Ukrainian Regulations States That Mining Does Not Require Governmental Oversight

Ukrainian’s powers stated that crypto mining does not require regulatory activity from governmental oversight bodies or other third-party protocols.

In its legal article on virtual assets published on Feb. 7, the Ministry of Digital Transformation of Ukraine specified that mining does not necessitate directives by state authorities as this activity is measured by the protocol itself and network members.

The agency further added that it will contribute to the development and implementation of decentralized technologies, as well as establish sandboxes for their evaluation and verification, and assessment of potential risks to the market.

The agency swore to promote collaboration between the financial market and virtual assets and their effective development, international best practices on taxation of virtual assets, as well as establish effective mechanisms to prevent abuse and offense from business and law enforcement.

Ukraine has appeared to be actively exploring the digital currency and blockchain space, in recent months. At the end of January, Ukraine’s Finance Minister reportedly said that the State Financial Monitoring Service of Ukraine (SFMS) would be the authority responsible for tracking the sources of origin of the funds on citizens’ crypto wallets. Thus, the SFMS would be able to not only find out the origin of crypto but also detect how those funds have been spent.

Last December, the Ukranian government approved the final version of a money laundering law that will handle virtual assets and virtual asset service providers per FATF guidelines.

The new law comprises some guidelines on how the government aims to monitor and regulate the trading of cryptocurrencies. One of the guidelines focuses on individual crypto transactions worth less than 30,000 hryvnia ($1,300), from which the administration will only gather the public key of the sender for the purpose of financial monitoring.

Explained: Elliot Wave Theory

The underlying theory behind the Elliott wave principle is based around how price moves, which typically is not in a straight line, but in a series of waves. A great analogy would be one that compares an ocean tide coming in as the water rises, and flowing out as the water recedes into the sand below.

Within any financial market (including cryptocurrency), every action creates an equal and opposite reaction. When price movement moves up, a contrary downward movement must follow.

Price action within any financial marketplace is often divided into trends and corrections (sideways movement). Upward or downward price action will showcase the direction of a trend, while corrections will always move against the trend. These repeating patterns have been shown to occur within all financial marketplaces since the dawn of time.

A man by the name of Ralph Nelson Elliott, first discovered these repeating patterns, known as impulsive and corrective waves. He noticed that these impulsive waves, which always coincide with the main trend, tend to respond in 5 waves.

Even on a smaller scale, each of these impulsive waves can be found and continue to repeat themselves inside the larger Elliott wave patterns. These “waves within waves” are labelled as “wave degrees” within the Elliott Wave Principle.

Human social nature can be found within these repetitive patterns due to the predictive manner of human psychology in which the powers of greed, FOMO, and “weak hands” rule. You can call it another “self-fulfilling prophecy” all you want; however, these patterns show up within all financial markets due to these reactive and basic human emotions.

As discussed above, Elliot waves come in 2 different phases: motive (the trend) and corrective phases. The motive phase forms 3 advancing waves of 1, 3, and 5. The counter waves (downward) are comprised of 2 and 4.

During the corrective phase, you’ll typically find 2 receding ways labeled A and C, with a counter wave (upward) labeled B.

The rules behind the motive waves are as follows:

Wave 2 never moves below the beginning of wave 1.
Wave 3 is never the shortest wave.
Wave 2 and 4 can sometimes alternate in form, for example, Wave 2 can show up as a zigzag wave while Wave 4 will be flat.
At least one of the waves (1, 3, or 5) will be much longer than the other two. Most of the time, the third wave is the longest of the three, but that is not always the case in crypto.

Rules for the corrective phase are as follows:

Wave B terminates at or below the start of Wave A
Wave C typically terminates below Wave A.
In the cryptocurrency market, corrective waves typically claim more than 60% of the all-time high price (top of 5th wave). Some would argue that the norm is 75 to 80% and 100 to 120% retracements can be found if correlated with bad news.

