I would describe Stoicism as being indifferent to the contrasts of fortune, pleasure and pain. I have found this philosophy invaluable in life, and it translates perfectly to investment practices – including NFT trading.
Why Do Stoic Ideals Help With NFTs?
Let me start by saying, buying and selling NFTs is emotional as fuck. There are constant distractions. Paper hands undercutting you, gas wars defeating you and the dark doubt you feel whilst your listing lies unsold as the floor implodes.
It is during these times that you make inefficient decisions.
This works both ways. When the spectacle of an unending bull run catapults every cute frog project to the moon, you feel inexplicably immortal. That is so, so dangerous – Apes are gonna’ ape. You end up with a bag of junk you can’t give away and then the market dips and your liquidity is gone. Sad times.
All of this is due to you changing your strategy… ‘because it felt right’.
The point of utilising stoicism is to enable you to make sound decisions and unwaveringly commit to them, no matter how you feel in the moment. Adopting that ideology will help you make efficient decisions before you arrive in the situation. It prevents you having to make irrational choices fuelled by emotion rather than reason.
How To Use Stoicism in Practice
The first thing you can do is decide how you plan to handle a project before you have even bought into it. I like to divide projects into separate baskets.
These are the projects that I don’t believe have very sturdy legs but I can see an abundance of hype. In these scenarios, I will wait until the project starts and monitor the activity. If I feel 99% confident that the hype is leading to a sell out and an oversubscription of demand, then i’ll buy in.
I will then stick to the next step of holding them no longer than 24 hours. If at the end of those 24 hours, the price is 50% down, it does not matter. I sell there and take the L.
It is at this point where it is easy to falter. You don’t want to take a loss, so you slide the NFTs into your hidden folder and sit waiting for the day they recover from their impending doom. But you decided beforehand that this was not a long term hold, so what changed? The only reason you changed your mind was because you made a decision based on emotion – that is what we want to avoid.
Long Term Holds:
If I see a project as a long term hold, I will just buy and leave for a set period of time before re-evaluating my position. In these circumstances I am a little more flexible, as the longer you hold a project, the more space you leave for anomalies to arise. I understand that and am willing to wander a little more from the plan if necessary.
Very often there is a post reveal dump. You can be 20-30% down and feeling the impulse to cut your losses. Perhaps you are at a 3x and feel the desire to take the profit. Well that wasn’t in the plan. You have worked out the expected value beforehand of what you should do. You made that decision before you were in the midst of the frenzy, when you were calm and logical. That is what you should stick to. Because repeating this game hundreds of times would lead to you making the most profit by doing the thing you chose to do, rather than making decisions on the fly.
With speculative plays I will have seen positive signs but am not as confident as I would be in a long term hold. If I have a little extra liquidity, I may decide to take more risks and go into these plays. I tend to buy a set amount of stock and quick flip half to make my investment back. I’ll then treat the remainder as a long term hold and let it play out.
Again, as this is my strategy, no matter what, I have to stick to selling enough to recoup my investment first and hold the rest. If I feel in the moment that the activity is looking great and the hype is growing, I still sell half. No matter how confident I feel in the project during that moment.
But, It’s Not Always Practical
Whilst this mindset creates a solid framework to pivot from, it is not practical in every situation. There are always going to be times when you need to break away from the plan. These situations may be;
- New evidence pointing to red flags emerges
- Big influencers suddenly talk about the project
- Some kind of anomaly occurs that you had not factored in before hand
If one of these circumstances arise, then you will have to act in the moment. It happens often. But even though you act in the moment, you should have an idea of how you like to react to certain shifts.
For example, if you have high liquidity and you have a more risk-taking strategy that has served you well, then perhaps a little FUD in a project makes you even more bullish. Perhaps you like the other buyers to feel doubt and lower their prices so you can sweep the floor. Perhaps you have decided that the expected return on those cheap buy ins tends to be higher than the expected loss of the FUD materialising into fact.
Everyone will be different in these concepts. But you should decide what your approach is in advance. So in the moment you can at least stick to your intention.
How Can You Get Started?
Take yourself aside for a day. Think about your past experiences and how much risk your financial situation can feasibly let you take. Look at projects you have been in before, and projects you haven’t. Look at how they progressed overtime. Write down how you would want to act in these different categories of drops.
Now just simply do what you say you are going to do, with conviction.
As a final note, you need to be indifferent to pleasure and pain. If you mess up and fat finger a crypto dick butt for 0.1 eth it does not matter. Once it has happened, you cannot change it. Just move on. Don’t let the emotion in the moment affect the decisions you make next – because they won’t be how you want them to be. Dwelling on a lost opportunity may lead you to missing another.
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Wonderfully written! Thank you for breaking this down in rational way 💙