Exploring the Psychology in Crypto Trading & Investing - TOKEN2049 Singapore 2022

good afternoon everybody so I recently participated in a trap fight trading conference where somebody from the audience actually asked why is web3 relevant to us and why is it important to us as well let me share the story which I shared with them during the event itself last year during The metaverse Craze uh I got curious about the central land and I wanted to go on to check it out because one of the plot of land went for almost a million dollars right so I went there about five to ten minutes after five to ten minutes I got a bit giddy maybe because the ux wasn't that great or maybe because I just wasn't used used to it so I was ready to give up my 10 year old son walked by and he said hey Dad this looks interesting let me try it out and so I say go ahead and I went to do my stuff 10 to 15 minutes later I heard a shot from my son he said hey Dad check it out I'm actually riding a dragon my 10 year old son figured out how to ride a dragon in a metaphors in such a short period of time they are dead this fast any company who wants to succeed in the next 10 to 20 years must have a web tree angle must have a web tree strategy in place because the next generation of customers the next generation of users are already in the digital space before I continue let me quickly introduce myself my name is Kelvin C I spent 15 years trading in New York and Singapore as well and I'm now head of trading at coinhako is founded in 2014 based in Singapore we are fully licensed by mes we are Asia's crypto premium crypto platform offering Digital Services to institution family officers High net worth and retails customers do check us out at our booth at p8 so he has been a rough six months we all know that right so and uh as instead of trading I get many many questions Where Do We Go From Here itself let me share your story this time for the crypto crowd itself about Einstein in 1942 Einstein was actually teaching in Oxford University uh and he had just given his class uh their final exam paper so after the exam Einstein and his teaching assistant was walking back to the office and the assistant finally plucked up his courage and asked Einstein Professor did you realize that the paper which you gave to the class was the exact same paper you gave last year Einstein being Einstein he was like of course I know I know that this is the same paper so he got curious why sir why did you give the same paper to which Einstein replied because the answers have all changed so this is physics already with a few hundred years of History still finding that they are making errors still finding that they have the wrong answers crypto is only about 10 years old we are allowed to make mistakes we are allowed to find that we have the wrong answers but we must have the humility to admit that we have the wrong answers we must have the determination to figure out that to find the correct answers itself in a blue Market it's very easy to pick winners right in the bull market everybody or anybody can be a successful Trader can be a successful investor but it's only during the bear Market where True Value emerges where the strongest company will emerge the strongest project that have real world value image and the people with the most passion will stay on that is the blue Market oh that's the bear Market do not mistake the value of blockchain Technology with the actions of some Bad actors over the past six months when I was given the opportunity to speak today I thought of doing something different you know everybody's talking about web 3 blockchain different currencies everything I thought tackling something difficult pertinent but not often talked about in investing and trading which is the human psyche lucky or Not Human psychology plays a very important part between the success and failure of trading or investing how big apart think when the roads from billions for those who know the show you understand immediately for those who don't yeah you can you can go check it out not now though the problem with prep 5 trade trading on investing is that most of the financial strategies most of the financial models rely solely on numbers numbers are important right but what it does not capture is the value of sentiments the value of emotions or even the value of culture let me give you an example this is my very first nft this was chosen to me by my son one night we are going through all the nfts and and I was like Hey Dad this looks like you we should get it and so I will say okay let me get it I was skinnier but back then so this nft probably costs less than a gas fees which I paid So based on financial models for example this might be value for example about ten dollars if somebody offers me a thousand dollars financial analysis will say that I will make 100x from from this nft right and most of our most recommendations will be to sell it but I won't sell it why because what this ten dollars or thousand dollars to not capture is my intrinsic value of my attachment to this nft this is my very first nft this is chosen to me by my son when I grow older I can actually pass it out to him and to Future Generations as for example a family heirloom so the issue with a lot of those successful uh people in a chat fight space a lot of people say that crypto is worth zero what are they not capturing they are not capturing the intrinsic value of the need for alternative Financial system whether their financial models are right or wrong but this there is an intrinsic value and as long as there is a need for alternative Financial system crypto value cannot be worth zero but in trading and investing numbers are very important itself because numbers are logical we understand numbers let me give you an example we all understand that the probability of us making money over a one day period is 50 50. oh and this probability goes higher as time goes further so that's why we understand the concept of time in the money not timing uh not time time in the market not timing the market right and a prime example of this being used is in Amazon right this example is being used both in a track flight space and it's also in the crypto space so the example goes like this if we you have bought Amazon at the highest in 1999 you would have suffered a 95 drawdown underwater for 10 years but you have kept it all the way till 2021 you would have made over three thousand percent gain so this example is a prime example that people like to give about being having a lot being a long-term investor in a very good asset class so this is an example we use for Bitcoin as well right these numbers are very very logical but these numbers are unreasonable why is it unreasonable because firstly because it's unreasonable to think that anybody can withstand a 95 drawdown why is it unreasonable it's unreasonable to think that everybody can have the discipline to hold all the wave to a 3000 game so numbers are unreasonable why is it the reason is because we have our emotional baggage