In a recent article for Coindesk entitled How to last the winter crypto, Decred's project led Jake Yocom-Piatt to describe the complexity faced by investors and projects in the still nascent blockchain industry.
The whole article is excellent and deserves a read, but there was one particular part that stood out for me.
When discussing the complexity for cryptic investors and what leads to expanding market cycles (ie 2017 vs 2018), Yocom-Piatt said:
There is a minority that is incredibly well informed and a majority that is quite uninformed.
This knowledge gap often benefits the well informed to the direct expense of the uninformed, therefore the former are encouraged to maintain this agreement.
This discrepancy between investor proficiency levels is not surprising when considering what we are investing all of. These are not global brands with stores in the local mall, or online platforms with hundreds of millions of users. There are no quarterly sales reports, nor consolidated regulatory guidelines.
At the end of the day, everything is reduced to the code. And most of us investors can not read it.
The very solid code – code that is worthy of supporting a multi-million dollar or multi-million dollar market capitalization – is rare. Projects with consistent value propositions that could attract traditional risk capital are, in the same way, rare.
Finally, teams with strong ethics and integrity that can be trusted by investors to their full potential are – you guessed – rare.
One thing is common in the cryptocurrency sector is marketing. And the goal of marketing in any industry is NOT to use logic and education to inform investors so that they can make rational investment choices. The goal of marketing is to make you feel emotions associated with the marketed product.
Marketing is often designed to make you experience pain in the form of insecurity, fear (FOMO) and dissatisfaction. So try to convince yourself that if you simply purchase this product (or invest in this token), you will feel safe, secure and satisfied.
Here is the secret you need to know if you want to succeed in this space: emotions are your worst enemy when it comes to investing and trading. When you make decisions based on emotions, the market rewards you by taking your money and redistributing it to those who are less emotional and better informed than you.
Emotional attachment is the reason why some people in the Substratum community were / denied when they were confronted with evidence suggesting that some of their ICO funds had been misused (to put it bluntly).
If you're emotionally tied to your investment choices, you're already fighting a hard battle. Add to that a lack of general skepticism or laziness when it comes to doing your own thorough research, and the odds are stacked even higher against you.
So, what should you do?
Bridge the Knowledge Gap
Investing is a game, and better understand the complexities of the game, the greater your chances of success.
If you do not have a background in technology or finance and you have not gone through more than a full cryptography market cycle, then it is almost certain that many people in the market have a leg on you. But it is not necessary to know how to code or have more than 10 years of experience in financial markets to separate from the uninformed majority who loses money.
Simply by understanding the role of marketing in the industry and the default to skepticism every time you read a promotion of certain cryptocurrencies (even those of this article), you will already be immensely richer than others.
Following this with the awareness that the market will punish you for being emotional further increases your chance of success.
Last but not least, doing your research and focusing critically on the value propositions and reputation of the teams you are investing in – rather than on the promises they make – can push you down the bridge to a well-informed minority.
I'm not an IT specialist, nor have I ever worked in finance. However, these facts did not prevent me from working hard to gain a competitive advantage in the market by learning cryptography, game theory, the history of moneyand many other relevant topics.
If you are willing to invest large percentages of your portfolio in cryptocurrencies, a certain understanding of each of these topics can be very beneficial.
The first 3 HODLs in my portfolio
I learned a lot of lessons this way winter cryptand I just shared some of the most important lessons with you in the text above.
The following is an overview of the 3 cryptocurrencies that are more confident in HODLing for the duration of the winter crypto.
Yes, I'm packing all of you and I will not hide it. You can and should be skeptical and should not be interpreted as investment advice.
That said, I have a lot of skin in the game and a lot of conviction based on countless hours of research, participation in coin communities and critical thinking. If you want to find out why, I encourage you to keep reading!
I thought about leaving Bitcoin from this article just because it's such an obvious choice. After giving a little more thought, though, it did not seem right.
The bullish case for Bitcoin it remains a good case as it can be done for any cryptocurrency. Bitcoin may not be perfect, but it is still an alternative superior to legal currencies and other cryptocurrencies, thanks to scarcity, resistance to censorship, transferability and resilience, to name just a few of its important properties.
Being the cryptocurrency with the longest track record and the highest number of awards, Bitcoin has the highest probability of achieving any significant measure of adoption as a store of value – resulting in a multi-trillion dollar market capitalization.
The most consistent work I have read on the basis of this belief is John Pfeffer "An investor (institutional) who takes on criptoasset".
