The crypto market is one of the most volatile asset classes in the world, and inevitable periods of decline can be extremely emotionally challenging. But how do you deal with difficult times? By building mental resilience.
Have a long-term vision
Innovation in the crypto market has been rapid, even over the last 2-3 years. This acceleration has been fueled by the huge inflow of capital that we’ve seen since the start of the pandemic. Increased funding has led to better, faster development. Do you believe that this will slow down over the next 5 years? 10 years? We do not, we believe the trend will continue – that is our vision for crypto.
By developing a 5 to 10-year vision, we can see the bigger picture and look past day-to-day fluctuations and short time horizons. As Warren Buffet famously said: “Always invest for the long-term.” This helps us think rationally when the market periodically turns against us.
Manage your expectations
The crypto market has been through several boom and bust cycles since the introduction of Bitcoin in 2009. But no matter how much experience you may have, going through drawdowns is never pleasant. Managing your expectations regarding market volatility is key to building the mental resilience you need to weather the storms.
Have conviction
Having conviction in your investments and accepting that there will be volatility in the crypto market, in both directions is essential to weather the storms and come out on top.
No one likes seeing drawdowns, but in the crypto market, it’s just part of the game. If an investment is making you feel uncomfortable, figure out why. Ask yourself- do you know exactly what you’re invested in? If the answer is no, it’s time to learn more about the project.
The only way to build conviction is through research and understanding. Without an adequate understanding of the assets you’re investing in, it’s impossible to achieve long-term success in the crypto space.
Understand how emotions affect decision making
The human mind is one of the most complex entities in the universe and learning more about psychology can help us understand the emotional responses that influence our decisions. As investors, we feel a wide range of emotions watching assets appreciate or depreciate over time. Understanding the psychology of investing can help us avoid letting our emotions take control of our decision making.
It’s important to learn to be skeptical and critical, not fearful. Skepticism keeps us rational and prevents us from making poor decisions. But, if fear and stress take over, we aren’t really making decisions at all, we’re merely succumbing to emotion. If we’re overly fearful, we’re not in a position to make rational decisions.
