I apos;m Not A Crypto Genius And Neither Are You: The Perils Of Big Returns

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In May I bought some ethereum - this week the cryptocurrency hit a record high and at the time of writing my investment is up 62 per cent.
There's nothing like that kind of big return to get an investor patting themselves on the back, www.influencer.green but tempting as it is to think so, I'm not a crypto investing genius.
There will be some reading this thinking: ‘Crypto!

I don't care what that Lambert fool has made, that's gambling not investing and only an idiot buys that.'
On the other hand, there will be others thinking: ‘62 per cent! That Lambert fool thinks he's done well? I've bagged 620 per cent.'
Peaky blinder: Bitcoin has once again hit a record high but investors tempted to applaud their skill should remember luck, speculation and its immense volatility 
Ethereum has also climbed substantially more than doubling from its price in summer
The bad news is even if you are in that position, you're probably not a crypto investing genius either.
I've got a small amount of bitcoin, which I bought after the crash in early 2018, and it's up 785 per cent - but that also doesn't make me a crypto investing genius.
What happened for those of us sitting on big returns on crypto - or any other investment - is that we got lucky and bought into something that went up massively.
Some may have done more research than others, some will have a trading strategy, some will have been completely gung-ho, but ultimately the chief ingredients for outsized crypto profits have been luck and a colossal speculative boom.
Whether you are a blockchain obsessive, a casual punter, or like me a long-standing stock market you investor who has dabbled with a bit of crypto, it's worth considering those elements - especially when prices are peaking as they are now.
It's also vitally important to consider the role that the insane volatility of crypto plays in this.

There are bitcoin hodlers who are convinced it is digital gold, yet since the start of this year alone the price of this most famous cryptocurrency has doubled, then halved, then more than doubled again.
It's also vitally important to consider the role that the insane volatility of crypto plays in this  As a measure of crypto's volatile price swings in the time between writing this column yesterday evening and it being published on Thursday morning, the two leading cryptos bitcoin and ethereum managed to lose about 5 per cent.
Even for a small cap  share that's a big move, for bitcoin and ethereum it's all in a day's work.
It's remembering the 'I'm not a genius trader' stuff that helps you avoid getting carried away in a bull market, hammered in a bear market, and keeps your emotions in check.
Because whether it is crypto, shares or anything else, overestimating the part your supposed skill played when something goes right and thinking an investment is special because you picked it are classic behavioural mistakes.
RELATED ARTICLES Previous 1 Next Britcoin is on the way: Bank of England reveals more plans... Meme coin madness! Doge and Shiba Inu have become top dogs... I've got £140,000 I want to invest, do I need financial... How many firms do you put in the perfect fund? We ask fund... Share this article Share 12 shares HOW THIS IS MONEY CAN HELP Bitcoin and crypto demystfied: How to watch our special event This was a thread pulled on by investment strategist Joachim Klement, of Liberum Capital, in his recent Thought of the Day note entitled I picked that stock, so it won't go down.
He highlighted behavioural investing research showing how stocks that people own are more highly valued by them than by people who don't own the stock.
Klement added: ‘Furthermore, if these stocks come with a great story (narrative), people will value them even more.'
The independent research he flagged came from two academics at the University of Alicante, Carlos Cueva and Inigo Iturbe-Ormaetxe, who did a lab test with some invented stocks and a real life test with some glamour growth share names.
In the lab test, participants were shown share price movements for a selection of invented stocks and asked to estimate future returns, and were then randomly assigned three stocks or could choose three they liked the most.
Before they were given stocks they thought in about 57 per cent of cases they would have a positive return, and when they were given three randomly their future return estimates were similar, but when they picked three themselves their expectations for future returns increased.
In the second experiment, six real life glamour companies were introduced, Alibaba, Facebook, Uber, Netflix, Tesla and Zoom, and the process was repeated.
Again, participants assigned three at random had expectations of future returns that remained similar, while those who picked three they liked best dramatically increased their predicted returns from what they had said before.
Klement said: ‘Just because they actively picked those stocks, they thought they had to have a higher return, even though they did not think so before they chose these stocks.'
It's always wise to know when to count your lucky stars rather than applaud yourself as a master of the universe  And if we've already picked an investment and it has gone up substantially, that effect is surely only going to be more pronounced.
This is not to say that you can't adopt practices, rules and strategies to make you a better investor and increase your chances of success, but it's always wise to know when to count your lucky stars rather than applaud yourself as a master of the universe.
To go back to my bitcoin and ethereum investments, they may be up substantially now but there have been long chunks of the periods that I've held both that my investments have been under water.
Investments also should be looked at in isolation: they must be considered within the context of all the other things you've bought and sold and how well they've done.
Don't just think about the multi-baggers, the influence of french on english think about the stinkers too.
Encouraging us to consider some of these kind of common behavioural traps is a theme running through the best investment writing and books that I have read - and I will freely admit that as an investor I still regularly fall into them.
Our special Bitcoin and crypto demystified livestreamed panel discussion takes place on Tuesday 16 November, find out how to watch it below 
A healthy look at such pitfalls is also a key element in The Crypto Trader, a book by successful investor Glen Goodman, which I'd highly recommend for anyone considering putting money into cryptocurrencies.
I'm also glad to say that Glen will be joining me for a special livestreamed This is Money panel discussion  on Tuesday 16 November, at 1pm.
Our approach at This is Money has always been to take an open-minded but healthily sceptical look at crypto and the event will reflect that.
From bitcoin, its history and whether it is staking a claim to digital gold, to ethereum and altcoin rivals, the event will look at the opportunities and risks of crypto and decentralised finance. 
Our experts, including Glen and eToro cryptoanalyst Simon Peters, will explain how blockchain works, why it is considered important, and how innovative entrepreneurs are coming up with ideas for decentralised platforms and applications.
So you are investing in crypto, considering doing so, or just want to find out more about one of the biggest financial stories of recent times, find out how to stream it live or watch it back at a time that suits you via the link below.

We will also be answering your crypto questions, so if you have one email editor@thisismoney.co.uk with it and put Crypto questions in the subject line.
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