Just remember that if you get confusing results from your chart, it’s most likely that you’ve miscalculated and dismissed some of the rules mentioned above. Don’t worry though; you’ll most likely miscount these waves the first several times you try.

In order to combat this miscounting issue, here’s a trick you can use to spot these waves.

Go to the top bar where you can change the candlestick display on TradingView and choose the Heikin Ashi candlestick. This type of candlestick helps you better view red or green candles that correspond with a particular trend.

The Heikin Ashi displays the average pace of prices, which is great at identifying trending periods. This is what Elliott waves are all about. It will greatly reduce the confusion on whether candlestick patterns are showing bearish or bullish patterns. Trust me, these help immensely.

The Elliott Wave Principle is another highly useful chart pattern that many veteran traders use to recognize the beginning and end of a trend.

Never buy into the news or hype alone. These systems are used to fool people into buying the tops or bottoms of the market, which is a sure-fire way of failing.

Do your own research before buying and selling into the market. Know what phase the market is currently in (motive or correction) and make an informed buying decision utilizing the Elliot Wave Principle.

Crypto Ponzi Scheme Lures Unknown Number Of Baseball Players

Two men charged over an alleged crypto trading ponzi scheme lured investors, including professional baseball players, with social media posts boasting about their luxurious lifestyles.

On January 30, the Secret Service arrested the Arizona-based founders of Zima Digital Assets, John Michael Caruso, aged 28, and Zachary Salter, aged 27.

Caruso commonly refers to himself as “Krypto King” in social media posts and claims he’s been a cryptocurrency investor since 2012. He has a criminal history and was last released from prison in late 2017.

Salter is an aspiring R&B singer who releases music under the name “Sweet Talker.”

Despite claiming no taxable income, the pair’s extravagant social media posts about their luxury good purchases helped draw in new investors.

They were charged with conspiracy to commit wire fraud and money laundering.

The complaint alleges that Salter and Caruso defrauded more than 90 investors out of at least $7.5 million since June 2018. That figure includes an unknown number of former pro baseball players and senior citizens. Zima is still actively taking investments so the total amount lost is unknown.

Zima’s website claims the firm “operates various private funds focusing on investments in cutting-edge technologies, including crypto and other blockchain based assets,” and Caruso and Salter were featured as successful crypto investors in Forbes, Entrepreneur, and Cigar Aficionado.
A press release that looks an awful lot like an ordinary Business Insider story referred to Caruso as “the Michael Jordan of algorithmic cryptocurrency trading.”

Forensic accountants believe that none of the money Zima took from its would-be investors was actually invested in cryptocurrency. The pair instead used the money to live it up, spending $350,000 on luxury car rentals and another $610,000 on private jets, a mansion rental (dubbed “the Krypto Castle”), as well as a variety of jewellery and designer clothing.

Caruso had a fleet of luxury cars including a Lamborghini, and the pair lost $830,000 within 134 hours of gambling at Las Vegas casinos.

They frequently posted about their lifestyles on Instagram and Facebook, including a video suggesting Zima had $1 billion in assets under management. They used direct messaging on the platforms to contact potential investors.

Their victims include former Major League Baseball players and their families, along with a 76 year old man who lost $200,000 and an 86 year old who lost $60,000.

The investigation found that $1.9 million of the funds was paid back to investors in the form of “returns.”

“The pattern of investor payments against investor payouts with no investment of funds is consistent with … a Ponzi scheme,” court filings show.

Weekly Overview: Cryptocurrency

Canada Issues Guidelines For Cryptocurrency Exchanges

Canadian authorities have issued new direction to regulate which digital currency trading platforms fall under derivatives law.

The Canadian Securities Administration (CSA) clarified new provisions in the “Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets” published on the 16th of January, 2020.

To know more check out our previous blog.

Canadian Teen Charged For Cryptocurrency Theft

A Montreal resident, age 18 if facing 4 criminal charges connected to a $50 million SIM Swap scam that targeted cryptocurrency holders.