what's emotional baggage we like to compare with our peers and we like to also we we are fearful to let down our spouses so these emotional baggages cause us mental stress which causes us to make illogical decisions very often at a very at a very uh wrong time this code is is I love this code because this code sums it up perfectly this is by Victor Victor is actually a market wizard that is being featured at Jack Swagger's a famous book he says the the key to trading success is emotional discipline if intelligence were the key there will be a lot more people making money trading which is true you can have the best strategy you can have the best investment we can have the best numbers the most optimized parameters but without the mental fortitude to follow through your strategy to keep keep to your keep be disciplined and keep to your strategy there is no use the strategy will be thrown out the window at the first sign of stress so emotional discipline is key in a success of trading and investing but we must also be conscious of how stories and narratives can affect our decision making what what do I mean by that stories and narratives drives every daily aspects or every aspects of Our Lives when When We Were Young we all know the story of Washington chopping down the cherry tree right this drives the narrative what narrative drives honesty can make you successful in the East we know Romance of tree Kingdom and the character kwani his story of going through five passes cutting down six generals what narratives does it drive a drive to see his sworn brother Lupe right what narratives does it drive it drives the narratives of loyalty loyalty to your family loyalty to your country loyalty to your company for example right but in nowhere right except in the finance industry where this kind of narrative can Garner an immediate financial gain right Drive The Narrative that this stock is the next Amazon you drive the narrative that this stock this coin is the next ethereum prices go up if you're successful in driving a narrative you make a immediate financial gain right the problem with human psychology is that the more we want it to be true the more we overestimate the probability of it being true that's why in crypto there is so many rampant and successful pump and dumb schemes but this doesn't just happen in crypto as well this also happens in the traffic space right we know who this is Bernie Madoff right Bernie Madoff drove the narrative that he's a very successful Trader very successful in the individual uh investor and a lot of people want to believe him very smart people very intelligent people want to believe him we despite the red flags what kind of red flags firstly very very consistent returns despite the market fluctuations secondly being audited by a relatively unknown accounting firm thirdly refusing to share details of his investment strategy despite being asked these are red flags but people chose to ignore it and chose to believe the narrative that he's a very very successful Trader investor so narratives can be very misleading we need to do our our own research we need to have emotional discipline to resist the urge to jump on any narrative right because jumping on any narratives will make will lead to very very bad decisions right investment decisions so let me stop here and give you one one example right now imagine I have a piece of paper here and I fall into half okay and and uh if the the the size the leg of the paper is double right how many times do I need to fall in order to for this piece of paper to reach the moon the very common answer is about a few hundred times or maybe even a few thousand times because the distance between here and the moon is about uh to a few hundred thousand kilometers away right but the actual answer is 42 times if I fold this piece of paper 42 times I can reach the Moon humans are trained to think linearly but the problem is that risk in the market is not linear it's non-linear it is actually convex let me give you an example four examples in a traffic space in a fixing gun space there's Turkish Bonds in an fx space Russian Ruble in a common space nickel and in the equity space more famously GameStop which started the meme stock craze right so if you look at look at the price action and the risk we are managing non-linear risks we are managing convex risk but having uh not having a linear mindset will lead to disastrous results right so we need to have a non-linear mindsets because what it does it gives us better risk management trading is not just about maximizing top side but also minimizing your downside right so that's why kohaku focuses on risk adjusted return not absolute return what do you mean by risk adjusted return let me give you an example one project or get uh offers a potential of 60 gain by the potential drawdown of 80 percent the second project offers you a potential upside of 30 percent potential drama of 10 percent a lot of people in crypto and over the past past couple of years will recommend the first one because what they do they look at the absolute games are 60 percent recommends looking at the second project because in the long run the second project will shine because it has a higher risk adjusted return we are also focusing on three factors that will drive Mass crypto adoption Simplicity Simplicity in a user experience because you know some some some may be too complicated for those people no visitors they want to learn Simplicity in the products because any any extra layer of complexity in the products will mean extra risk for the customers and also for the firm itself second security has two aspects also security for the customers assets second aspect security for the value of the customer's asset Quantico has a very experienced security team led by our CSO also our training team has years of experience in track 5 that will help risk manage our the value of our customer assets third regulations we are we are fully regulated by mes we always believe in a compliant first approach and being on site with The Regulators because we believe that working with The Regulators then we will be able to increase the adoption of crypto again find out more at our booth to end off let me show you a story about this uh Persian king years and years ago this Persian king was uh feeling very lonely very very down so what he did was that he gathered a group of wise men including the very famous Persian poet Atta of nishapo in order to come up with a phrase that will last all time or make him happy at all times so the the wise man contemplated for a while and then they came up with a phrase which the Persian king was so happy that he inscribed it on his ring and why at all times what did the inscription say these two shall pass it signifies the impermanence of everything in life and everything will change we may be experiencing a winter currently in crypto but remember winter never fails to turn to Spring we were built in the winter we were so during spring so that we can Harvest during summer thanks a lot