YEREVAN (CoinChapter.com) – It’s been a crazy year with no shortage of surprises, both good and horrific disappointing. While many traders await the new year with a little nervous twitch in their eyes, here are some of the valuable lessons 2022 has taught us all.
#1 Don’t believe in cult personalities
Sure, some personalities in the crypto sphere have earned the respect of their peers and investors alike. However, 2022 was a violent reminder of how dangerous it is to blindly follow a shiny persona while not giving two sh*ts about their business strategy.
Do Kwon was the first ‘golden boy’ to bomb in 2022. His Terra platform (LUNA) and UST stablecoin crashed seemingly out of the blue. Were there signs of the looming crash? Some experts say YES, while others scratch their heads in disbelief.
Meanwhile, the crash did not leave a sour taste in the mouth. Instead, it evaporated $45 billion of investor money and caused a contagion that wiped another $400 billion from the digital asset market cap—an unprecedented f***kup in crypto history.
However, Do Kwon’s fiasco wasn’t enough. Many ‘big dogs’ looked the other way and praised another ‘golden boy’ for his eccentricities – Sam Bankman-Fried, the CEO of the infamous FTX exchange. Some experts rang warning bells about the man, but not loud enough. As a result, SBF’s crypto empire collapsed to its feet, taking investor money along for the crash.
There’s a saying that “no one is completely useless. You can always serve as a bad example.” Let’s hope Do Kwon and SBF can be examples of what can happen when we inflate someone’s ego to cult proportions.
#2 Don’t keep your funds in an exchange
We all have that one friend who doesn’t trust “the system” and would rather keep his hard-earned cash under the mattress than at the bank. Well, that would be the sensible thing to do in the crypto sphere at this point. Of course, you’re golden, so use a cold wallet instead of a mattress.
The FTX debacle has taught us that centralization in the digital asset world spells trouble.
George Orwell wrote his books for a reason, and yes, Big Brother IS watching you and your money. In no way are we promoting conspiracy theories and other heresy. Remember that safety and a sensible approach should always come first when it comes to your money.
#3 Don’t challenge a hawkish Federal Reserve
2022 will forever go down in history as the closest we came to an actual “Game of Thrones” season. Needless deaths, deceit, careless fiscal policies, pigeon pies, and a glass of poisoned wine to “wash it down.” We all hope 2023 will be better.
However, we shouldn’t underestimate how far the Federal Reserve is ready to push to stop the inflation train.
Several 0.75 bps interest hikes later, the US is still at 7.1% inflation, three times the ‘healthy’ rate. Moreover, the hawkish policies are expected to continue well into 2023, while the new Omnibus bill for the coming year’s federal spending raised a wave of anger among retail investors.
So, what’s the way out for us, the people who don’t make the big decisions? Make the small decisions, carefully choosing who will represent us in government based on merit, not political affiliation.
Also read: Experts Ring Recession Bells for 2023 – Another Crash for Bitcoin?
#4 Don’t buy into sector hypes
2021 was a DeFi year that saw many layer-1 platforms emerge, such as Solana (SOL) and Algorand (ALGO), challenging Ethereum’s dominance.
The hype was enormous, which resulted in an influx of funds into every project that promised investors to be an “Ethereum killer.” The result? Ethereum is still alive, while many other competitors fizzled out.
Then came the NFT era. Owning a digital image of a bugger in a cup with some whipped cream would cost people thousands of dollars. We can endlessly argue whether the underlying idea of non-fungible tokens has merit. However, the truth remains that once the hype left the sector, so did the funds.
After the NFT craze left the building, it made room for the Metaverse hype.
It could be traced back to Facebook turning into Meta. However, many other projects followed, scooping more success than Meta itself. Metaverse platforms were all the rage in Q2-Q3 2022. However, the crypto sector is in a bear market now, with little to no room for more risky projects.
Again, there’s nothing wrong with having a hunch and making money from momentary hypes. However, a sensible, even cold approach would spare you from unnecessary disappointment if the hype runs out quicker than you anticipated.
#5 Don’t think altcoins are decentralized
Getting back to the idea of decentralization, it is important to add that having illusions about what you’re investing in can harm your mental health and your funds.
On that ‘optimistic’ note, let’s discuss some altcoins. Take Ethereum’s Ether (ETH), for example. It is as far from decentralized as you can get.
Any proof-of-stake coin, for that matter, would fall under the same category.
Once you have more power concentrating on several nodes, you can kiss decentralization goodbye. At best, Ethereum can be considered a well-oiled machine that you trust to take care of your transactions, much like you would trust a bank.
Why would you trust Buterin more than JPMorgan’s Jamie Dimon or Goldman Sach’s David M. Solomon? If you’re a part of the Ethereum ecosystem, have an answer to that question.
Also read: Binance’s CZ advocates against self-custody wallets, while BNB loses 10%
The bottom line is that many of us went into 2022 with naive expectations, pumped from 2021’s crypto success. However, the bear market plays by its rules, and it is important to educate ourselves on how to make money without losing our heads.
P.S. Dear 2023, we’ve had enough ‘crazy’ for a decade. Give us a break!
Sincerely, EVERYONE
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