"The optimal strategy to wealth is to take the greatest reward for the lowest risk."
Learn how to manage Risk and Reward in NFTs through one of @Diamond_Cruiser's #✉️-daily-letters. 🪡🧵👇🏼
This is one of my favorite pictures. My old Cool Cat.
This teaches me an important lesson in risk/reward theory and why paper-handing and FOMO is bullshit.
There is RISK and REWARD in any investment. Ideally, you want the REWARD far outweigh the RISK in any decision.
The optimal strategy to wealth is to take the greatest reward for the lowest risk.
Why TF are we doing NFTs and crypto?
Because the REWARD far outweighs any RISK, like 1000% unlike traditional finance where the REWARDS are shit.
But as time passes, and floor price keeps going up, and liquidity stops, the RISK goes higher and the REWARD goes lower.
Do I feel bad at earning 5 ETH when floor price went to as high as 12 ETH? No.
I should feel bad for the person who bought from me and earned 3.3 ETH after risking 5.74 ETH. Because his RISK/REWARD ratio was skewed more towards RISK.
Should you feel bad you paper-handed Art Gobblers at 12 ETH when it reached 18 ETH? NO.
Because you exited when the REWARD side was FAR, FAR greater than the RISK side.
The person who bought it at 12 ETH only earned 6 ETH, risking more money for less upside than you.
Should I feel bad for selling at break even and cutting loss, and then the NFT moons? NO.
Reducing risk trumps optimizing reward.
Again, the name of the game is going for the highest reward with the lowest risk.
Use your capital to search for the next gem.
The entire history of humanity has been people moving to de-risk their lives.
At first, it was hunters risking their life for food eventually going for less-riskier agriculture.
People banding together rather than doing it alone.
The best traders don't do trades forever.
They eventually become exchanges/membership organization to get a cut from ALL trades.
Nobody wants to take risks forever.
Whenever you sell, you wish the buyer good luck. They'll need it.
WGMI.