There are some things in life that we can’t quite explain why or how they happened in the first place.
However, we take lessons from them and, with time, some of those strange facts start to untangle and we begin to understand the phenomenon itself – or sometimes we will keep wondering for years to come: “what the hell happened?”.
Well, we can’t prevent what we can’t see. Some call it fate, some call it recklessness. At the end of the day, it does not matter – it happened. Period.
So, instead of trying to find culprits in the situation, many prefer to study the facts to prevent it from happening again (or at least to the same extent that it did).
And, in the crypto market, this has been discussed, dissected, and shown to the public for some time now. But we have to consider that even the cryptocurrencies themselves are very new in the financial system.
Since the crypto market has experienced falls throughout its history, it would be considered normal to learn from them.
Without further ado, this was the case with Terra (LUNA) recently.
While some people are trying to find the responsible for what had happened – and we don’t blame them, since we have to figure out what caused it to happen in order to prevent it from happening again – we will try to concentrate on the lessons we already learned in order to avoid situations like that in the future.
The crypto market is volatile, Joe!
But, first of all, let us remember that: the crypto market is volatile.
We can’t escape from this fact.
Pretty much like the stock market, it was built to be this way: the exchanges work on the speculation of prizes based on crypto projects that bring solutions to a new generation of technological finances.
TradingView’s graphic shows the volatility of a cryptocurrency
In the beginning, when Satoshi Nakamoto came up with the idea of Bitcoin, the goal was to create value on top of a very decentralized and seamless system – the blockchain.
With this updated technology, we would deal with a new kind of money in a more, let’s say, democratic way.
But with time, it was pretty obvious that we would find some gaps and holes that could be fulfilled with technology inside Nakamoto’s idea.
That’s what happened and, as time went by, various crypto projects were born like this: trying to evolve and fill in the gaps that existing projects haven’t been able to cover.
Until this day, this is a reality inside the crypto market.
And one of those ideas was the concept of a ‘stablecoin’, which we all know by now that they work pegged to the “real world” currencies such as US Dollars – it’s the case of the USDT, for instance.
Consequently, as we already know as well, it is considered by many as a “safe spot” for people to put their money on as it kind of “imitates” the real world coins.
However, sometimes people forget that even stablecoins are not regulated by any kind of government whatsoever. So, it continues to be a cryptocurrency in its essence and, therefore, under the influence of the crypto market as it works: in a volatile way.
Terra (LUNA) case
Basically, this is what happened to the Terra (LUNA) project:
Even though they are two different coins, they worked almost in a symbiotic way.
The idea of the creator of the project, Do Kwon, was to create some kind of balance between them, as Terra’s UST worked as a stablecoin while Terra’s LUNA was the more “standard” crypto.
Terra (LUNA)’s logo
A series of smart contracts kept UST at a dollar’s price, and ultimately it didn’t have much reserve cash.
That’s when LUNA came into the picture, as it worked with the market’s fluctuation.
So, as long as LUNA had value in the market, UST would be able to keep working with the value of a dollar – this happened because every time a UST was sold, a LUNA was minted, keeping the volume high.
However, this bond that kept the Terra (LUNA) project strong was also its major enemy.
Recently, there was a huge sell-off of USTs leading to a “disbalance” of all the project’s harmony.
As USTs were being sold in a massive way, all at once, it was a slippery slope to LUNA’s crash.
Of course, it generated all the talk in the world, as some investors lost millions with this crash.
However, as I said before, we’ll not dwell on the speculations and possibilities of who and why some people did what they did to cause this.
Let’s try to focus on what we have to know about crypto projects and how we can keep sharp and try to avoid some of the impacts that can usually happen in this volatile market.
Gold tips to crypto investing
Just a quick disclaimer again: this is not financial advice. I just try to dig up as much information as I can so we are able to analyze and dissect the possibilities together, ok?
That being said:
1. Learn how to get acquainted with a project
I’ll take a very simple and mundane example: when you are meeting a significant other, you have to learn about his/hers personality, what they like, what they listen to, what they believe in, etc.
When things get more serious, you get to know the family. The people behind the person are extremely important to know what you’ll be getting into, right?
