💸 Lessons From A 23YO First Cycler

It’s been about 18 months since I started investing in crypto. Yep, I’m a “top-signal baby” 👶

At the peaks and troughs of the market, the market stops thinking rationally and you get drunk on groupthink. I’ve made my fair share of mistakes. I’ve also stopped myself from making some big ones thanks to a few principles I follow. This is the story of a first cycler. Hopefully, it will act as guardrails for myself (and others!) for the upcoming market cycle(s).

It’s important to judge the thought process instead of the results, since the result could have been a fluke. I will still be illustrating my bad results sometimes to hit the point home.

May, 2021

I’m freshly minted out of a CS degree from a reputable university, and I’ve been learning the ropes at a Web2 startup as fast as I could. For the first time in life I can afford Startbucks without feeling too guilty about it.

“Hmmm…”, I thought, “If I have money to burn on mediocre-at-best drinks, maybe it’s time for me to learn about investing”. I read up on the usual suspects - Rich Dad Poor Dad, The Psychology of Money, Die with Zero, etc. These forced me to think clearly about my relationship with money and how I want to change it moving forward. Part of the money puzzle was investments - and it was obvious to me that I wanted to be a long-term investor, instead of putting it in a “savings account” or becoming a daytrader¹.

Buuuuut I wasn’t not sure what to invest in.

• Financial Advisors seemed to have misaligned incentives.
• Opening a robo-advisor was easy, and I regularly put some money in. Too boring.
• Trying to open a SAXO account for investing in ETFs and stockpicking had such a bad UX that I kinda gave up.

During this time, I was introduced to Bitcoin and Ethereum by krenzx. This was around DeFi Summer, and I was fascinated by the idea of a decentralized (censorship-resistant, permissionless, trustless, and immutable) alternate financial system. I joined crypto twitter and discord servers - people seemed to have a grand time getting rich supporting a good cause and being at the cutting edge of tech! I was sold.

Buying the first bit of ETH took some time.
SO. MANY. QUESTIONS!
Isn’t KYC against the ethos?
Isn’t stablecoin making us dependent on the centralized financial system?
What’s an exchange? What wallet should I use?
What’s a private key and how should I secure it?
What’s all these squiggly lines people draw on charts and predict so confidently?

Once I found good-enough answers, I decided to put some skin in the game by buying a few hundred dollars of ETH. Soon I figured that I did not want to learn more about “Technical Analysis” and instead wanted to learn about the underlying tech that powers blockchains.

✅ I didn’t go all in because I was still learning. But putting some money in would motivate me to learn more.

✅ Learning about the underlying tech is more akin to “Fundamental Analysis” and is better suited to my longer time horizon. Worst case scenario, I pick up new software skills.

Krenzx was a huge fan of Thorchain’s RUNE around this time, and predicting how it’d 10x soon. I intuited the necessity of a cross-chain DEX after my horrible CEX experience with Binance and Crypto.com (spoiler alert: I did not know what any of these meant). So I started allocating my monthly investment to RUNE instead of ETH and BTC. My average RUNE price was around $4. I was convinced that I was going to have 6 figures wired to my bank account in a few months :D

❌ I deviated from my plan of “only invest in blue chips” without a good reason. Greed.

November, 2021

I negotiated a nice little bonus and invested most of it in 1 shot.

❌ I wasn’t trying to time the market, but turned out I invested very close to the top. Always DCA².

Somewhere around this time, the $THOR IDO happened and I was lucky enough to get in - promptly getting dumped on and losing the small amount I put in plus the fees in the eye-watering gas wars. “No worries, good experience to feel what ICO mania felt like”, I thought.

❌ Retroactively rationalizing stupidity. The main intention wasn’t to know what ICO mania felt like.

Most of my bags are still ETH, BTC and RUNE. I can branch out a bit and put some money into other projects, right? Call it an exploratory budget. Let me install the FTX app and log my trades there so I can see how I’m faring in the market.

✅ Exploring is fun and I learn through the process. Good decision to set bounds around this, within which I can be guilt free.

✅ Tracking my trades is a good way to keep myself accountable. I can see how I’m doing and make adjustments if needed.

I started learning about Finance, how DeFi protocols worked, how to write smart contracts, etc. That’s all I consumed when I was not sleeping/working/spending time with someone else. Crypto Youtube, Crypto Twitter. Checking prices obsessively every few minutes - even though I only bought once a month.

❌ Putting all your attention into one thing is similar to putting all your eggs in one basket. Good way to get burnt out, lose focus, or fuck up mental health.

I started seeing “Ponzinomics” and (3,3) everywhere. Guess I’m stupid to question whether “Ponzi” is a good thing or not, since all these smart sounding people seem to be right and getting rich off of it. Algorithmic stablecoins sound like a terrific idea! Buy a bit of $LUNA even though Do Kwon seems like a dick. He’s just trolling, right? All the posts against $LUNA is probably just FUD by jealous people who missed the train.

❌ I didn’t do my own research and just followed the crowd. During a bull market, everyone seems like a genius. If you’re invested in a project, you should pay special attention to the negative news and try to bucket them into FUD vs valid argument.

❌ Do Kwon being a dick and the persona for Terra was a clear red flag that I ignored.

While we’re at it, why not invest in this upcoming project? $VADER sounds like they’re gonna improve $LUNA with more ponzinomics. I don’t know how it works but everyone is saying it’ll go up. Just put some money in. What are all these new coins in the Cosmos ecosystem? I’ll just buy a bit of each even though I have no idea. No ETH killers though, I’m not stupid. SO I won’t even take the time to study them properly because all the previous ETH-killers were dud. Boo SOLANA and AVALANCHE!

