strategy | Cryptobeyer

In crypto, fortunes can be made or lost in an instant. Here’s a nuanced perspective on investing that is interesting for those seeking financial success while also considering the impact on overall well-being. I present the "steel hands" approach, a strategy that aims for a delicate equilibrium between risk management and mental health.

The first strategy in investing is shaky and tough on our mental health. The "paper hands" strategy, characterized by impulsive selling and low-risk tolerance, provides a shield against steep losses during market downturns. However, the emotional roller coaster of fear and uncertainty associated with this approach can take a toll on mental health. Studies suggest that impulsive actions driven by fear are linked to long-term negative outcomes, highlighting the potential psychological impact. Word in the crypto community is that this strategy usually leads to losses as it's nearly impossible to perfectly time the market. I hear that “time in the market” is better than “timing the market.”

On the other end of the spectrum, the "diamond hands" strategy represents unwavering commitment, showcasing resilience even in the face of extreme market volatility. While this approach may result in long-term gains, maintaining such steadfastness requires a significant psychological toll, potentially affecting overall well-being. This strategy is for hardcore believers in crypto and is only appropriate for investing in solid cryptocurrencies. You know, the top one! The problem with this strategy is that it can mean that one never takes profit and only experiences the ups and downs of the crypto market.

Now, consider the "steel hands" approach, a strategy offering a more balanced and sustainable path. I did some research and found a study from the Journal of Behavioral Finance, titled "The Impact of Risk Tolerance on Investment Decisions: Evidence from the Chinese Stock Market" by Y. Zhang, Y. Li, and Y. Wang, that underscores the importance of maintaining a balanced approach to risk management. It’s common sense research; when considering our mental health in trading, it's smart to be balanced and take a moderate risk. I would add, that may also be smart in terms of cryptocurrency investing as this asset class is highly volatile and risky. But hey, I am not an investment advisor and not as knowledgeable as those guys at the bank …

Investors with "steel hands" possess a moderate risk tolerance, balancing investments across different asset classes and sectors. As the FOMO-force in crypto is strong, I would say that this strategy is a commonsense approach to investing. For those new to crypto, FOMO is a strong feeling that we must buy immediately along with everyone else. Generally I hear that we want to do the opposite.

Whereas the “steel hands strategy” allows for a more thoughtful and well-considered decision-making process, steering clear of impulsive actions. The study also emphasizes that this balanced approach aids in avoiding irrational decision-making and maintaining focus on long-term financial goals.

Here's a practical example. Imagine an investor faced with a sudden market downturn. A person with "paper hands" might panic, hastily selling off assets to avoid potential losses. Conversely, an individual with "diamond hands" would likely hold onto their investments, convinced of long-term success but enduring increased stress.

Now, envision an investor with "steel hands" in the same scenario. With a moderate risk tolerance, this individual would navigate the downturn with resilience, holding onto assets but also being open to strategic adjustments based on rational analysis. This balanced approach not only allows for potential gains but also contributes to a healthier mental state. Daily swings in prices will not impact as much and one can even ignore daily statistical analysis or astrology to guess the future price of an asset. Yes, there are those that predict cryptocurrency prices through astrology…

If you learn anything from this article, it is to stay away from having paper hands. Please do not jump from coin to coin or from stock to stock thinking that you are smarter than the market.

Here’s some sobering data: Day trading, a risky strategy in the financial world, faces considerable hurdles, as highlighted by several studies. A study in the Journal of Finance found that only 1% of day traders consistently make profits. Another study by Charles Schwab showed that while 70% of day traders have a game plan, only a small portion of them actually end up making money. In a more extensive study called "Day Trading For A Living," which tracked 1,600 Brazilian day traders for over a year, only 13% were still actively trading after three years. Moreover, official data from 30 ESMA-regulated brokers disclosed that, on average, a high 74.9% of forex traders incur financial losses, emphasizing the substantial risks linked with day trading.

If you decide on investing in crypto, “Do not day trade.” Just don’t.

Crypto is not an empty futuristic dream. It is happening. The Abu Dhabi Blockchain strategy is a genuine initiative to become the first crypto-powered government and city. What is happening in Abu Dhabi and what can we learn from it?

Cryptocurrencies are now being recognized by governments and accepted by organizations and businesses across the globe. Dubai has long been a frontrunner in embracing digital innovations and Abu Dhabi holds 31 percent of the global cryptocurrency exchange and has a huge financial market.

But it takes guts to be in the forefront of innovation. As early as 2015 a group of blockchain experts and policy makers decided to implement blockchain technology and disrupt the digital landscape of the nation. Dubai was to become the first crypto-powered government and city and a testing ground for crypto business experiments.

In fact, The Ministry of Artificial Intelligence wants the government to be paperless by 2026 and goes all-in on using blockchain technology. The Abu Dhabi Blockchain Strategy has the bold goal that 60% of all public transactions should be on a blockchain by 2025. This technological shift has potential to save 3 billion USD in transactions cost and 100 million paper documents and over 50 million operating hours each year. The grandiose feel of the project is highlighted with building the World Trade Center to create a high-end spot for a range of crypto services and to create a true blockchain-based world city. Currently over 300 crypto businesses have established their base in Dubai and crypto firms are being assisted with zero taxes and visa restrictions have been removed to support eager entrepreneurs. In 2022 the Emirate has doubled down on its commitment to blockchain technology.

Money laundering, inadequate customer protection and lack of accountability of crypto companies are still headaches in the crypto industry. Some governments and their agencies use weaknesses in the crypto space to increase their power and control of the people and some genuinely try to create regulation that protect the customer and accelerate innovation.

We need regulatory clarity on a global scale to support the good and to fight the bad in crypto.

We are getting clearer digital market legislation in Europe with the Markets in Crypto Assets Regulation bill which was recently passed by European lawmakers. This legislation is set to come into effect in 2024. While the USA is still trying to decide what crypto currency is a commodity and what is a security and how to properly regulate the market but not hinder innovation.

Abu Dhabi have followed a clearer path. To attract foreign direct investments, as well as venture capital, and to support the adoption of cryptocurrencies Dubai have introduced regulation by creating Dubai’s Virtual Assets Regulation Authority (VARA). These smart regulatory moves have been claimed to be the reason why the world’s biggest crypto exchanges, Binance, Crypto.com as well as Bybit are setting up regional headquarters in Dubai. Money clearly likes stability with great potential. Furthermore, VARA is the first regulatory organization in the world that have set up camp in the metaverse.

Blockchain technology, AI and the internet of things are key players in the fourth industrial revolution that we are experiencing. It is obviously not easy to be in the forefront of using new technologies that also need to converge with each other. Dubai is trying hard and will be sharing their mistakes for the benefit of the world.

Key lessons in the grandiose Adu Dhabi blockchain initiative may be the following. The sweet nectar of success will be tasted when focus is on building a crypto ecosystem that increase trust between governing bodies, investors, entrepreneurs, and customers. A true blockchain based city is transparent and safe and sound. That’s when technology has possibility to meet individual needs and improve society and potentially increase our sense of happiness.