The same can be said when it comes to your investments in the crypto market.
You have to know who you are dealing with.
And not only the people involved but what the project relates to and what is its core belief. What solutions it brings to the world and how it intends to solve them.
Let’s take Klever for example.
When you go to Klever Exchange’s whitepaper, you can see that we have two major solutions to bring into the crypto universe: the security and the user experience part.
We make it very clear that Klever wants to build an ecosystem that is extremely safe and very easy to use, since the market has other great projects but not as simple or intuitive to work with.
Piece of Klever Exchange’s Whitepaper
For that, you can read in the whitepaper the practical solutions we bring to the table when it comes to the problems we just highlighted: the ironclad security engine, the complete non-custodial system, the design made for beginners or experts and so much more.
Once the user reads it and relates to it, we can say that we are on a path to a potential investment.
2. In a money world, trust in humble humans
This tip is one of the less technical but one of the most important:
Of course, we all like to enjoy our lives to the fullest and delight ourselves with the goods we acquired with the effort of our labor.
However, when it comes to a multi-billion dollar industry, we have to pay attention to those who say they do too much or are smarter than others because they got rich out of the blue.
First of all, let’s reinforce that: nobody gets rich out of the blue.
Even if your success came suddenly, all your life work, and study led to this moment. So, even if it seems fast, it isn’t.
Secondly, pay attention to the richest around the world: usually, they keep a modest profile, only occasionally showing their assets and purchases – may it be because of their personality or for security purposes.
Either way, when someone is constantly bragging about how rich they got and how smart they are, think again.
Take a closer look at the project and what it represents.
See if you really can relate to someone who thinks their project is the ultimate solution to the world and that they don’t have anything else to learn in the process.
Like I said before, it’s not a technical and scientific tip, but it may be worth your attention.
3. Don’t invest what you can’t lose
Again, one of the most obvious, but also extremely important.
Since we are talking about a volatile market, where everything can change in a blink of an eye, it is wise not to invest in what you can’t afford to lose.
Let’s say you are saving money for an emergency reserve.
It’s very unwise to deposit it in any volatile market. It is your emergency money – what happens if you need it one day and on this day the market crashes or takes a deep dive?
You’ll have way less than you needed and invested in.
So, when it comes to crypto, always invest money which you can follow the ups and downs without having a heart attack if you lose it.
(I mean, every good amount of money will make you feel sick if you lose it. But, you get my point).
4. Keep up, Joe, keep up!
How do you want to be a successful investor if you don’t follow what’s going on in the market?
Don’t you see those movies where rich guys investing money keep an eye on tv news, huge home brokers, and exchanges the whole time?
Well, they are not altogether wrong.
You have to keep up with the news of the market all the time.
More so, since crypto is in the digital world and everything revolves around this digital universe, we have other platforms involved when it comes to the market updates: the influencers and social media (especially Twitter).
Klever’s official Twitter account has more than 276 thousand followers of the Klever Community
Create a Twitter profile and start digging up personalities that have good backgrounds and solid information about the crypto market.
The birdy social media platform is commonly known as the hub for crypto users, but with time, you’ll see that Discord, Telegram, Reddit, and other platforms also are very useful for a crypto investor.
5. DYOR, DYOR, DYOR!
It’s never enough to say that you HAVE to Do Your Own Research.
And if your own research is not enough, listen to experts – I mean, real-life experts with curriculum, not any socialite investing in NFTs, ok?
As long as the content creators are reliable (or as reliable as an internet person can be), you have to take your time to explore their content.
But, research also includes studying.
So if you feel like the info you are getting is not enough or you don’t quite get it yet, look for courses and schools that can provide good knowledge about the subject you’re interested in.
It’s never too late to learn – especially when the subject itself is so new to the picture.
The golden tip
Before we end, I’d like to add that none of those tips are directly related to the Terra (LUNA) situation. All of them can be applied to any kind of crypto project and to follow them is entirely your choice.
You can also have your own kind of rules to invest in crypto and that’s fine. One of the great parts of this segment is to be free to do whatever you want with your money.
However, like Uncle Ben said: “with great power comes great responsibilities” and you are the only one responsible for your crypto choices, so make them wisely.