Crypto Investing: A Squid Game?

Spoiler Alert! If you haven’t watched the Squid Game in Netflix, stop here, and I recommend to watch it first! It’s also fine if you don’t want to.

You’ve probably heard crypto but didn’t bother because you feel it’s risky.

Well, not taking any risk is the biggest risk of all, as we only have one shot in life!

Crypto gives you another chance.

Come and tag-along, as you begin your best adventure yet!

Are you ready Player 1?

Investment Profile

Imagine you’re Gi-hun, someone who doesn’t have money and borrows a lot!

No? Maybe, someone who manages a big portfolio like Sang-woo.

Or, someone who wants to improve the life of her family, like Sae-byeok?

Instead of asking when moon?, when sell?, the questions you should ask yourself should be:

  • What’s my financial situation?
  • What’s my tolerance to take risks?
  • What’s my timeline to hit my investment goals?

We are all unique and have stories to tell, but we’re all equal in the same room!

Is Crypto, a Zero Sum game?

In the Squid Game, everybody is afforded a second chance at making it big, but at what expense?

Sometimes, our goals directly clash with one another, and it is up to you to decide, how to continue your story, and live in the cruel present.

In this new but unpredictable game, you need to be careful to arrive at a decision by processing new information (No cheating!).

So what influences your decision?

Let’s arm you with three abilities.

  1. Preference. Only you can decide how to maximize for your own benefit!
    Oftentimes, we form groups with people we are comfortable to share our views, and thats fine!
    But! Tread lightly my friend, as groupthink can be a problem if decisiveness tramps your preferences, more so when crisis hits.
  2. Values. Fairness, justice, respect. This game may be cruel, but crypto enables fairness due to transparency.
  3. Emotions. It is human to feel emotions, but it should be under control in this game.

Everyone is dealt with different cards. Will you show your weakness, or will you use it to your advantage?

Emotions

We are currently living in the worst crisis of our generation and there’s one thing that we find very real and profound.

That is, people who have experienced crises are more risk averse, later in their life.

If they lost money, they simply cannot afford to take more risks.
If they lost someone, they cherish and protect what they have left.

Fear can be a driver of a decision, which also induces risk aversion.

What’s your motivation to invest? And how should you do it?

Let’s go back to our players.

Gi-hun has been a gambler after failing to recover from his debt. He likes to trigger emotions by going to the racecourses and bet on his favorite horse. Trading and investing is adrenaline inducing and can provide gambling-related thrills.

Sang-woo is a portfolio manager who likes to increase personal wealth. The more risky the asset, the more it can significantly increase profit in a short span of time.

Other players like to invest, simply because it provides status and value to one self.

Sage advice from the experienced investors:
- Don’t act impulsively. Decide when you’re calm and informed.
- Learn to recognize your emotions.
- Don’t micromanage and look at charts everyday! Assets naturally fluctuate day-in and day-out.

Cognitive Biases

As they say, to err is human, and humans make mistakes.

Knowing what biases influence your decision can be beneficial and makes you more impartial!

For this topic, let’s say your team is your portfolio, and each player is an asset.

When we only pick whom we know in our locality, we tend to contradict ourselves and have a Home Bias in a team.

When we only rely and overrate on new information, we tend to have a Recency Bias. The doctor on the game only relied on new information from insiders, and lost his mind without considering other factors.

In this game, each player attempts to take all THE marbles of their opponent by any rule they set.

When we process information, we have tendencies to these two biases:

When we estimate something and were influenced with unrelated things we recently encountered, that’s Anchoring Bias.

In the game marbles (pictured above), they assume that grouping by 2’s mean that only the strong and the intelligent pair survives. Not knowing that after the game, only half of the pair gets to advance to the next set of games.

When we tend to look for information that confirms our beliefs and ignore the other perspective, we encounter Confirmation Bias. Oftentimes, we only hear what we want to hear and live in an echo chamber.

When we encounter Fear of Missing Out (FOMO), we have a fear of regret, which is called a Disposition Effect. People have a tendency to hold onto a losing asset for far too long.

