Overcome the fear of loss in crypto
Did you ask yourself why you undervalue opportunities that appear in different crypto projects? I undervalue new opportunities based on past experience that proved to me that investing in hype or in many projects with the thought that all will be successful is just not realistic. Others might avoid investing in new or promising projects just based on the primal survival instinct and damage control from negative outcomes.
The loss aversion theory says that people will take the risk of investing especially in crypto as the return on it are at least twice as large as the potential loss. Investors will throw in easily $50 if they can earn at least $100 out of that. If it was just about gaining $50 most of the players on the market would not get into that. But this mostly applies to small amounts as when bigger sums are on the table, the risk assumed is much lower, the returns are lower but so is the potential loss.
To overcome the fear of loss in crypto we can follow some simple rules.
- Recognize the potential loss and see if you can emotionally balance that with the potential loss. The saying that "invest what you can afford to lose" means that by doing this way we will not be affected emotionally too much if all will be a failure.
- Understand yourself, your reactions, and your behavior in order to be able to control your emotions. Fear, anxiety, anger, despair, and excitement are strong drivers of good, but mostly bad decisions. Understanding how you respond to these you can do damage control and put the right triggers not to lose much more trying to earn it all back by playing against the market or so. We cannot get rid of emotions but we can put in place behavior control items to reduce the intensity and cope with the loss.
- Always have an exit plan. If we see and assume a crypto opportunity and investment, we need also to have a clear exit strategy. If things are not going as we plan, if we find ourselves on a sinking ship we'd better know how to get out of it quickly.
Fear of loss is on the opposite side of fear of missing out, but in crypto, in special, and in the financial world in general the first one can be a fast fallacy for us. The abrupt movements of crypto market trends, with falls amounting to integer multiplicators (like -2x, -3x ... and even -10x) can surely intensify the fear of loss more than the one of missing out. And this is doubled by the fact that we are still early with crypto adoption and we still find ourselves anchored in the fiat world.
That's all on this and I wonder how you manage your investments correlated with the fear of loss and if you are consciously considering this when going all-in with the hype. I know I did so with some investments and it didn't go "as planned". :))
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Most of the times, our emotions, expectations and sentiment are some reasons too why we cannot control this fear, you've given some really strong reasons. As for me, I'm taking it one day at at time and targeting long-term.
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Yeah, instead of trying to play the market and get fooled better to stay on the sidelines with a long term strategy and act when the time is right.
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Great post, not making bad moves when things are going down.
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Thanks, patience is a virtue and we need to think bigger and for a longer time than push the trigger too soon.
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I am a very terrible investor when it comes to crypto, but one thing I have learned so far here is to be calm at all times.
I'm going all in without trying to see if one is a loss or a failure and giving it my best no matter how small or big the reward is, turning deaf ears to your emotions can have a huge impact when investing.
We miss the whole point of investing when we are controlled by our emotions. Had to learn this the hard way lol
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Cryptocurrency is a tough world to be in if one fears loss.
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I use to buy when it dips. And buy as soon as it up a little. Now even if its up 30% I just hold it in my Portfolio. You past the point where you are sensitive. But my crypto is only small amount !
I make sure I can sleep easy at night and if I can't, then it means that I have to cut back down on some investments. Otherwise, I just follow my plan and let it run.
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The simplest and most valid rule; buy when the price goes down and sell when the price goes up.
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