12 Lessons From Winning and Losing $12 Million in Crypto

Over the last few years, I gained over $12 million dollars investing in cryptocurrencies. I did not take a single profit until they maxed out at a hundredfold at the very peak of the market in December 2017. The timing was perfect, I nailed it. However, I only took a small percentage of those gains to then reinvest in a blockchain startup. 

Then, the market crashed on me. I didn’t sell or de-risk my positions. If anything, I participated in pre-ICOs, adding more risk — and losses — to the table. This is what I’ve learned from riding the crypto market all the way up and down:

1. Holding is the easy strategy, but not the most profitable one. If all you are doing in the most volatile market that has probably ever existed is playing “long-term optimistic ostrich,” like I did, you are missing out on opportunity. Long-term confidence is a strong start, but identifying the cycles and patterns to minimize losses in prolonged bear markets is much better.

2. In hard times, big coins or stablecoins, in soft times — small coins.

3. Check the standing of your altcoins at least every three months, or you might lose them. Coins get delisted from exchanges, exchanges close down, tokens upgrade protocols. Make sure the number of different altcoins you own is manageable. Until the market matures and is able to more precisely tell apples from avocados, altcoins will continue their high price correlation. You may not need to own every single one you like.

4. Have a written exit plan. At least a reference to execute against. You don’t want to figure out your exit strategy in the middle of a rollercoaster. I didn’t have one three years ago, but now I do. It includes diversifying into other industries.

5. It’s impossible to sell at the very peak and buy at the very bottom. To think that the market is going to turn around after months of decline and only start going up the minute you buy is not very realistic. Multiple times I lost 70% of an investment in the months after buying a coin and aiming for a subsequent forty-fold return. However…

6. Pay attention to the current stage of the project you are planning to invest in. There are networks, like Polymath, that may be extremely successful and profitable in the long run. However, to launch, they raised funds and used them for product development, market research, overcoming critical regulatory hurdles, testing, etc. All of this takes years. During this time, supply of these tokens enters the market through investor/advisor distributions while there is little demand or use yet, so the attention goes to other projects and the prices drop drastically. We all like the hype of participating in ICOs, however, it may likely be possible to buy at lower prices and much lower risk a couple of years down the road in platforms that have a proven product, a regulatory approved business plan, and are ready for commercialization.

7. The crypto market is not for everybody. My mother told me, “If it was so easy to make that much money, everybody would do it.” To me that’s like telling Rafael Nadal, “If it was so easy to make so much money hitting a ball with a racket, everybody would do it.” Yes, in crypto, you can make a lot of money very quickly, but you can lose a lot of money very quickly as well. To be “competitive” in the market, you need a clear head, a strong stomach and vetted information. Some luck, good timing and knowing what you are doing is also recommended. It’s not that easy to play tennis like Rafael Nadal.

8. Don’t pay off your mortgage until you are 100% sure you won’t need to borrow cash in the foreseeable future if crypto — no matter how much — is all you have. Once you quit your corporate job and have no steady paycheck, you are on your own and too risky to do business with. No more corporate America warmth when it comes to getting good health insurance or refinancing a house.

9. Don’t be like most people and don’t be driven by fear. At a minimum, be aware of the narrator’s voice inside your head. For most people, there’s never a good time to enter the market. When the market drops, “it’s over,” and when it heats up, “it’s too late.” There is always a fear-based excuse not to try out something fun, risky and adventurous. I have a cousin who researched and researched the market until his balls went blue. It felt like he was doing a Ph.D. He didn’t end up investing. It had nothing to do with the market. Not fun.

10. We have no freakin’ idea of what constitutes “too high” or “too low.” Crypto is a new kind of animal, so extreme that there usually is a higher high and a lower low. The volatility in this market requires a broader perspective beyond our understanding of traditional markets. Three years ago, my parents told me to sell their Ether (ETH) at $45. They insisted and I reluctantly agreed. It was their money after all, so I had to. But when a few days later Ether’s price was still pumping, I thought, “I can’t believe I’m listening to my parents on this, they have no clue of where Ethereum can go,” and bought them back in at $60. Wasn’t $13 “too high” for Bitcoin (BTC) at the end of 2012? Of course it was! Most people sell because they have no idea of how high a coin can fly or because “a bird in the hand is worth two in the bush.” My problem is the opposite: The market goes down and I think, “No way I’m selling, it’s too low,” and it keeps going lower, and lower. I sink with the ship all the way to the bottom because for me it’s always “too low to sell.” That’s not very sophisticated, either. I still need to find a practical way to stop losses and do better.

11. Have mature and grounded friends in the industry for those moments of knife-falling red charts or year-long walks through the bear desert to tell you: “I give a shit about what’s happening, I’ve seen this a dozen times before.” It feels so good to hear that from someone who knows their shit.

12. Make a clear distinction between your sourness in the market and what the market may do in the future. Just because you’ve done good, it doesn’t mean it’s going to go up forever, and just because you are distressed that you entered at the peak before the burst, it doesn’t mean that the market is never coming back up again. Some of my friends won’t put one more dollar into the market because they’ve been burned. The fact that you can’t psychologically bear one more loss doesn’t mean the market is not going back up. Distinguish between your personal circumstances and the world out there. Just because someone broke your heart, it doesn’t mean that all men or women are however you are telling yourself they are. Start talking about what your decisions really mean so that you can have more clarity (i.e. “I’m full of fear and won’t forgive myself if I lose more money”), and stop projecting your fears into the market (i.e. “The market will never recover”). These two things have nothing to do with each other. Stop protecting yourself and start calling things for what they are regardless of whether you invest or not.

Bonus lesson (and no, it’s not “don’t invest what you can’t afford to lose”):

Be proud you followed your guts and listened to your heart, regardless of the outcome. Of course it’s disappointing to lose that much money, and most people probably would have known better than that. The turnaround question is: How many of them would have put themselves in a position to lose that amount in the first place?

To me, investing — and life — is a tradeoff between mitigating risk and taking advantage of opportunity. Which of these two is more exciting for you when you invest? I know I don’t like to miss out on opportunity, so I need to have a huge tolerance for risk if I want to sleep at night.

Some of the people who love me most (particularly my parents) can’t drop the “I told you you should have sold.” True, I should have sold, but not at a 40% or a 300% gain, which is what they would have done. I’m not in crypto for that. The fact that I should have sold more at a 10,000% gain, though, I can agree with.

Some of my crypto friends also regret not selling at the all-time high peak. One of them told me, “If instead of partying that night in December 2017 we would all have been selling.” True, but how much fun did I have that night treating all my crypto friends! Epic. Those months in the spring and winter of 2017, and then January 2018 with CoinMarketCap washed in double-digit green across the board… How much I enjoyed that ride to the top, nobody knows. Can’t wait for more, and I am all buckled up. I’m ready to moon again, and this time there is no coming back.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, you should conduct your own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Richard Vitoria is an active angel investor and evangelist in the blockchain space. Since he was first introduced to the industry in 2014, he has performed direct investments in over 20 projects, including Ethereum and Polymath. He is currently the managing director of a private fund that invests in the digital assets and blockchain companies changing the world.