The past few days have been disastrous for the crypto market. Luna a top ten crypto crashed to abysmal prices and wiped out a lot of people's investments. Although I held a small amount of Luna in my portfolio it didn't compose a huge part of my portfolio. Even though it was a small portion of my portfolio it still left a bad impression on me. I've never experienced losing investment to almost zero within less than 3 days.
This blockchain is unlikely to recover from this crash. The blockchain has been printing Luna to return the value of UST to one dollar, which has resulted in a large number of investors withdrawing their funds. After suffering the worst investment loss of my life, I learned a few lessons that I will try to avoid in the future.
The first is to never invest in a cryptocurrency project that has an unlimited supply, even if it is perfectly functional. When that blockchain decides to print more coins indefinitely, prices will plummet and your investment will be worthless. I currently hold two cryptos in this category and intend to exit these positions once their prices recover.
The second lesson I learned is to avoid blockchains with algorithmic stablecoins. Even though I didn't own any UST, I suffered when it fell below a dollar. After the blockchain attempted to restore UST to one dollar, the value of Luna fell more precipitously than that of UST.
Third is that I would avoid investing in a new blockchain that has yet to be tested. There are a few cryptos that have been around since the last bull run. These cryptos have survived two devastating crashes and will almost certainly survive the current one. The majority of the cryptos that have survived these crashes have solid fundamentals. After this crash, I will stick with tried-and-true cryptos.
Fourth, I plan to diversify my investments across multiple platforms. I only held Luna on Binance because it was one of my minor positions. Unfortunately for me, Binance has recently suspended trading on their platform for Luna. I am unable to liquidate or withdraw my Luna to other exchanges.
Fifth is never try to catch a falling investment. Just because it has dropped 99% doesn't mean it can't go down any further. I bought luna at around $60 and held it hoping it would drop back below $60. After news came out that UST has been experiencing problems I waited for it to drop further before I added to my position. After 2 days the value of Luna dropped even further to -99%. I initially thought that I'd add to my Luna holding by purchasing a small amount hoping to recoup my initial investment once it bounces back. When I checked my holding it dropped to another -99% wiping out all the value of my investment. I initially wanted to add another small amount to my position but after Binance suspended all trading I decided to leave it be and focus on other cryptos instead. If a crypto drops 99% in a day chances are it is heading down further and I will lose all my money invested in it.
Finally, I learned to never overexpose myself in one investment. As of the moment I am heavily invested in XRP which consists of almost half of my crypto portfolio. I plan to increase my other crypto investments in order to rebalance my portfolio. I am optimistic about my XRP investment but if something unfortunate were to happen to XRP in the future my crypto portfolio would be wrecked.
Losing money in this manner is disheartening, but I remain optimistic that only a few large-cap cryptos will end up like Luna. I am fortunate to have diversified my portfolio and survived this crash. I feel sorry for the people who have invested everything they own in Luna. I sincerely hope they recover from this disaster.