Summary: Five years of ups and downs, three bloody and tearful rules
I remember this time last year, my cousin was just a broke graduate, holding 10,000 yuan saved from internships, squeezing into the subway every day eating instant noodles, even needing to borrow rent from me. As a result, this year when I went home for the New Year, this kid actually picked me up in a Model Y, laughing and saying: “Bro, the money I made in the crypto market over the past six months is enough for a down payment.”
You might think this is a tall tale, but I witnessed his transformation over the past six months with my own eyes. But don't get me wrong, this is not a myth — 99% of people in the crypto market are losing money. I myself paid a lot of tuition in the early years, losing enough savings for a down payment on an apartment in a small city. After five years of ups and downs, I have summarized three crucial investment principles, each one a lesson learned through real money lost.
1. Leverage: The Sweet Trap
The first time I tasted the sweet benefits of leverage was in 2020. At that time, I used 20 times leverage to go long on Bitcoin, and my account increased by 520,000 in one day. That feeling was like being on a rocket; I felt like a born trading genius. I even bought a luxury bag for my girlfriend overnight and started planning to change cars by the end of the year.
However, the good times didn't last long. Within a week, negative news hit the market, and Bitcoin plummeted by 12% in one day. My account went from a profit of 520,000 to zero in just two hours, and even my margin was forcibly liquidated. The feeling of falling from the cloud is still vivid in my memory.
Now my cousin and I have a strict rule: leverage should not exceed 3 times, and positions should always be controlled within 5%. It's like putting a bulletproof vest on the account; even if the market fluctuates violently, it won't go to zero overnight. In November last year, Bitcoin dropped by 20%, but my cousin, with a light position and low leverage, not only didn't lose but also added to his position at a low point and directly earned three times after the rebound.
The concept of 'fat tail distribution' mentioned by Taleb in (The Black Swan) explains why leverage is so dangerous in the crypto market. The cryptocurrency market has significant fat tail characteristics, meaning that the probability of extreme events occurring is much higher than traditional statistical models predict. Those seemingly impossible large fluctuations are actually not uncommon in the crypto world.
2. A Clear Asset Allocation
I was once deceived by the myth of 'hundredfold coins.' When the metaverse concept was booming in 2021, I heard about an NFT project claiming to be a 'metaverse toilet' that could increase tenfold, and I unhesitatingly invested 300,000. Initially, it did perform well, and my account peaked at 1.86 million. The first thing I did every morning was check the market; I dreamed of laughing.
As a result, a month later, the project team suddenly ran away, the official website was inaccessible, the community was disbanded, and my 300,000 was lost. That day I sat in the toilet and cried for half an hour, unable to even smoke— that was my savings for three years.
Now our investment portfolio is very simple: 85% of the funds are allocated to Bitcoin and Ethereum, and the remaining 15% is used as 'lottery funds' to occasionally participate in some promising altcoins.
This idea aligns with the traditional 'barbell strategy.' On one end of the barbell are very low-risk assets (like government bonds, cash), and on the other end are high-risk, high-return assets (like cryptocurrencies), while assets with moderate risk (like stocks and bonds) are avoided. We adapted this strategy to fit the crypto world: the main focus is on stable mainstream assets, supplemented by a small portion of high-risk opportunities.
The strategy proposed by Liang Xinjun to 'build your own crypto ETF' is also worth referencing. He suggests capturing the systematic growth of the entire industry by allocating mainstream assets like Bitcoin (60-64% of the market), Ethereum (14-15%), etc. This strategy may not make you rich overnight, but it can help you survive longer in the highly volatile crypto market.
3. Stop-loss: The first principle of survival
In 2022, Ethereum fell from $1,800 to $1,530, a drop of 15%. I thought 'it has already bottomed out,' and kept adding to my position to average down costs. As a result, the market continued to decline, and when it dropped to $1,200, my account had lost 70%, leaving no chance to break even.
Now the strict rule I set for my cousin is: for any cryptocurrency, if it falls more than 8%, liquidate immediately, never hold on. It's like a timely stop-loss; dragging it out will only lead you deeper into trouble. Last September, a small cryptocurrency he bought dropped 9%, and he sold it without hesitation. Later, that coin dropped directly by 60%. He happily said, 'I'm glad I ran fast.'
In the crypto world, staying alive is more important than anything else. Only by preserving the principal can you wait for the next wave of market.
The Art of Survival
There are no myths in the crypto market, only 'survivor bias.' Those legends of hundredfold returns are backed by countless losses. My cousin's small rebound is not due to good luck, but because he strictly adheres to these three principles: no greed, no gambling, no holding onto losing positions.
True investment wisdom has never been about the thrill of getting rich overnight, but rather about the patience to win steadily. Only traders who are alive can see tomorrow's candlestick; only those who are steady and methodical can survive long in this brutal market.
Sometimes, slow is fast, and less is more. This is my deepest insight after five years of struggling in the crypto market.
In the current highly volatile market environment, maintaining stability is more important than pursuing excessive returns. Data shows that using a dollar-cost averaging (DCA) strategy to average out costs and keeping high-risk asset allocation within 30% of the total position can effectively avoid risks brought by extreme market conditions.
I hope my experience can help you avoid detours. In this market, we all need to remain humble and keep learning. After all, the only certainty is uncertainty itself. Follow Bin Ge for more first-hand information and precise points of knowledge in the crypto world; learning is your greatest wealth!#巨鲸动向 #隐私叙事回归 $ETH