“Eighteen-year-old hacker Samy Bensaci is accused of being part of a crime ring that stole millions of dollars in crypto-currency by gaining unauthorized access to the cell phones of crypto-currency holders in America and Canada.” — Infosecurity Magazine. 17th January, 2020

To know more check out our previous blog.

South Korea Considers Imposing Income Tax on Cryptocurrencies

The Ministry of Economy and Finance of South Korea, is considering levying a 20% tax on the incomes made through cryptocurrency transactions.

According to a news report published by The Korea Times on the 20th of January, 2020, the ministry had reportedly ordered its income office to review cryptocurrency taxation. The Korea Times cited an anonymous official who reportedly said that the ministry has not finalized its plan, but noted that the government may impose a 20% tax on crypto income.

To know more check out our previous blog.

PornHub Adds Tether As A Payment Option

Adult entertainment website Pornhub has added a new cryptocurrency payment option after PayPal had abruptly stopped servicing its models in late 2019.

According to a Jan. 23 blog post, Pornhub now supports Tether (USDT) — a major United States dollar-pegged stablecoin — to allow instant and zero-fee payments via the crypto wallet and browser extension TronLink.

Binance Invests In Taiwanese Startup Numbers

Major cryptocurrency exchange Binance has invested an undisclosed sum in blockchain data monetization startup Numbers.

According to a post published on Binance’s official blog on Jan. 21, Numbers aims to create an open, transparent and traceable data sharing, verification and management system. The firm’s open source application reportedly allows individuals to own and monetize their personal data.

Ether Is The Most Correlated Cryptocurrency To Other Coins

Recent research shows that Ether (ETH) was the cryptocurrency most correlated to the rest of the crypto market in 2019.

In a report published on Jan. 22, the research arm of major cryptocurrency exchange Binance suggests that throughout 2019, ETH had an average correlation coefficient of 0.69.

Weekly Overview: Crypto And Blockchain News

PwC Switzerland Partners With Chain Security

Smart contract auditing team ChainSecurity partnered with the Swiss branch of Big Four auditing firm PwC to enhance the services the global auditor provides.

In an email sent to Cointelegraph, a PwC spokesperson explained that no acquisition took place and multiple ChainSecurity teams joined the firm.

According to a press release published by the firm on Jan. 5, PwC hopes that, with ChainSecurity’s team, the firm will become “the world’s leader in smart contract auditing.”

FTX Launched Bitcoin Option Trading

Cryptocurrency derivatives exchange FTX has launched Bitcoin (BTC) options trading on Jan. 11.

FTX CEO Sam Bankman-Fried announced in a tweet on 11th January, that options were listed on the trading platform. Furthermore, later the same day he also claimed that options trading volume on the exchange reached $1 million in about 2 hours.

Student Wins Satoshi Nakamoto Scholarship

Bitcoin SV (BSV)-promoting Bitcoin Association has awarded a PhD student at Cambridge University with its Satoshi Nakamoto Scholarship, designed to support the development of blockchain applications.

Per a Jan. 9 press release, Robin Kohze, a second-year human genomics PhD student at Cambridge University, became the first to receive the scholarship following a series of blockchain competitions within the Bitcoin SV Hackathon last fall. With his project dubbed, Hive, Kohze took second place. The scholarship is set to allow further development of Hive into a fully operational platform.

Block.One Released Major EOS.io Blockchain Software Update

Blockchain software development firm Block.One released EOS.io 2.0, the software underlying the EOS blockchain.

In the release announcement published on Twitter on Jan. 10, Block.One claimed that the update makes the blockchain “faster, simpler, and even more secure.”

The official blog post on new software explains that it includes a purpose-built WebAssembly (WASM) engine on which the EOS smart contracts run. According to its official website, WASM is an instruction format designed for deployment on the web and servers.

