22 Lessons Crypto Market Taught Us in 2022

1. Locking tokens is not worth it.

There was a time in DeFi when the lock-in mechanism of ve economics became popular. You lock your tokens for a period of time, and in exchange you get additional revenue or utility.

The result was that some people watched their locked tokens go down -90% in a bear market. I prefer to keep my tokens liquid.

2. There is no "smart money".

All the "smartest" people in this field are losing money (3AC, Alameda, VCs).

Superior chess skills, MIT degrees and code skills are not enough to stop greed and poor risk management. Don't invest in a project just because you have the backing of a big name.

3. Nothing in cryptocurrencies is too big to fail yet.

Please remember:

? 3AC

? FTX

? Luna

4. Question the Treasury.

The Treasury of agreement is its lifeblood, and no money means no agreement.

1) 3AC secretly manages some protocol treasuries;

2) Some founders secretly traded with their Treasury.

Bad financial management destroys good projects.

5. Bull markets are easy, but not every protocol can survive the cryptocurrency winter.

Always ask yourself.

1) Are the protocols funded outside of their original tokens?

2) Do they have enough runway to survive for more than 2 years?

3) Are their costs reasonable?

6. Protect yourself against rumors of bankruptcy:

? "They are stable";

? "The probability of FTX going bankrupt is close to 0%".

When things are about to happen, protect your money. No one else will do it for you.

7. Beware of the cult of the individual.

"Power leads to corruption; Absolute power leads to absolute corruption."

Every leading man has fallen this year.

- Daniele Sesta

- Do Kwon

- Zhu Su

- SBF

You can walk with them on the way up, but get out fast before the inevitable crash.

8. Algorithmic stablecoins are still daydreams.

·????????UST collapse.

·????????Bean bad debts.

·????????FEI/USN collapses.

·????????USDN/USDT trading below its peg price.

People will continue to try to make these experiments work, but I'd rather hold fiat-backed stablecoins and just watch from a distance to count the stability.

9. Cross-link bridges are dangerous.

Vitalik has warned us about the safety of cross-chain bridges.

Axie's Ronin bridge ($624 million).

Solana's Wormhole ($326 million).

Harmony Bridge ($100 million).

Nomad ($190 million).

When using cross-chain bridges, you add additional risk.

10. There's no such thing as free income:

? 20% Anchor UST;

? Get 5% Bitcoin Yield with CeFi.

Companies market these products as if they are as safe as banks. But the yield comes at the cost of high risk (-100%). It is perfectly feasible to store coins in a cold wallet and not earn any revenue.

11. Cryptocurrencies are still tied to macro.

The Ether merger was one of the biggest technical achievements in cryptocurrencies and unfortunately, the macro winds were too strong for ETH to take off. The Fed's policy and interest rate decisions currently determine the market capitalization of cryptocurrencies.

12. Beware the halo effect.

- SBF on the cover of Forbes.

- FTX rescued BlockFi / Voyager.

- FTX sponsored sports athletes.

The halo effect means people don't do their due diligence and if you put enough money into it, no one will ask the tough questions.

?

13.Don't try to wait until the exact top or bottom.

You can never have the perfect timing, and trying to seize it may hurt your money. A simpler strategy is to exit a fixed investment in a bull market and continue to make a fixed investment in a bear market.

14. There are still some games in the bear market.

We can see that the narrative of real income became popular around the summer.

Those who invested in GMX and GNS in the early years got huge returns. There are few narratives in the bear market -- too many narratives were forgotten before the macro situation improved.

15. When cryptocurrency enters the background, it will be adopted.

Most people on Reddit hate things related to cryptocurrencies, but Reddit's "digital collections" have been sold out. The key is to make the encrypted part invisible and frictionless while providing value.

16. The second layer of Ethereum will continue to exist.

The second layer of Ethereum is sucking TVL away from the copycat L1 (Arbitrum and Optimism are in the top 10).

Starknet, zkSync and other zero knowledge Rollup are coming. The future seems to be a war between the second layer of ETH and the application chain.

17. Historically, cryptocurrencies operate in a 4-year cycle.

Near the end of the cycle, you will see people trying to prolong it.

? S2F Diagram;

? "Super Cycle";

? Bitcoin Delay Theory.

People are economically motivated to think that the bull market will last longer.

18. If you do not know the source of income, you are the source.

Do you remember all those node projects? No one can answer where the benefits come from.

Yield comes from new entrants. Before investing, make sure you understand how value is generated.

19. History does not repeat itself, but it often rhymes.

? Mt. Gox → FTX；

? Bitconnect → Terra Luna。

In the next cycle, we will have an exchange collapse, and in the next cycle, we will have new Cult leaders.

Human nature is difficult to change, and it is up to us to warn the next generation.

20. Find FUD.

When token are hot, there is only one voice around. Fomo mentality makes it difficult for people to have a rational discussion.

? They attack your character

? They dig up any old tweets they can use against you

So when you invest, look for FUD.

21. Humans fails, but DeFi does not.

The biggest disaster this year is human greed, risk management, fraud and wrong decision-making.

When CeFi was insolvent, DeFi loan was the first one they repaid. Learn to trust code, not people.

22. Learn to keep it by yourself.

If you cannot master the private key, it is not your token.

It seems that we have to learn this lesson in every cycle. Any tokens in the exchange are "IOUs".

Token is not yours unless you have a hardware wallet to protect it.