To reframe your thinking and avoid FOMO, question yourself:
“If I didn’t own that losing asset, would I buy it now?”

If your answer is no, cut your losses early, and re-assess. Even a squid can cut his tentacle and regenerate with a far superior one.

Follow your plan and stick to your investment strategy. Do not get FOMO.
Do Due Diligence (DYOR)
Adjust and rebalance accordingly.

When evaluating past performance, we have a tendency for these two biases:

Everyone is guilty of saying “I knew it”, this is Hindsight Bias.
The outcome of our performance is only one of many possible futures.

When you see other people’s biases but not your own, you have a Bias Blind spot.

Decentralized: Coins, DeFi, NFT WTF?!

In this game, players have to choose any shape, not knowing the rules beforehand.

There’s vast opportunity in the emerging crypto economy, now a $2T asset.

The gold standard equivalent of crypto is still Bitcoin, followed by Ethereum, and other web3 platforms. These platforms enabled frictionless transaction, and crowdfunding (Initial Coin Offering to Initial DEX Offering).

You can invest in these coins, ‘hodl’ them, or even trade them!

Then came DeFi, which is an abbreviation for Decentralized Finance. It aims to bank the unbanked by providing staking and lending services to individuals.

You don’t even need to trade with each other. DEX (Decentralized Exchanges) already lets you buy from a pool of tokens, or swap with different coins across, like crossing a bridge from point A to B.

NFT, which stands for Nonfungible Tokens, is the hottest craze in town right now! In layman’s term, it’s a certificate of authenticity that cannot be destroyed.

This asset could be in the form of art, in-game asset, music, video, etc.

You can start by browsing defytrends for all things crypto, DeFi, and NFT collections. We welcome everyone in our community!

Risk, Reward, and Gambling

Gi-hun wins the claw crane after several attempts.

“Only risk what you can afford to lose”.

There are a lot of risks to consider when investing, not only in crypto but in every assets:
Macroeconomic risk — is my asset, affected by the current trends during the pandemic?
Liquidity risk — Is the market mature enough to accommodate everyone? Can a bank run happen during this crisis?
Counterparty risk — Can the other side of the deal default on its contractual obligation?
Cybersecurity risk — Can my assets be siphoned off from servers? Hackers are present in an ever evolving digital world, just like how one soldier in the game manipulates the monitoring for their selfish pursuit.

By knowing these risks, you are now well equipped for the upside to cryptoassets!

These assets are further categorized to growth and value but for the purposes of this piece, we treat almost every asset under growth. Meaning, the value of an asset can go far beyond 10x, before even getting revenues in the platform.

There’s a thin line between investing and gambling. The saying “Don’t put all of your eggs in one basket” rings true until this day! Be very careful and not lose your whole portfolio in the process.

Always remember, this game is a marathon, not a sprint.

To end our article, here’s a cool Easter egg for you:

Go to Tradingview.com to check out charts of stocks, bonds and crypto.
Hit UP UP, DOWN DOWN, LEFT RIGHT, LEFT RIGHT, B + A on your keyboard.
Wait for magic!

If you’re still reading this, you’ve already made a massive gain!

Click the Follow button for more high signal and less noise.

Our next topic will be on Macroeconomics and what moves a market. Any feedback is much appreciated!

Disclaimer: The above post is for educational purposes only, and must not be construed as an investment advice. Please do your own research and manage your risks, accordingly.

Squid Game and all its related content are copyrights of Netflix Inc.

DeFy Trends is a women-founded, all-in-one, intuitive, real-time analytics application and chrome extension that uses on-chain analysis and high tech data science algorithms to provide data insights based on DeFi fundamentals and sentiment. By scraping the web and social media for cryptocurrency sentiment analysis, incorporating real-time market data, qualitative data, and forecasting AI to bring retail and institutional investors state of the art insights on the rapidly growing crypto-decentralized finance markets.

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Defy Trends provides traders & investors with AI and data-driven crypto insights and education to support informed investment decisions

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