This change is expected to improve the performance of smart contract execution, given that it is supposedly up to 16 times faster than the engine used in the previous version.

Will Blockchain Security Issues Be Dealt With, In 2020?

The past few years have been a crisis for security in crypto. As the asset class has increased popularity, more and more security breaks have been highlighted and more institutions targeted.

The burgeoning industry is ripe with opportunity, but also with risk. Two incidents that highlight this lapse in security spring to mind.

Back in January 2018, Coincheck Japan was targeted, with attackers succeeding in stealing $530 million worth of NEM tokens from the crypto exchange. It is one of the biggest crypto exchange heists in the relatively short history of the industry and stands alongside the infamous attack on Mt. Gox, when around 800,000 BTC was stolen — a sum worth over $6 billion today.

Further back in February 2016, the Bangladesh Bank was targeted. Thieves tried to steal a total of $850 million via properly authenticated transactions in ordering the Federal Reserve Bank of New York to transfer the money through the SWIFT network. While “only” $101 million was transferred to final beneficiaries in the Philippines and Sri Lanka, this ended up resulting in a whopping total of $81 million successfully stolen during the incident.

What do these incidents have in common? The complacency of the victims — central banks and top crypto exchanges — and their management of security credentials (be it passwords or private keys) in giving access to the transfer of fiat money or cryptocurrencies.

The SWIFT network used for the Bangladesh Bank and other similar heists was not hacked, the users of the network were. The blockchains utilized to transfer the NEM out of Coincheck and the BTC out of Mt Gox were not hacked, the exchanges — i.e., the users of these blockchains — were. Their systems and credentials were so poorly protected that hackers were able to take control and impersonate their victims with ease.

The SWIFT community reacted to these events by reinforcing cybersecurity controls, by identifying the weakest players and by ensuring hackers’ modus operandi were shared among the community to prevent further incidents. Has the crypto industry done the same and learned from its mistakes? Probably not at the level this issue deserves. Will 2020 see more collaboration to prevent these incidents or to enable the recovery of stolen funds in case of successful hacks? The jury is still out.

In 2020, more education and awareness will be required. Exchanges, funds, projects, foundations, and all the other crypto players servicing underlying customers must put in place the proper transparent and secure processes around the safekeeping of the assets of their customers. Most will rightfully opt for the outsourcing of that critical task to third-party custodians whose job is to do precisely that.

This year will hopefully also be the year when digital asset service providers such as crypto exchanges and custodians will not only collaborate about the implementation of the Financial Action Task Force rules but also about the exchange of information on hackers’ modus operandi and blacklisting of addresses.

By the end of the year, the cashing out of hacked funds should be so difficult — thanks to a more formal collaboration between players — that thieves will be discouraged from targeting cryptocurrency organizations.

Beyond the adoption of the right established technology, it is only when common-sense operational and business practices — those of segregation of duty, focus on core activities and established risk management — are put in place that the digital asset industry will become mainstream. Today, it is not, and now you know why.

Dark Pool Explained

Dark pools are an ominous-sounding term for private exchanges or forums for securities trading. However, unlike stock exchanges, dark pools are not accessible by the investing public. Also known as “dark pools of liquidity,” these exchanges are so named for their complete lack of transparency. Dark pools came about primarily to facilitate block trading by institutional investors who did not wish to impact the markets with their large orders and obtain adverse prices for their trades.

Dark pools were cast in an unfavorable light in Michael Lewis’ bestseller Flash Boys: A Wall Street Revolt, but the reality is that they do serve a purpose. However, their lack of transparency makes them vulnerable to potential conflicts of interest by their owners and predatory trading practices by some high-frequency traders.

Why Use a Dark Pool?

Contrast this with the present-day situation, where an institutional investor uses a dark pool to sell a one million share block. The lack of transparency actually works in the institutional investor’s favour since it may result in a better-realized price than if the sale was executed on an exchange. Note that, as dark pool participants do not disclose their trading intention to the exchange before execution, there is no order book visible to the public. Trade execution details are only released to the consolidated tape after a delay.

