Biggest lesson from the crypto meltdown

Co-Authored and Reviewed by Gagan Sandhu, MBA - The University of Chicago Booth School of Business, CEO of Xillion
Posted on . 2 min read

🛑 Biggest lesson from the crypto meltdown: if anyone promises greater than 10% returns & says nothing about tradeoffs involved, JUST SAY NO.⛔

Let’s dig in:

Investing is a tradeoff between four main things:

1️⃣ Returns: Money you can make by investing in any asset. Generally represented in % terms. Higher is better.

2️⃣ Risk: Probability of losing your entire investment. Lower is better.

3️⃣ Volatility: How do these returns change over time, from one extreme to another? Lower is better.

4️⃣ Liquidity: How quickly can I sell this investment to get cash? Higher is better.

High returns generally mean:

📉 Higher risk of your investment going all the way to zero.

🌀 Higher probability of investment value changing wildly over the medium term.

💰 Lower probability of converting this investment into cash in a short amount of time.

Venture capital (or angel investing) has been the best investment category over the last two decades, but you can’t take your money out for up to 10 years! And most investments go to zero, but very very few become 100x or 1000x. That’s why venture funds make a large number of investments.

On the other hand, most crypto influencers put aside these trade-offs. Instead, they:

🤩 put laser-eyed profile pictures on social media

🤦‍♂️ chided non-believers with “have fun staying poor”

🙊 urged us to buy digital monkey pictures, calling them NFTs

🤯 came up with obscure terms like web3, DeFi

💯 Grifters will be back with yet another scheme with an even fancier name as soon as the dust settles from the current crypto mayhem. But now you know how to snuff out such frauds! Don’t you?

🎯📑Create an account with Xillion if you would like to see how your money will grow when invested in different types of investments, with tradeoffs.

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