Whether you’re a card shark or a total rookie, you can adapt some of the cardinal principles of poker to help you achieve crypto success. Play your hand right, and the rewards can be glorious. Play it wrong, and you can all too easily find yourself in a pit of despair.
Luckily for us, DeFi Edge has written the ultimate poker player’s guide to crypto, outlining 17 vital lessons anyone and everyone can apply on their investment or trading journey.
It’s a magnificent thread, jam-packed with wisdom, insight and alpha.
Let’s dive in.
- Crypto is a psychological test (and more you realise).
- This is an unregulated space where whales have immense power.
- There are guidelines to follow if you are new to this player-vs-player (PVP) game.
- Don’t confuse luck for skill.
1. The whales have an edge
Players with deep pockets (and a lot of chips on the table) can easily manipulate their opponents. However, ‘chips’ are not only monetary, but can come in the form of access to the best deals on the market and access to inside info. Combine the two, and you get big players that can move markets – especially small caps. A recent example of which is Wonderland.finance. The whales were swimming (and game-playing) and caused a cascade of liquidations, leaving everyone but themselves REKT.
2. Ulterior motives
Be careful who you trust, and understand the incentives of everyone around you. When someone comes up to you and tells you that a certain token will go up 100x, ask, why are they telling you that? Are they doing it out of the kindness of their heart? Or are they trying to get as many players as they can to buy into the token to then use them as exit liquidity.
3. PVP Mentality
There can be only one winner at the table; it’s a player versus player game, and looks can be deceiving. If your opponent puts on a good enough poker face, you could be in for a rude surprise. Players want to have an edge over each other: there is often no good reason why someone who does their own research would want to share their top-secret knowledge with you. Sometimes, by the time you hear about a protocol, the early adopters (turned whales) are already planning on selling.
4. Don’t play too many hands
Don’t get caught up in the hype. We all know how easy it is to get addicted to the action, but sometimes it’s better to wait on the sidelines for the best possible move. FOMO will cost you money. Look for good projects, and don’t act irrationally. After all, you are investing – not playing a video game.
5. Play solid
Televized poker can be misleading. Everyone wants those golden moments when a player (sitting on a dismal hand) bluffs, and no one calls it. However, that’s an example of skilled deception, and not necessarily poker playing. If you are new to crypto, it’s best to stick with the solid projects and not chase high APYs. There is no free lunch in this game.
6. Outcome bias
Stick to your conviction. Just because you played the perfect hand (but still lost), that doesn’t mean you should change your strategy. You can’t win them all, and it just might happen that the best protocol in the world has a serious dip. Just because someone 10x’d a shitcoin doesn’t mean you should blindly follow suit. Skill beats luck in the long run.
7. Table selection
Be careful where you sit, and buy in at a table after doing due diligence. Knowledge is key, and very important to winning the game. If, for example. you don’t understand the world of art and culture, but you do understand the world of decentralized finance, then you should stick to DeFi projects instead of trying to flip NFTs.
At the same time, if you have less money to invest, are tied into a full-time job, and can’t be on top of crypto 24/7, the best method for you might just be to keep it simple and dollar cost average (DCA).
8. The small wins add up
There’s no need to go all in, and there is definitely no rule saying that the more you invest the more you will make. Being smart can make you more than simply throwing all your capital at shitcoins. Don’t obsess over finding 10x plays. Sometimes keeping it simple and just farming stable coins can make you far more.
9. Be the tight, aggressive player
If you want to maximize your wins (and minimise your losses), you need to be patient and wait for a good hand. Then, go for it. With conviction. You need to believe in your investments and remember it’s hard to keep track of tens or even hundreds of different tokens. Invest more in fewer projects that you believe in rather than loads you know nothing about.
10. Zoom out
It’s easy to get caught up in the daily price action and get hyped, or scared, because of high volatility. At times like that, it’s best to zoom out from the tempest. Stop checking your portfolio 25 times a day, as it will compromise your psyche and conviction.
11. Bank roll management
You want to make sure that you are safe no matter what happens in the markets. It’s a good idea to have emergency funds that can cover a minimum of six months of living expenses for a rainy day. Diversifying yourself, and not being all in crypto, is another way of being cautious, because no matter how much conviction you have, there is always the possiblity of black swans events, as well as rug pulls and exploits (however good a project may be).
12. Pot sizing
You have to allocate your pot sizes correctly. You don’t want to put all your money and bet your house on an unknown project. However, allocating a small amount of your portfolio to riskier projects is a strategy that even the most knowledgeable investors follow. A good strategy may be sticking to a maximum allocation of 15% per protocol and a maximum of 5% for any degen bet.
13. Know went to cut your losses
If you make a mistake, you’ll want to cut your losses as quickly as possible. Folding your hand is sometimes the best option. You don’t want to get caught up in a royal flush out.
14. Fix your leaks
Knowing yourself is even more crucial than knowing your opponents. You need to understand your flaws, and patch them up as soon as possible. Look for patterns as to why you are failing and correct them. Maybe you keep getting wrecked chasing high APYs, or maybe you keep getting scammed. These are leaks you need to plug up.
15. Learn the math
You don’t need to be Stephen Hawkin, but knowing some simple math (and doing some simple calculations) can greatly improve your odds of winning. Learn about the impact of impermanent loss, tokenomics and marketcaps.
16. Handling bad beats
Imagine you are playing with a hand that is mathematically favored to win, only to then lose. Your anger may spill over. You may become reckless. Don’t. You will only make worse decisions. Learn to handle these emotions at all times.
17. Find your edge
Poker is a game of skill, and skills can be improved. Get better at certain aspects of the game to gain an edge over your opponents. Skills you could work on include tokenomics, Game theory, cryptography, decision-making, cognitive biases, macroeconomics and trading psychology.
Poker and crypto are both mental games, and your success relies heavily on your ability to think straight and clearly. Having a psychological edge over your opponents is key. Try and improve your mental edge by exercising, getting plenty of sleep, not drinking when you are playing (or trading), and maybe even meditating daily. Train your mind like an athlete trains their body.
When you first get into the market, it is easy to think that making money will be a brief walk in the park. Anyone whose been around teh block knows it isn’t the case. Making (and keeping!) money in this space takes time, patience, and commitment. There are many people out there making their own money from telling you how easy it is for you to make money. Stay grounded and humble whilst remembering that the first step to winning is surviving.
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