The institutional seller has a better chance of finding a buyer for the full share block in a dark pool since it is a forum dedicated to large investors. The possibility of price improvement also exists if the mid-point of the quoted bid and ask price is used for the transaction. Of course, this assumes that there is no information leakage of the investor’s proposed sale and that the dark pool is not vulnerable to high-frequency trading (HFT) predators who could engage in front-running once they sense the investor’s trading intentions.

Types of Dark Pools

Broker-Dealer-Owned

These dark pools are set up by large broker-dealers for their clients and may also include their own proprietary traders. These dark pools derive their own prices from order flow, so there is an element of price discovery. Examples of such dark pools include Credit Suisse’s CrossFinder, Goldman Sachs’ Sigma X, Citi’s Citi Match and Citi Cross, and Morgan Stanley’s MS Pool.

Agency Broker or Exchange-Owned

These are dark pools that act as agents, not as principals. As prices are derived from exchanges — such as the midpoint of the National Best Bid and Offer (NBBO), there is no price discovery. Examples of agency broker dark pools include Instinet, Liquidnet and ITG Posit, while exchange-owned dark pools include those offered by BATS Trading and NYSE Euronext.

Electronic Market Makers

These are dark pools offered by independent operators like Getco and Knight, who operate as principals for their own account. Like the broker-dealer-owned dark pools, their transaction prices are not calculated from the NBBO, so there is price discovery.

Dark pools provide pricing and cost advantages to buy-side institutions such as mutual funds and pension funds, which hold that these benefits ultimately accrue to the retail investors who own these funds. However, dark pools’ lack of transparency makes them susceptible to conflicts of interest by their owners and predatory trading practices by HFT firms. HFT controversy has drawn increasing regulatory attention to dark pools, and implementation of the proposed “trade-at” rule could pose a threat to their long-term viability.

Leading Vs Lagging Indicators

Lagging indicators use past price data to provide entry and exit signals, while leading indicators provide traders with an indication of future price movements, while also using past price data. When faced with the dilemma of leading vs lagging indicators, which should traders choose? The answer to this question ultimately comes down to individual preference after understanding the advantages and limitations of each.

Lagging indictors

Lagging indicators are tools used by traders to analyse the market using an average of previous price action data. Lagging indicators, as the name implies, lag the market. This entails that traders can witness a move before the indicator confirms it — meaning that the trader could lose out on a number of pips at the start of the move. Many consider this as a necessary cost in order to confirm to see if the move gathers momentum. Others view this as a lost opportunity as traders forgo getting into a trade at the very start of a move.

Leading indicators

A leading indicator is a technical indicator that uses past price data to forecast future price movements in the market. Leading indicators allow traders to anticipate future price movements and therefore, traders are able to enter trades potentially at the start of the move. The downside to leading indicators is that traders are anticipating a move before it actually happens and the market could move in the opposite direction. As a result, it isn’t uncommon to witness false breakouts, or signs of a trend reversal that just land up being minor retracements.

SHOULD YOU USE LEADING OR LAGGING INDICATORS?

There are no perfect indicators. By their very nature, indicators will help traders discover likely outcomes as opposed to a sure thing. It is up to the trader to conduct thorough analysis, with the aim of stacking the odds in their favour.

To further illustrate this point, below is an example of leading vs lagging indicators in EUR/USD, where the leading indicator appears to provide a better signal. Keep in mind that this is purely for demonstration and that the lagging indicator is equally as important.

The market sold off aggressively before retracing to the significant 61.8% level. Using a simple moving average (21, 55, 200), it is clear to see that the faster blue line (21) has not crossed below the slower black (55) line and therefore, this lagging indicator has not yet provided a short signal.