Nothing significant has changed in the fundamentals of Bitcoin over the past year, in addition to the bear market. In fact, the The accelerated growth of Lightning Network probably gives Bitcoin a much stronger case than it had during the frenetic peaks of the bull market, although I would be remiss not to mention that the Lightning Network does not solve all the problems of resizing Bitcoin alone.
All in all, Bitcoin is still the most powerful HODL in crypto.
Next is the project I have already mentioned indirectly in this article: Decred.
In a pistachio shell, Decred differs with community-based governance, strong engineering and transparency from the project team and a hybrid work trial / stake test consensus system that makes 51% of attack extremely expensive compared to other coins similar in size to those on the market.
There are numerous reasons why they are HODLing Decred and will purchase more during the winter crypto.
A noteworthy feature is their unique DEX based on atomic swaps, which I discussed in more detail in a previous article, Why you should keep the Decred eye. Although this DEX should not have a direct impact on the price of DCR, it is another indicator of Decred's technological skills and dedication in bringing cryptocurrencies in a traditional way.
I could go on and on, but space is short, so I'm going to go straight to the heart of my motivation to make DCR an important part of my portfolio.
Last October, Decred launched Politeia – the most advanced tool in the sector for decentralized governance. With a well-informed and highly ethical community, Decred's future is now in the hands of its stakeholders.
My investment in Decred eventually comes down to an unanswered question of what the best property is between resilience and adaptability. Where Decred is built to evolve and improve relatively quickly, Bitcoin is quite resistant to change – a fact that has so far led to major fractures in the Bitcoin community and a lot of hard forks.
Now, it is possible that the lack of adaptability of Bitcoin is a feature – not a bug – and that a widely adopted reserve of value should be extremely difficult to change.
On the other hand, it is also possible that the high adaptability of Decred will allow it to scale and increase the wealth of functionality at a much faster rate than Bitcoin while maintaining the fundamental properties shared by the two currencies, such as scarcity (both have a fixed stock of 21 million) and resistance to censorship.
Since I am not sure what the outcome of this cryptocurrency experiment will be, it is only rational that my bets are covered. Decred, in my opinion, is the best coverage against Bitcoin that exists today in the cryptocurrency market.
The "smart contract platform" category of cryptocurrencies it is one of the most diverse and competitive. Ethereum has been the undisputed leader in recent years, but is struggling powerfully to climb and still has an extremely uncertain transition to the pole test before it.
Bitcoiner Tuur Demeester tweeted on an interesting theory that Ethereum could be the Yahoo of our day, referring to the fact that Yahoo has been valued at over $ 100 billion during the dotcom bubble, but never returned to those heights later.
In the interest of transparency, I will say that I am still invested in Ethereum due in large part of his industry-leading development community.
But if we assume the entirely plausible assumption that Ethereum will not be the winning platform of the intelligent contract, this raises the question as to which competitor can pass it? Correctly answering this question and acting accordingly can be a huge success, just like investing in Google rather than Yahoo in 2004.
Cardano is the cryptocurrency on which I'm betting, and here are some reasons why:
- Cardano is building slowly and consistently through a rigorous academic peer review process, a unique approach that makes it innovative and reliable.
- Charles Hoskinson, CEO of IOHK, is one of the most qualified technical leaders in the entire industry and has been in the world of intelligent contracting since the beginning, having worked extensively on Ethereum and Ethereum Classic.
- Despite consistent progress of development, including the inclusion of the Shelley phase in the first quarter of 2019, Cardano is still flying under the radar compared to other cryptocurrency platforms. This is not all that surprising, given that Cardano's long-term approach does not have the same flash and hype as the successful marketing campaigns of the other so-called "Ethereum Killers". In the midst of a cryptic winter, however, I will take every day a well-executed engineering on a successful marketing.
- Cardano is establishing a presence in the developing world, paying close attention to Africa, underdeveloped regions of Asiaand South America. Where the existing infrastructure is severely deficient, cryptocurrencies can make an immediate positive difference in people's lives and Cardano is positioning itself to get a large portion of those early users.
All in all, Cardano seems to be the most responsible and competently managed organization in the entire space of the smart contract. I do not have the technological knowledge to really analyze one of these platforms too deeply below the surface, so it's really crucial to choose the strongest team and community.
In this regard, Cardano is an obvious choice.
The encrypted winter has been the opposite of a season alt so far, with Bitcoin having maintained the largest market capitalization of the major currencies since the speculative bubble burst.
Without strong evidence to suggest that the market is changing in the near future, I am still not conducive to diversification in many alts. Winter is going to survive, so you can thrive in the spring, and with BTC, DCR and ADA, I can not wait to see how spring is going to thrive.