22 lessons the crypto market taught us in 2022
Original Author: Edgy
Original compilation: Deep Tide TechFow
1. Locking the Token is not worth it.
In DeFi, the locking mechanism of ve economics has become popular once upon a time. You lock your Token for a period of time, and in exchange, you gain additional benefits or utility.
The result is that some people watched their locked tokens drop -90% in a bear market. I prefer to keep my tokens liquid.
2. There is no "smart money".
All the "smartest" people in this space are losing money (3 AC, Alameda, VCs).
Great chess skills, an MIT degree, and coding skills are not enough to stop greed and poor risk management, don't invest in a project just because it has the backing of a big shot.
3. Nothing is too big to fail yet in cryptocurrency.
Please remember:
- 3 AC
- FTX
- Luna
4. Question the behavior of the treasury.
The agreement's treasury is its lifeblood, and no money means no agreement.
1) 3 AC secretly manages some agreement treasury;
2) Some founders secretly use their treasury for transactions.
Bad financial management ruins good projects.
5. Bull runs are easy, but not every protocol can survive the crypto winter.
Always ask yourself:
1) Is the funding source of the protocol other than its original Token?
2) Do they have enough runway to survive 2+ years?
3) Are their costs reasonable?
6. Protect yourself from rumors of bankruptcy:
- "They are stable";
- "The probability of FTX bankruptcy is close to 0%".
When something is about to happen, protect your funds. No one will do it for you.
7. Beware of the cult of personality.
"Power corrupts; absolute power corrupts absolutely".
Every lead character has fallen this year.
- Daniele Sesta
- Do Kwon
- Zhu Su
- SBF
You can ride with them on the ascent, but get out quick before the inevitable crash.
8. Algorithmic stablecoins are still a pipe dream.
UST crashes;
Bean Bad Debt;
FEI/USN collapsed;
USDN/USDT is trading below its peg.
People will keep trying to make these experiments work, but I'd rather hold a fiat-backed stablecoin and just watch from afar.
9. Cross-chain bridges are dangerous.
Vitalik warned us about the security issues of cross-chain bridges:
Axie's Ronin Bridge ($624 million);
Solana's Wormhole ($326 million);
Harmony Bridge ($100 million);
Nomad ($190 million).
When using cross-chain bridges, you add additional risk.
10. There are no free earnings:
20% Anchor UST；
Earn 5% Bitcoin yield with CeFi.
Companies market these products as if they were as safe as banks. But the rate of return comes at the cost of high risk (-100%). It is perfectly feasible to store coins in a cold wallet and not earn any yield.
11. Cryptocurrencies are still tied to macro.
The merger of Ethereum was one of the biggest technical achievements in cryptocurrency, unfortunately the macro winds were too strong for ETH to take off. Federal Reserve policy and interest rate decisions currently determine the market capitalization of cryptocurrencies.
12. Beware of the halo effect:
- SBF on the cover of Forbes;
- FTX rescued BlockFi/Voyager;
- FTX sponsors sports players.
The halo effect means people don't do their due diligence, and if you invest enough money, no one will ask the hard questions.
13. Don't try to wait for exact tops or bottoms.
You can never have perfect timing, and trying to time it can hurt your bankroll. A simpler strategy is to exit fixed investment in a bull market and continue fixed investment in a bear market.
14. There are still some games in the bear market.
We saw the narrative of real gains kick in around the summer.
Those who invested in GMX and GNS early have reaped huge returns. Fewer Narratives in a Bear Market - Too many are forgotten until the macro picture improves.
15. Adoption happens when cryptocurrencies enter the background.
Most people on Reddit hate anything related to cryptocurrency, but Reddit's "digital collection" is sold out. The key is to make the encrypted part invisible and frictionless while providing value.
16. Ethereum Layer 2 is here to stay.
Ethereum layer 2 is sucking TVL away from altcoins L1 (Arbitrum and Optimism are both in the top 10).
Zero-knowledge Rollups like Starknet and zkSync are coming. The future seems to be a war between ETH Layer 2 and Lisk.
17. Historically, cryptocurrencies have run on a 4-year cycle.
Towards the end of the cycle, you'll see people trying to prolong it.
- S 2 F chart;
- "Super Cycle";
- Bitcoin delay theory.
People are financially incentivized to make you think the bull market will last longer.
18. If you don't know the source of the benefit, you are the source.
Do you remember all those node projects? No one can answer where the proceeds come from.
Yield comes from new entrants, make sure you understand how value is generated before investing.
19. History doesn't repeat itself, but it often rhymes.
- Mt. Gox FTX；
- Bitconnect Terra Luna。
In the next cycle we'll have trading platforms crashing, in the next cycle we'll have new cult leaders.
Human nature is hard to change, and it's up to us to warn the next generation.
20. Go find FUD.
When Token is hot, there is only one voice around, and the Fomo mentality makes it difficult for people to have rational discussions.
- They attack your character
- They mine any old tweets they can use against you
So when you invest, look for FUD.
21. Humans have failed, but DeFi has not.
The biggest disasters of the year are human greed, risk management, fraud and bad decisions.
When CeFi companies become insolvent, DeFi loans are the first they repay. Learn to trust code not people.
22. Learn self-preservation.
If you cannot master the private key, it is not your Token.
It looks like we have to learn this lesson every cycle. Any Token in the trading platform is an "IOU".
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