Crypto is its own world. It’s a new asset class that’s going to be massive, generate huge amounts of wealth, and transform the economic and technological landscape of our society, but it’s not there yet. Right now, everybody involved with crypto is an early adopter, someone in the know, and maybe even a dyed-in-the-wool fanatic.

For something so new, it’s easy for anybody to get the wrong idea. Even those people who think they’re on the cutting edge. Even the people most up-to-date. In fact, maybe especially people who think they have it all figured out.

That’s why it’s important that we watch out for “The Illusion of Truth Effect,” where statements seem truer the more often, they are repeated. Just because you hear something over and over again doesn’t mean it’s true.

And as I’m going to show you, anybody who goes on believing something just because they hear it over and over again is liable to make the same mistakes as everybody else who isn’t getting rich right now.

After all, if you’re just following the crowd, that puts you last in line…

A Million People Can Definitely Be Wrong (And They Probably Are)

We live in an age of memes, and ultimately, a meme is just an idea that people think is catchy enough to repeat over and over again. They’re especially popular on the internet, which is also where we get crypto, so naturally, memes have a way of creeping into the crypto space. If you’re not careful with this, you’ll end up making mistakes.

What’s the most basic crypto meme out there? “HODL,” the cutesy misspelling of “hold” that symbolizes how loyal crypto fanatics are dedicated to always maintaining their crypto holdings. We are not loyal crypto fanatics. We are crypto investors. We are here to make money, not fly a flag.

We buy when it makes sense to buy. We sell when it makes sense to sell. All those people saying they will never sell their bitcoin aren’t making any sense. Sure, holding some makes a good foundation for a portfolio. There may be good buying opportunities ahead. But if you’ll never sell an asset, it’s useless.

Selling the asset is when you get to cash in on your investment. What if you borrow against the asset? That’s basically the same thing as selling it. You need to be careful when you sell, and exactly how much of your total holdings you sell, but “hodling” forever defeats the whole purpose of investing.

Or let’s look at LUNA. At the end of 2021, it was an extremely popular “stablecoin,” with the 9th biggest market cap in the entire crypto universe. The thing is, it tried to maintain stability with an algorithm instead of proper collateral.

In the long term, this is fundamentally impossible, so naturally, LUNA collapsed, and now it’s worthless. Everybody who was holding it when this happened has lost big-time.

While we’re at it, I’d watch out for Solana. For a while, it was the biggest new platform crypto in the headlines, but with its persistent network instabilities, I don’t see good things in its future.

Don’t Join the Crowd, Beat It

By that same token, if people on Twitter won’t shut the hell up about Dogecoin, it doesn’t make dogecoin a good asset. In fact, it may even mean the opposite.

The whole point of good investments is “buy low, sell high.” That means being one step ahead of the news. If you’re following the memes, it means it’s probably too late, the asset they’re all buzzing around has already rallied, if it will at all. Then, it’s going to fall.

If you follow the memes, you buy high, sell low, and get washed. After all, high prices, by definition, mean lots of buyers. Low prices mean lots of sellers. The name of the game is to get ahead of the game; don’t be left holding the bag.

So be careful, stick to the fundamentals and the five T’s. Don’t believe everything you hear, and don’t believe everything you hear over and over again. That’s how you avoid “The Illusion of Truth Effect,” and all the financial hazards it can create.


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