❌ Classic FOMO with $VADER and Cosmos coins. DYOR always. If you don’t understand it, don’t invest. There will be LOTS of trains to catch and you only have to catch 1 to get rich. No need to try and catch all.

❌ Just because I was so heavily invested into ETH, I had allergic reactions against “ETH Killers” and didn’t even bother to study them properly. Had I done so, at least I’d learn more about consensus mechanisms, why the merge was taking so long, and how the EVM was a bottleneck from some perspectives.

OOOOH Chainlink and The Graph seem to be crucial to the smart contract system, better buy some LINK and GRT. Didn’t even know what tokenomics meant.

❌ Just because X protocol has usage by devs doesn’t mean $X has value. Taking a second to think about Econ 101 supply-demand dynamics would have been a good idea.

May, 2022

Terra death spiral happened in astonishing speed, and the contagion felt terrible. What a crash! I was already numb to the pain by June of 2022 (or so I thought, lol). Of course, all of this was the fault of centralized bad actors, how would I have known? It was buidl market! I’d left my job earlier and was full time into crypto, trying to build something novel in Web 3.0! Always buy the dip! So even though my net worth was down bad, I had other things to think about. Prices would take care of themselves since I had conviction on any asset that wasn’t close to 0 by now (read: ETH, BTC, RUNE). I’ll just keep hodling and wait for the next bull run. I’ll probably hodl forever!

✅ What’s happened has happened. No point overthinking the could haves.

❌ It might be someone else’s fault, but I suffer the consequences.

❌ I rode coins to 0 because I had no exit plan - neither stop-loss, nor take-profit. A podcast episode from Tascha Labs convinced me this was a bad idea. I had to internalize that investor psyf (the one that was motivated by money), and buidler psyf (the one that was motivated by the potential and the ethos) had to sometimes work at odds and that’s okay.

Lesson learnt: decide on a stop-loss and take-profit when you’re entering a position. Since DeFi tools to do that don’t exist yet, I would have to manually execute them. Never touching a CEX again!

✅ Adjusting strategy based on new information is a good thing. I’m glad I learned this lesson.

✅ Sticking to DEX-es was ultimately a decision based on the desire to fit in with the ethos of the space. It ultimately helped me avoid having funds stolen in the FTX collapse. Use CEX to onramp, and then move to self-custody. Trust me, the gas prices are worth it.

Maybe it’s time I remove the single points of failure. Buy a ledger, distribute horcruxes to friends and family and make a secure backup plan. Do the same for multiple wallets.

✅ Backup plans + multiple wallets = no fear of completely fucking up. Sleep better at night.

November, 2022

FTX unravelling happened at a crazy pace. Thank God I took self custody seriously. Heart goes out to everyone affected in this and the following contagion. Not making a lot of mistakes these days, but that might just be a side effect of pausing my DCA to keep investments to build up a personal runway. Invest some money on what makes you happier long term - travel, mental health, physical health, gifts for friends.

✅ If you have a runway, you’ll be less emotional with decisions. It also enforces “don’t invest more than you can afford to lose” to a certain extent.

✅ Your mind, body and relationships are your biggest asset. The ROI of figuring things out and putting in good systems early in your 20s is way higher than DCA-ing another 1k into crypto.

February, 2023

Wrote a post about my journey so far³. Started DCA-ing back in because I think we’re close to the bottom.

Now that I’ve experienced first-hand the result of not following (or following) popular and “boring” investment advice, I’m more confident about what I want and what works. Here’s my plan for the next 2 years:

• 80% of the upcoming investments will be DCA into assets I believe in, rest of the 20% is exploration budget for more exciting bets.⁴
• I have stop-losses and take-profits in my head. I know what I’ll ride down to 0.
• I have bounds on how much I’ll invest.
• I will not buy or sell without due dilligence, but I won’t have analysis paralysis either.⁵
• I will remove single points of failure everywhere, but not spread myself too thin either.
• I will stick to self-custody.
• I will not lose sight of why I’m doing this in the first place.
• I will be accountable for my mistakes, which means I will take an honest assessment and improve anything within my control.
• I will keep learning technical skills so I can contribute to building a decentralized web.

At the end of 2030, I might be a millionaire, or I might be broke, or I might still sit on what I have now. Either way, I’ll be happy because I’m playing the game I want to play the way I want to play it.

Trust the process.

Enjoy the journey.

1. Day Trading feels like monkeys pulling levers randomly, but using random ass lines drawn on a chart to justify to themselves that it’s not random. ↩

2. dollar cost averaging ↩

3. That’s called recursion ;) ↩

4. If you’re still curious about my bag: I’ve divested out of BTC because I don’t have confidence in the community being able to evolve. ETH I still DCA into because Lindy, and the core community still has the ethos and drive to keep improving (see the Merge, EIP4844, etc.). All the other “dust” bags are not worth selling off, let ‘em ride (none were shitcoins anyways, so there’s some probability few will survive till the next bull). RUNE I hold - still feels important to a multichain world and is slowly gaining adoption, though I think the community needs to grow up and be more effective at execution. ↩

5. This means looking at the community dialogue, tokenomics and actual utility of the token, understand well the whitepaper and the unique tech fueling the protocol, look at counterarguments and then augment my git feeling to make a call on whether I want to invest or not. ↩