This is the most common mistake gamblers, investors make on a habitual basis. Never gamble with your rental money. Do not gamble with the money you need to buy food. The bills do not pay by themselves! This should be obvious for many reasons, but it is clearly easier to say in theory than what is achieved in practice.
Being financially overextended at the end of the day is an easy mistake to make. This is the standard in crypto. We see right and left projects deliver three-digit percentage gains, and we think like this: "Yes, but if I bet everything on it, I would earn even more!"
Slippery slope, man!
This is why DeFi farming actually has a good chance of acceleration. Every DeFi farm has a nice pair to a stable coin. This makes it a much safer gamble. Half of the total value will always be measured in fixed coins and we can convert this side to cash when we need it.
Non-permanent loss is irrelevant
Why is that? Because let's be honest: There was no way to keep 50% of your assets in fixed currencies from the very beginning. You entered like everyone else. This is the only reason you got into this mess in the first place. Remember?
With yield agriculture, we actually MUST keep 50% of our assets in something else. If we tend to over-expand financially, a stable coin is the best choice.
The worst part of financial overexpansion is that we cannot pay our bills when the fan hits, right?
False!
The worst part of overexpansion is an overly emotional attachment to money. We need that money for performance! THIS SHOULD WORK! This is the mentality of someone in a bending state, and bending will ruin you very quickly.
When you are inclined, you will constantly make stupid decisions. You see another token increase in price and you're trying to chase those gains, oops, that coin just lost your money. "The price will improve soon; it just should be!" As you think, you will refuse to take any harm. Not so: the price went down again, you lost money. As soon as you sell it, it looks like we have our number in the market and will go up one day later. Every time these things happen they will make us more emotional and more prone to making stupid mistakes.
How can we fix this?
1-We should always have a position in fixed money.
DeFi Farming makes it easy.
2-We should never gamble more than we are comfortable with.
Set the money on fire in your mind.
You do not care.
It's all a fun game: even if we lose.
3-Be careful about the slope of the winner.
Some people are more prone to stupid mistakes after winning. If you waste your winnings during a chance streak, you'll lose everything after your luck changes temporarily.
4-DCA DCA DCA
Always mean cost in dollars.
Stop making big decisions and then do everything.
There is no reason to take advantage of trading or increase the risk here.
These are currently the most volatile markets in the world.
A 5-10% movement in the stock market is huge.
A 30% move is standard (in both directions) in crypto.
Result
The emotional side of investing is a difficult nut to solve. It's easy to be trapped in a dark void of our own design. However, the market does not care about our emotions. It's a wild, untamed beast and we can fall on the journey All we can do is pack ourselves and try again. Maybe next time we play safer. Or maybe we're not learning anything and we're trying to get those losses back. Who knows?
Statistics and probabilities are not affected by past events. If you lose 5 times in a row, there is no better chance of suddenly winning on the 6th try. Every gambling is a completely independent event, and if you try to convince yourself that you are playing a bad game when you are really unlucky, the next time you come across this decision, you will probably make the other bad move instead of playing. correctly.
When it comes down to it really, we don't need to bet on crypto on the farm. This is technology of abundance: The only difference is, this time around technology, the money itself. There will be money everywhere.
No matter how much collateral we put into the system to get started, it's only a matter of time before we get a good chunk of it for ourselves. It is better to play it safe then I apologize in crypto.
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Good one