Top 4 Pieces of Bad Advice in Cryptocurrency
Markets are comprised of a wide variety of traders of differing success levels and intents. While charts can clearly show which trades are winners and losers, it’s much more difficult to assess the value of a trader. As a result, there is often bad information spread, due to either malice or lack of knowledge, that should always be recognized and ignored.
4. “This coin is a good buy because it is cheap”
This sentiment isn’t so common as it was in late 2017, when many new traders were beginning to attempt cryptocurrency trading, but it still is a frequently shared piece of advice. Oftentimes, certain coins are promoted as undervalued or good entries due to their low price. This is inherently an improper way to evaluate a cryptocurrency, because the simple metric of unit price completely ignores the market cap, distribution, inflation, and inception of such cheap coins.
Kin provides a pretty straightforward example of this. US$0.01 can buy over 30 KIN, which would suggest the coin is very cheap and therefore undervalued. However, a simple look at Kin’s market cap shows that this certainly isn’t the case. Merit of the project aside, there are close to 1 trillion KIN in circulation, which equates to a market cap of US$222 million – by no means a cheap project.
3. “Don’t fall in love with your holdings”
This concept is almost universally accepted among cryptocurrency communities, but it may not always be a proper rule of thumb. For new traders, yes, it’s probably not best to become attached to any single trade. However, for veteran traders who can recognize the merit and potential of different projects, there is nothing wrong with falling in love with a project. If you’re a long-term holder, your biggest position should be your favorite, and even one you love.
Having such a strong connection ensures unwavering faith in a position, even during extended downtrends. If this faith is well-founded, it will be infinitely easier to persevere through days, weeks, or months of red. Some projects can even take years to reach their true value. IOTA is a great example of that. Those who loved IOTA for years when it wasn’t listed on any exchanges have since had a massive payoff.
2. “Buy this coin because it’s better than Bitcoin”
This line is often used to shill the absolute garbage coins. There is no value in an altcoin being “better than Bitcoin”. The fact of the matter is that almost every single newly-created cryptocurrency is better than Bitcoin. It either forks the original code base to facilitate faster transactions, better distribution, or greater scalability, or implements new features that Bitcoin does not offer. A coin that is better than Bitcoin certainly does not automatically deserve to someday be worth as much as Bitcoin.
1. “Listen to what well-known traders say”
There is massive value in taking advice from proven, veteran, successful traders. However, a majority of the “crypto personalities” are merely facades. These popular social media profiles are just that – popular accounts that leverage their own outreach to turn a profit. This was clearly shown by all the YouTube channels with tens or hundreds of thousands of subscribers promoting the obvious and now defunct Ponzi scheme Bitconnect (BCC).
In fact, Trevon James and “Crypto Nick” now face lawsuits for abusing the faith of their supporters for their own profit through the promotion of this Ponzi. However, these acts also happen much more subtly, especially on Twitter, in the form of paid shilling. It’s recently become known that sleazy projects will offer top cryptocurrency Twitter accounts such as John McAfee’s as much as hundreds of thousands of dollars worth of miscellaneous cryptocurrencies to tweet about their coins.
Overall, the best piece of advice one can follow is to be cognizant of one’s own decisions and learn from their mistakes. Through trial and error, real lessons are learned. It is through this process that legitimately successful and veteran traders have established themselves in the market, and it is through this process that capable traders separate themselves from the incompetent ones.