Don’t Fall Into Sunk Cost Fallacy & LOSS Aversion
My Facebook feed reminded me a few days ago that it’s been over a year since I initially started investing in crypto.
Bare in mind, when I started investing into crypto, I was investing into sh*tcoins at first.
I’ve learned several core lessons with my mastermind over the last year since investing into sh*tcoins and I’m going to share a few of these lessons to help you not get WRECKED like I did as a beginner.
And no this is not a tutorial on how to invest into sh*tcoins. This is a tutorial on how to not get wrecked as a investor in crypto, so pay close attention
Even though at the time it was fun, sh*tcoins was one of the most degenerate ways of investing however it was a excellent time to learn and make an insane amount of money in a short time.
So it only makes sense that I fell into this because of the enjoyment and dopamine rush.
This is a slide I shared in the spartan syndicate and these are just a few screenshots of the lot
This is what I got into when I first got introduced to crypto and it's called moonshots.
With moonshots essentially you’re investing into various meme coins and these coins may have no utility whatsoever so you can literally multiply your money.
There’s this coin called JRINU I put in four hundred and then it was worth five thousand dollars when I sold.
The next one was called dire wolf which as soon as I got a profit, I took the principal out.
And the reason I used to do this was so that I could make my profit and then get out as soon as possible.
This was all profit, and mind you, this was only a few days.
Every day, I was glued in front of a computer and it was so addicting because all I saw was $400 turn to $5000 and then $100 turn to $3500.
Then another $235 dollars was turned into $7000 in a span of 20 minutes which was one of the most thrilling experiences
This was how I got started in crypto which was in my opinion was fun but very risky because it ended up doing two things for me which are going to be covered in today's lesson
What is the Spartan Syndicate?
Of course, this is a project to provide you with the Philosophy, Principles, and Proximity to profit from the complicated world of centralized finance
So in hindsight, looking back in the past, if I were to talk to myself when I first got into crypto and had applied these three P’s, I would have evaded major errors in my THINKING.
By now THINKING, I started behaving in an irrational way because I was getting emotional with all the money coming in.
This was the root in my opinion of why I ended up losing and getting wrecked in the future.
So now I’m going to give you the two principles of what could’ve helped me NOT get wrecked.
These two are:
Sparta Principle: Stay Humble
Sparta Principle: THINK
In a previous article, we talked about these crypto gurus & charlatans focus more on NOT making you think by shoving all kinds of things down your throat so that your brain doesn’t know what to think or how to think.
This is why so many people get screwed because they are emotionally filled with greed, FOMO, and fail to use their brains, and thus get WRECKED by it.
The first trap that I personally fell into was The overconfident bias
“The overconfident bias is the tendency for a person to overestimate their abilities and it may lead to a person thinking they’re better than an average driver or an expert investor”
This is what happened in my case because as I was investing in all of these various sh*tcoins.
I was one of those who consistently won, and was always following my initial principle of making a profit as soon as possible and then getting out.
I didn’t initially fall into the trap of thinking “okay if I get out now, I won’t be able to multiply my money”.
Instead, I kept investing and getting out and making a profit.
And I knew this was a degenerate way of investing,but losing all the money I had earned wasn’t an option, so I stuck to my principle.
But as far as the two traps that I fell into, once again, I was overconfident.
Because it was that continuation of getting in and getting out that lead to be being overconfident, and thus leading into our second reason I got WRECKED
But the second reason was that there was this coin that ended up being created called Phiba.
So this token “Phiba” was called Papa Shiba and was originally a scam token.
How did we know we knew?
Because inside the ether scan and blockchain you can see all of the transactions of the token.
Now, this is the chart on dex, and as you can see it went straight up and then it just went straight down to the ground until the developer rugged the entire project and took all of the liquidity.
As you can see, there’s no pulled ETH in here anymore. Which means that you can’t trade and you can’t take anything out because there’s no money inside as everybody had it taken.
So when it comes to this token, I stopped using my brain and became EMOTIONAL about the potential of what money I could make ( GREED ).
In the mastermind, I am a part of, we always focus on how to NOT get scammed because the majority of these meme coins are meant to scam you.
These developers have the ultimate upside in their favor because they have nothing to lose.
So if you look at the ether scan you can see this is super sketchy.
You see over here there are a bunch of transfers to different wallets BEFORE this developer added liquidity.
Now adding liquidity, basically what that means is that this is the time he allows you to freely trade the token.
So what he did with all these transfers before adding liquidity, was send them to various wallets.
Now, why is this a sketchy thing?
It’s because these wallets got these tokens for free and so when people started buying these tokens and putting more Ethereum inside, he started selling his tokens for profit.
He sold them as he transferred tokens from the smart contract to various wallets and he started selling them.
So I’ll give you an example.
If you look at any of the transaction hashes on this last page hereof PHIBA, you will notice that it started 150 days ago.
If you look above you can see what he was doing as he was transferring these wallets and he was getting it in and then he was quickly exchanging the tokens he got for free money.
He sold about uh $36000 worth of Ethereum.
And he got it ALL for free and this is the danger of projects inside the crypto space.
Sh*itcoin projects try to scam people and of course, if you know how to read ether scans, you will be able to see what's truly going on.
