Don't Be Afraid of Crypto, but Investors Shouldn't Do This Either
Don't trick yourself into thinking you are smarter than you are.
I know, you're different. This warning doesn't apply to you because you are smart. You read books, you know the market is "tough" but you're a special mind that studies "mental models" and has "emotional intelligence" and this warning is for the other folks out there, not you.
Nonsense. You are exactly the person this post is for.
By all means, invest in crypto if that's what you want to do, if that makes sense for your financial situation. But if you start showing some open profits or actually exit with a profit, please be cautious before diving into your next position. Don't start thinking about quitting your job and opening a crypto hedge fund. Don't drink your own cool-aid after a few winners.
To know if you actually have skill over the market, you need a large sample of decisions that outperform some baseline. In stocks, for example, if your picks consistently outperform a benchmark like the S&P, OK maybe you are on to something if you are able to repeat this performance over a few years with 100s or at least 10s of decisions.
You are not going to beat the market after listening to one podcast about trading momentum.
The people selling their next top crypto pick to the moon are likely more clueless than you. The crypto market is the stock market, just 10x faster. This means the same psychological waves of fear and greed happen quicker and with greater magnitude. Recognize that despite what you think, you are not immune to this.
Picking an occasional winner can be fun to talk about. But please realize if you pick a winner in a bull market, you didn't exhibit any skill in picking that particular trade, you just got luck with your timing by buying in a bull market. Like every crypto wave that has come and gone, you'll get crushed in the bear market if all you do is buy random cryptos.
Please, don't trick yourself into thinking you are smarter than you are when it comes to investing.
PS - This post is me venting to my future self.