However, upon further analysis traders would be able to see that the market failed to break and hold above the 200-day moving average. The 200 SMA is widely viewed as a great indicator of long-term trend and in this example, is acting as resistance. This supports the short bias for traders eyeing a bounce lower off the 61.8% level.

Traders looking for fast signals will tend to favor leading indicators but can also reduce the time period setting on lagging indicators to make them more responsive. This however, should always be implemented with a tight stop loss to in the event the market moves in the opposite direction.

Traders seeking a greater degree of confidence will tend to favor lagging indicators. These traders often trade over longer time frames looking to capitalize on continuing momentum after entering at a relatively delayed entry level, while implementing sound risk management.

Explained: The Wyckoff Method

One of the most helpful tools I’ve discovered for trading is The Wyckoff Method, created by Richard Demille Wyckoff, a pioneer in the studies of technical analysis, and one of the five “titans” of TA, along-side Gann (Gann Fans/Squares), Dow (Dow Theory), Merrill, and Elliot (Elliott Wave Theory). Below is a summation of what I’ve gathered and factored into my trading.

The Wyckoff avoidance method means to trade only the best assets in the leading market sectors.

Crypto is an emerging asset class, but there are already ways of determining which cryptocurrency has fundamental value. Focusing on the opportunities in those markets makes your decisions process much clearer:

You want to buy/hold a fundamentally valuable asset when its price is not reflecting its value yet.
You want to take profits and abandon an asset that is appreciating in the short term because of things like tiny market inefficiency or news hype.

FINDING THE MARKET WEAKNESS

You can use any of your favourite technical analysis tools that are good for spotting the weakness of a market — divergences would be a very early sign (and possibly a misleading one) but combined with a three-push formation and lower highs when seen relative to the Bollinger bands would be more reliable.

The general technical gist is that this transition is a substantial one, you should be looking for it on longer timeframes (daily, 3D or weekly charts). The market structure will be similar in all assets in the group you are looking at, but the weakening leader would display the crumbling more strongly.

Another important point in Wyckoff avoidance is to select assets that move in harmony with the market. The bigger picture and relations between different assets of the same class is often overlooked, but it is incredibly useful for market timing.

Assuming we are in a broad crypto bull market, if you can find cryptocurrencies that are performing consistently strong and if you can also find their counterparts, you have your best candidates for your long and short positions:

Strong crypto assets rally quite easily. After the rally comes a retrace, but some of the gains remain.
Weak crypto assets don’t rally consistently. If they do, the retrace kills all the gains.

On legacy markets, it is easy to compare an asset against a composite index: In a bull market, if an asset trades still well below a known resistance line and gains more than the index, it’s typically the strong performer.

The play there is to buy this particular asset, avoiding all the rest of the assets in its group.

The technically suggested time to sell comes when the price approaches a resistance area. Then you can look which stock was performing poorly in the rally: It’s is going to be the one that should drop the most in the coming retrace and therefore it is technically the best candidate for a short.

We now also have composite indexes in cryptocurrency markets, but the information you can get from them is still fairly questionable. Remember, the crypto markets are still very new.

Wyckoff’s insights are keenly relevant right now, and used well will help you make a good entry point as the bear market plays out its final stages. Add it to your toolbox

Psychology of Financial Markets

Market psychology refers to the prevailing sentiment of financial market participants at any one point in time. Investor sentiment can and frequently drives market performance in directions at odds with fundamentals. For instance, if investors suddenly lose confidence and decide to pull back, markets can fall.

Greed, fear, expectations, and circumstances are all factors that contribute to markets’ overall investing mentality or sentiment. The ability of these states of mind to trigger periodic “risk-on” and “risk-off,” in other words boom and bust cycles in financial markets is well documented. Often these shifts in market behaviour are referred to as “animal spirits” taking hold. The expression comes from John Maynard Keynes’ description in his 1936 book, “The Theory of Employment, Interest, And Money.” Writing after the Great Depression, he describes animal spirits as a “spontaneous urge to action rather than inaction.”