Reading ether scans is something I was taught in a mastermind and so then I became overconfident.
I started to NOT do the things that got me profit and I started behavior emotional.
But why am I sharing this? Because in crypto, once you start winning and start winning consistently, it’s very easy in my opinion to start following into your ego and thinking you’re better than you are.
And of course in the Spartan Syndicate, I want to give you the gift of proximity by telling you the truth.
The last thing you want to do is think you’re better than what you are, especially in investing because you’re going to lose your ass like I did when it came to this specific token.
So as he started selling these tokens, we started to catch onto what he was doing and throughout time, one thing that he did is that he ended up selling the majority of his tokens.
It was at that moment we the community of the token, started to do or what we tried to do, was take over this token.
Now mind you, our team, our group, and our mastermind at the time had no experience whatsoever running communities like this.
We were all brand freaking new to crypto and all of us were brand new to meme coins except for of course the creator of the community, Mario who turned $80 to $20 million.
We were all brand spanking new and the one thing that I had was just the naive overconfidence such as “Hey I made so much money beforehand and I know I’m just gonna make money here and I’m just trusting everybody else not to use my judgment and not use my thinking like hey is it really smart to keep putting in money into a coin that was originally a scam and it was super transparent inside the blockchain.
If I just took a step back and thought about it maybe I wouldn’t have made the mistake of basically losing all the money that I invested here.
So originally what I did is I invested uh around like five thousand dollars but I believe it was like 1.5 ether at the time.
So I invested a total of $20,000 and mind you, I put in the effort to also help talk about this token which is what our mastermind was about and I didn’t know any better.
I tried to be engaged in the community and when it came to the actual truth of things, as you can see below this is the point in time June 2021 where we tried to “Community Pump” the token.
So I put another 0.5 ETH and then everybody started selling it off.
However, I was the idiot that didn’t and I’ll tell you why.
I didn’t sell it off because of what's called “Sunk Cost Fallacy” and “Loss Aversion” which is something that you may experience in the world of crypto.
So below is the definition of the “Sunk Cost Fallacy”.
So me leaving and just selling this token at like $1000, $3000, or even $5000 loss would’ve been WAY BETTER than holding it and FANTAZING about what it could be and NOT looking at the evidence of what I DO see.
So let’s do an example outside of crypto outside of investing because again I’m sharing universal principles that if that work in all areas of life.
In this case, our example is going to be in a relationship.
So I don't know if you ever had a friend who was struggling in a relationship such as a girlfriend cheating on them over and over again and each time she cheats on him, she begs for forgiveness, and then your friend like an idiot doesn’t use his brain.
He doesn’t end up seeing the evidence of what is NOW and keeps coming back to her.
Typically it’s because they invested so much time, effort, and energy into the relationship.
So that is an example of the sunk cause fallacy in a relationship.
So if it’s a sinking ship, GTFO.
And this is EASIER said than done because of these biases that we’re falling into.
The second thing that I fell into was a “Loss Aversion”.
So I invested in this token even though fundamentally I knew at that time that it wasn’t a good bet.
And as you can see lawsuit version got me.
And also to some cost fallacy since I invested so much time helping this token.
Between talking about it and investing so much money, you can see that this invested so.
much money into it.
But as you can see in the image above, this is a sinking ship.
I also too we knew it was a scam because of reading the ether scans on how he was transferring it to various different wallets and the wallets that he transferred it too was selling the tokens and there was so much evidence at the time for it NOT to work, but again I got cocky and naive thinking I was better than I was.
That 20k ended up turning into 1k.
So that’s my personal example of coin trading.
Now, I’m going to go over three key takeaways from my experiences with this shitcoin so that in the upcoming season of alt, which could be coming a year or two from now, you are prepared.
And alt season is basically when things go nuclear and parabolic and again this is when you can start multiplying your money turning 400 to 5k 235 dollars to 7k and things like that.
However, it’s very very very easy to get caught up in your wins which leads to you stopping using your brain.
Now when it comes to this community of spartans the main thing we want to do is use our brains and make sure we’re always making the best decisions.
I’m sharing all of this because it was a painful experience that I experienced when first getting into crypto trading.
As soon as I became interested in the meme coins, I became caught up in the wins, and that hurt my understanding of the biases that were going on during the time when it was happening.
Since I was so emotional it prevented me from using my freaking brain!
So when it comes to the world of crypto if you’re brand new, I just want to let you know that it's easier to win if you’re around the right people.
However, the more important thing is that when you are winning in the world of crypto, the philosophies and principles you’re implementing are the most important thing for your success and understanding of the biases that are happening to you.
If you don’t have these bumpers to keep you on the straight line, you run the risk of falling into the same trap I have shared with you today.
If you end up getting way too emotional while investing, again a quote I’ll say over and over and over again is “as emotions go up intellect goes down” so all I have to say for this quick video is to Stay C3
What does that mean?
Stay C3 means to stay Cool, Calm, and Collected when it comes to your investing journey.
This principle also works for any other area of your life, especially in investing.
As someone who’s in the trenches, and has been investing in crypto for over a year, I wanted to share this article so that you can remember to Stay C3.
