Earlier today, I had a bit of discussion with my friends about their wanting to get into crypto. I feel that people are getting aware of crypto in general and it is becoming more interesting even for traditional retail investors. It's a good sign but it's also worrying me in a sense that most of the people that are new to crypto have high expectations of high profits.
It's really difficult to explain the kind of mindset that a person should have if they decided to invest in crypto.
At the end of our discussion, I'm not really sure if they still feel excited about crypto or they are already having second thoughts.
So, what exactly did I told my friends about crypto?
Store of Value
Firstly, cryptocurrency is a wonderful invention ever. It's a global currency that is not limited by borders or intermediaries. There is no single person that is in control of it. The printing of a coin is governed by the blockchain itself.
The inflation rate is hard-coded into the blockchain.
The supply is capped and it is also hard-coded into the blockchain.
Having these aspects of cryptocurrency makes it the most reliable store-of-value since nobody can tamper with the quantity and distribution of new coins.
This is the feature that they seem to like and would appreciate even in the future years.
Irreversible Transactions
Since there are no intermediaries on the transactions made in the blockchain, there is no way for anyone to reverse the process.
This is the part that made them worry a little bit. It only shows that people are accustomed to the scenario that someone is assisting on their transactions and that they could rely on someone whenever they are having a bit of trouble with their transactions.
Of course, I had to bring them into a perspective that "I am" in control of my account and I hold the keys that will allow me to transact. And so it is my sole responsibility to make sure that the info that I input is correct.
And in the case that I made a mistake on the info then I have to charge that to experience and learn from it.
Volatility
I had a bit of a hard time explaining this aspect. To be honest, I don't even fully grasp the price trend of many of the coins let alone the volatility of it.
It's really funny how people in this space react to a "correction".
Actually, I understand why someone would feel disappointed when the coin that he just bought has dropped by 10% or even lower in its price. Looking at my portfolio getting lower makes me feel like I'm losing it.
However, I had to add that the reflected loss in the portfolio is not really a loss until the asset is sold at a lower price. It's merely a paper loss until you dump the coins.
Profit
This is the most interesting part of our discussion; "When to take profit?"
I feel like there is no definite answer to this question. It will depend on the person holding it.
In the discussion, I made a biased claim that BTC & ETH are the coins that I'm not willing to trade on a daily basis. For me, they are as good as gold & silver which can serve as store-of-values. These are the coins that intend to hold for a very long time until I feel that it has reached the price that satisfies me.
As for the new coins, these are the cryptos that bear the huge risks that could also earn me huge rewards. These coins have the tendency to 10x, 100x, or even 1000x in a short period of time. However, it could also drop significantly by 10x, 100x, or even 1000x. In these cases, anyone who wants to take part should have a strong stomach to handle the volatility of the market.
It's totally up to the individual person. If 50% gains are good enough for them to realize their profit then they may sell a part of it for them to use or spend on something else.
Final Thoughts
The discussion wasn't very detailed at all. I only talked about the basic aspects of crypto that I feel comfortable sharing with them.
Also, I'm careful enough not to over-hyped them about crypto. I don't want to build-up unrealistic expectations in their minds that might affect them negatively.