Things I learned from the Crypto Crash as a Tyro?

I started investing and trading in cryptocurrency just few weeks before the Crash of 2021, most of my portfolio was long on Ethereum at a 3x leverage. As the price of $ETH plummeted my heartbeat hastened, but I did not sell my holdings as I reckoned it was a temporary dip and I was not in a mood to take home a substantial loss. Shortly after, I was liquidated and lost over 70% of my portfolio.

While I am currently in the process of rebuilding my portfolio, I hope to share a few of my key learnings from this, so that you can learn and avoid the mistakes that I made-

1. Leverage only what you are ready to lose WHOLLY- Leverage trading is a game of high risk high reward, while your gains will be multiplied but so will your losses. I fell prey to the greed trap and ended up losing more than I had the appetite for. I would say, leverage only that you would not lose your sleep for. Don't commit the same fallacies as I did and consider this a thumb rule, it may help you avoid a lot of stress.

2. It is okay to take a loss, it might save you from worse- If I had walked out with even a 25% loss, it would sure have been bitter, but it would have averted a tragedy for my personal finance. I miscalculated the gravity of the situation and stayed stubborn when it was time to accept the position I was in. I know it is difficult to not let emotions get the best of you when you see a huge red on your portfolio and this is only aggravated by the FUD(Fear, Uncertainty & Doubt). But, you have to set emotions aside or at least try your best to keep them aside as they will only cloud your vision. If you are in trading and investing for a long-term, then remember to regress is a part of progress.

3. It is okay to HODL, but not to be a Bagholder- As cool as being a HODLer with diamond hands sounds, keep in mind that it can readily turn into a bagholding scenario. A bagholder is one who holds a commodity long enough to cause him unnecessary losses, it may even stretch to the extent that the given commodity becomes worthless. So, it becomes vital to know when to quit, when to get out of that losing game. Do not keep holding the bag when you should not be, do your analysis for the same.

Most importantly,

4. Today's loss can be a profitable lesson for tomorrow- this practically self-explanatory header comes hand-in-hand with the caveat that you do not repeat the mistakes. Later on, you will hopefully have a much larger portfolio and loss on that will hurt a lot more than a same percentage loss on your current portfolio. Think of it as a pricey lesson that can potentially save you a lot more in future. Once you have recovered from the emotional impact of the loss, objectively analyse the trade, it will help you figure out the errors you made. To sum this up, realize where you went wrong and avoid those faults.

Finally,

Making mistakes is alright, but not learning from them isn't.

The goal of the article is purely for learning purposes and in no way is or should be taken as financial advice and “tips”. Invest at your own risk, do your own research. I hope this article was of some meaning to you, stay connected for more. Best regards, Jatin Goyal, Team Shunya Finance.