must do their own deep due diligence.

This requires going further than a website. Further than a white-paper. Further than a LinkedIn check.

As someone who’s had their profile stolen and used for both a white paper and a website I can assure you that there are companies out there looking to leverage influencers, high-net-worth individuals, credible technology leaders and the like – for scam purposes.

If you’re not taking the time to dive into the details of a white-paper, the technical capabilities of the startup, the investors and advisors listed – you stand a good chance to lose your money.

We only have to look back at the billions lost over the last couple of years.

Summing it All Up

The landscape is changing. Regulation is coming. And yes, there will be more trends – securitized token offerings may just one of the more recent ones.

Until then here are the 5 core lessons that every investor in early stage blockchain company token’s can leverage:

Truly understand what cryptocurrency is all about – and dive into the nitty-gritty of each potential investment.
Look beyond PR & Market hype
– Are the underlying fundamentals of what this company says possible?
– Are the underlying fundamentals of this team sound? Are they a good team?
– What about this company is verified VS non-verified?
– Is the market signaling hype?
– Does it seem too good to be true?
9 of 10 early stage startups will fail. Be prepared for this and invest accordingly.
Look for companies with good traction before investing in them
Do your own deep due diligence

Here’s to 2019 investing in great companies in 2019 and beyond.

Cahill Puil is an author, founder and CEO of Byte Media Group. He has interviewed many of the Top 100 Blockchain CEO’s, Founders and influencers. His insights have been featured in dozens of publications – from Hackernoon, Brave New Coin, and Cryptocurrency News to Fintech Weekly, Tabb Forum, and CEO World. His team is currently focused on helping the leading blockchain and technology companies build credibility, exposure, and share stories with innovative thought-leadership and PR.

Beneficial Resources To Get You Started

If you’re starting your journey into the complex world of cryptocurrencies, here’s a list of useful resources and guides that will get you on your way: