Plankton Adrift – Building Small Portfolios in the Crypto Market

“Whales are accumulating.”

You’ve done your due diligence, and everyone has hyped this coin ad nauseam. From the moment your market buy went through, the only doubt you’ve had is which color your Lamborghini will be when it moons. Your rock solid composure is unscathed as the first few red candles form. You assure yourself that it’s simply manipulation, a bad day for the market here and there. A green candle erases your losses considerably – “here’s the reversal” you say with a sigh of relief.

A bearish engulfing pattern shakes this thought from your head as the first signs of doubt creep in. The downward trend continues. Soon, the volume begins to dry up. You’re bleeding, but alive. You pass the time reassuring yourself by drawing triangles and support lines on the chart. You follow the team on Twitter and turn on alerts so you don’t miss it when the big announcement comes that will send you into the stratosphere. You wake up and read crypto news over breakfast. “X country is banning crypto”.

Not again!” you leave your half eaten meal and rush to your charts. Bitcoin is falling, and your coin is dropping faster. Before long, half of your initial investment is gone. Your cursor hovers over the sell button for a moment. “I can easily make this back, I can’t just sit here and bleed when I could just reinvest what’s left and make 100%”. You initiate the trade, and just like that, the investment of a lifetime is gone, along with half of your money. Months pass, and the coin has all but slipped from your mind. You click over to the top gainers for the day, and there it is – your beloved coin, but it somehow now
costs twice what you originally paid for it. Your heart sinks into the floor. “I guess crypto isn’t for me.

What went wrong?

The crypto trader’s worst enemy – the unceasing downtrend.


Social media is inundated with fantastic rags to riches tales of success from normal, everyday people. It’s easy! All you need to do is find the hot new trend, buy the coin, flip it for profit and retire. But how do you spot the trend before it’s too late? How do you get the sacred knowledge that crypto “whales” have? How do you beat the guy halfway around the globe with a sell wall of 500 Bitcoin, when you can only afford to buy a hundredth of that wall?

The answer, of course, is you don’t. Whales are called such because of their enormous portfolio. The smaller dolphins, sharks, minnows, and all other manner of sea creatures are fighting to thrive in an enormous, mysterious ocean. But what of the smallest creatures? What of the plankton? Much like the real plankton of the sea, investors with small portfolios are at the mercy of the seemingly random and often aggressive tides, and if not careful, they are ultimately doomed to join countless others in the belly of the whale.

As grim as this comparison is, fortune can also favor the crafty plankton. After all, they’ve existed for eons and have adapted to live even in the darkest crushing depths of the ocean. This is true of the crafty investor as well. A common fallacy in human behavior that persists in every generation is the notion of getting rich quick. Others are rich from trading, thus, it is possible and therefore seemingly inevitable for it to happen to you as well. Cryptocurrencies are prime for multiplying even the smallest
portfolio into a sizeable nest egg. Since crypto is, even after the eruption in price and popularity, relatively unknown to the layman, it’s often a disorienting and perilous space for newcomers.

Diagon Alley. Here, you can turn a dollar into a million – or lose everything on a coin flip.

Unlike the snake oil vendors of old, a grinning salesman is not going to show up to your door, offer you a free vacation, and then trap you in a meeting for hours on end trying to sell you a coin. Indeed, most people that get into crypto do so by word of mouth. For example, I started in crypto through a chain of events that originated by funneling money into 4chan recommended stocks until I had a Robinhood account
that could buy the most prestigious dollar menu items. Eventually, I caught wind of the righteous gains being made by a stock trading Discord chat. When that went south, I hopped into the Cryptocurrency channel to see why everyone was posting there. Thus began a journey fraught with ups, downs, and worst of all – sideways.

Much like schools of fish, crypto traders large and small thrive in groups. You can scan Twitter and read through ICO whitepapers for 23 hours a day, but it’s much easier to take bits and pieces from many people and form a mosaic of knowledge that benefits everyone as a collective. That’s not to say individuals cannot make money as crypto investors – it certainly happens, but tribal knowledge trumps individual efforts in most cases.

That of course leads to the darker side of clan behavior, exploitation. If you had a dollar for every fraudster that leads lambs to the slaughter, you’d have enough money to become a whale yourself. Twitter is a popular hunting ground for shills looking for hordes of plankton to feed on, touting their success, partnerships, connections, and insider knowledge. It is all too common for people who are new to the crypto space to latch onto a charismatic and seemingly knowledgeable internet personality – after all, they’re rich, so of course they must know something that you don’t. But since crypto is a hitherto unregulated space, people with massive followings are able to execute pump and dump schemes using their network of followers and associates.

Twitter Suits – one of the most common indicators of an individual running a fraudulent scheme.

They simply purchase a coin, typically one with low trading volume, hype it up to their followers, watch it skyrocket as everyone buys in, and by the time the crash comes, the hypeman is now sitting safely on the sidelines with his hefty new stash of riches. There are of course fantastic people who offer insight and excellent investment ideas, but it behooves the reader to take this advice with a grain of salt. You will hear the phrase “Do your own DD (due diligence)” constantly. As condescending as it can come across, this is perhaps the single most important nugget of wisdom you will hear. That does not mean you have to know the ins and outs of blockchain development down to the last line of code, but it also does not mean reading the first page of a coin’s website and immediately throwing every cent you have at it. Much like everything else in life, if you want to succeed, you’re going to have either be lucky, good, or plain hard working.

Every person has a personality, and every trader has a niche. In the early part of my crypto trading career, I was fortunate enough to show up in the midst of an unprecedented bull market. I would come to discover that this was the equivalent of arriving at a battle just in time to help raise the victory flag. For most coins, your entry was never wrong – simply early. If you bought an asset and it went down, chances are you just had to wait a bit and the market would save you. This gave many traders, myself
included, a false sense of confidence in their trading ability. When the rocket fuel began to run out on the bull market and the magic began to fade, these “early entries” began to resemble bad trades.

I maintained the mindset that if the ship began to sink, another was nearby to hop onto and sail ashore. But as the ships began to sink one by one, and the coins that had no product or development team didn’t quite make as much money as they did just weeks before, I realized that soon the only ones afloat were the coins that had strong fundamentals.

The ship graveyard – where echoes of past successes and failures both met with the same fate.

I began to panic. “What happened to the easy money? Why can’t I simply buy something that a stranger on the internet says is good and ride my way to glory?” As panic turned to fear, I began to over-trade. I’d buy a coin, see it lose a few percentage points, then sell and hop onto a different coin that was on an upward trajectory (paying transaction and trading fees along the way, of  course). Thus begins the death by a thousand cuts. It takes a significant gain to recoup a minor loss, and this is amplified by repetition. Jumping from one buy to another in hopes of catching a trip to the stars can quickly erode your portfolio until there’s nothing left.

The only option at that point, of course, was to turn to leveraged trading. After all, I can trade like a whale if I can take a meager amount and leverage it as hard as I can, right? But of course – this was doomed to fail. Leveraged trades can make you a large sum of money very quickly by multiplying market movements, or they can wipe out your investment in an instant. An inverse relationship exists between portfolio size and risk.

A large portfolio of, say, one million can pile up massive sums of cash with very conservative trades. After all, just a 5% gain on a million dollar portfolio is enough to buy a small home, whereas the same amount to a $100 portfolio is enough to buy a small combo meal. Therefore, traders with small portfolios must accept a higher level of risk to achieve a similar return those of a large portfolio accepting a lower level of risk.

Many traders take this to mean that they have to put all of their eggs into one basket if they make it. To these traders, every trade is do or die. But time is not on your side with this strategy. You only have to be right once to make a handsome return, and you only have to be wrong once to wipe it all out. Conversely, over diversification can spread your portfolio too thin, to the point where any gains are offset by losses elsewhere, and you can end up sitting in one spot. However, when you do your due diligence, find a solid fundamentally sound projects, time becomes your friend.

Dangers lurk beneath the shadows of the deep, vast, ocean. You must be prepared.

The metamorphosis from a single celled organism into the mythical whale is an iterative process that requires time and strategy. Just as a single cell becomes two, then four, eight, and so on, making smart trades and reinvesting profits will have a snowball effect. Your portfolio will be able to grow exponentially in bull markets, and weather the storm in bear markets. The hardest thing to do is sell a bad investment, and the second hardest is to sell a good one. There is never shame in taking any amount of profits, regardless of how high you think the price will rise. A good rule of thumb when one of your investments takes off is to cash out a percentage of your investment, whether it be the amount that you initially put in so that at worst you will break even, or more to guarantee profit even if it crashes to nothing afterwards. The benefit here is twofold; you increase your liquidity by freeing up funds to reinvest, and you lock in profits while allowing your investment to continue to grow. Sticking to a set of rules you set for yourself is an absolute must.

Another form of leverage is investing borrowed money. Borrowed money doesn’t necessarily have to mean money that you’ve physically taken from someone with a promise of repayment. Perhaps you believe you can make a good amount of cash if you dip into your rent money for the month. After all, you’ll be able to pay your rent for several months if you invest in X coin and get Y return, right? So is born the age old adage “don’t invest more than you’re willing to lose”. This is another common sense
principle that isn’t so common. You can purchase coins on a credit card and just pay it later after you coin takes off, right?

Maybe not today, or tomorrow – but the bear’s return is as inexorable as the tides.

This is a seemingly excellent plan until the market turns sour and you’re left paying interest on money that you borrowed and lost. As lucrative as cryptocurrency trading can be, you must also accept that you can lose, and likely will, to some degree, at some point. Trading in a volatile market requires a thick skin. You will often hear the phrase “strong hands”, meaning that you’re able to trade without emotion and hold on to a trade until a certain parameter or target is met. This harkens back to the notion that you must establish a set of rules and abide by them.

The path of a plankton is a long and arduous one that requires careful planning, research, difficult choices, soul crushing disappointments, and euphoric successes. The ocean currents are not always kind, but swimming against them only makes you tired and easier to eat. Learn to move with the tides, practice patience and intelligent decision making, build a network of trusted individuals that can pool knowledge, and you will be well on your way to becoming a giant of the sea.


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