While conventional financial theory, namely the efficient market hypothesis, described situations in which all the players in the market behave rationally, not accounting for the emotional aspect of the market can sometimes lead to unexpected outcomes that can’t be predicted by simply looking at the fundamentals. In other words, theories of market psychology are at odds with the belief that markets are rational.

THEORIES AND TRADING

Some types of trading and or investing approaches do not rely on fundamental analysis to assess opportunities. For instance, technical analysts use trends, patterns and other indicators to assess the market’s current psychological state in order to predict whether the market is heading in an upward or downward direction. Trend-following quantitative trading strategies employed by hedge funds are an example of investing techniques that rely in part on taking advantage of shifts in market psychology, exploiting signals, to generate profits.

Studies have looked at the impact of market psychology on performance and investment returns. Economist Amos Tversky and psychologist and Nobel prizewinner Daniel Kahneman were the first to challenge both accepted economic and stock market performance theories that humans are rational decision-makers and that financial markets reflect publicly available and relevant information in prices (so that it is impossible to beat the market). In doing so, they pioneered the field of behavioral economics (also called behavioral finance). Since then, their published theories and studies on systematic errors in human decision-making stemming from cognitive biases including loss aversion, recency bias, and anchoring have come to be widely accepted and applied to investing, trading, and portfolio management strategies.

PSYCHOLOGY AND CRYPTOCURRENCY

Psychology has a huge effect not only on how we use cryptocurrency but the rate of its adoption in the general marketplace. Understanding these factors can give you an edge in cryptocurrency trading.

While the psychology of traditional investments is well-known and has been comprehensively studied, there are many key differences in the emerging cryptocurrency trading. Still more psychological barriers exist for a widespread crypto adoption in the marketplace. We’ll take a look at some of these different factors, starting with investment in general.

One of the number-one pieces of investing advice you’ll ever hear is ‘don’t invest based on emotion.“ You’ve probably heard that before if you even have a passing interest in investment, but you may not have stopped to think about why.

Statistics show that the majority of people trading financial instruments in any given year lose money. But what separates them from those who consistently gain? The answer is complicated, but can be understood when you examine the psychology that affects our decision-making processes.

FEAR

Fear is one of the most powerful motivating factors in the human condition. Fear of (further) loss is what causes people to sell off during a market downturn or correction. How can you counteract that fear? One way is by not over-leveraging yourself.

That means, only trading, say, 10% of your assets at a time makes you less vulnerable to acting out of fear than if you have 50% or especially 100% of your assets tied up in one single investment.

Investing money that you can’t afford to lose also causes stress and fear to control your decision-making. Even with the best information available and a very sharp mind, you’re not going to make good decisions if you make an investment with your next month’s rent money.

Most consider investment to be a long-term strategy, but many let fear dictate their actions and sell off at the slightest hint of a downturn. Even day-traders follow strict guidelines to take emotions like fear out of the equation.

ATTACHMENT

Another emotion to avoid is attachment. If a stock or asset is performing well, it can sometimes lead you to hold onto it longer than you should. This all depends on your goals, and if that is to make a profit, then you should not get enamoured by a high value.

Remember, the value of stocks does not equate to cash. Set realistic earning targets and cash out your investments when the price meet targets. Then, take a percentage of that and reinvest if you want — but you will protect the majority of your gains.

The psychology of investing and trading financial instruments is a very complex and tricky thing to navigate. Adding cryptocurrency to the mix adds a new layer to these same concepts.

One of the most important things to remember is that you need to protect the bulk of your wealth. Having all your wealth tied up in a volatile investment will lead to decisions ruled by fear.

Focusing on the goal of a crypto-issuing company, and how it is working to achieve that goal are better ways to frame your thinking. If their goal is to build wealth, or just to see cryptocurrency succeed in disrupting the market, the way they achieve that should be the same.