This article is a bit long; after reading, you will have a comprehensive understanding of the crypto space.)
No matter what prompted you to enter the crypto space, you must have heard of someone making a lot of money by buying a certain coin, multiplying their investment dozens or hundreds of times, and suddenly reversing their fortunes.
There are many such stories in the crypto space, and it is these stories that make us fantasize that one day we too can become wealthy through trading cryptocurrencies. Of course, you’ve also heard of many people blowing up their accounts and losing everything, even contemplating suicide. Losing money in crypto is the norm; making money is a matter of luck.
In fact, trading cryptocurrencies doesn’t require much intellect.
There is a saying in the crypto space: when you buy, it drops; when you sell, it rises.
From this, it can be seen that trading cryptocurrencies doesn't require much intellect. Some people refuse to accept this, insisting on reverse thinking, resulting in even greater losses, as if the market makers are specifically targeting them. It's just that magical. Practical results show that those who trade cryptocurrencies relying on their own intelligence end up losing and become fools.
Do you know why this is the case????
A leaf obstructing the view, a frog at the bottom of a well.
The information and knowledge resources you receive only show the surface, much like standing on Earth but having difficulty perceiving that we are actually on a spherical surface rather than a flat one. Your seemingly serious analysis is superficial, wrong, and meaningless.
Trading cryptocurrencies requires you to give up your intelligence. Giving up intelligence is also a form of wisdom, especially when your understanding of the crypto space is insufficient.
Yuhui often encounters newbies wanting to enter the crypto space without much understanding or practical experience, only seeing many myths of getting rich in crypto, hearing that it is quite profitable, and thinking about trying with a few thousand.
If you truly want to enter the crypto space, trying with a few thousand is not a bad idea, provided you are prepared for losses!
Why?
1. Today is not like any other day.
Now the crypto space is maturing, having passed the wild growth phase; there are no longer low-priced major coins. If you invest a few thousand to buy coins, the chance of skyrocketing a hundred or thousand times is almost nonexistent.
Look, when has Bitcoin's growth in recent years exceeded tenfold? Even during the bull market two years ago, it only increased a few times.
Currently, the price of one Bitcoin is an unusual unit.
2. Traps outweigh opportunities.
Since buying Bitcoin doesn't offer a chance for wealth, you might think about simply buying some cheap new coins; after all, previous meme coins have also surged hundreds or thousands of times. But the crypto space is always more traps than opportunities.
The new concept coins and model coins you are optimistic about are 99.9% traps designed to harvest retail investors. Some coins peak right after launch; you see it skyrocket a thousand times today, and as soon as you buy, it drops 50%. You cannot bear to take a loss, believing it will bounce back, but it drops another 50%, and you still hold on for faith, then it drops another 50%... After several drops, you become obedient. By this time, your account balance is minimal, and you think that at this point, you can only hold on, but after a while, TMD, the coin is delisted...
When buying things, buy expensive ones; you basically won't get scammed. Conversely, buying cheap ones greatly increases the chances of being scammed. Give up your intelligence; the market has already done the filtering for you.
In fact, you might only get to buy a skyrocketing potential coin once in your life, and if you can hold onto it, that would be incredibly lucky.
3. Low self-awareness.
In the crypto space, there are various concepts and coins, but you do not know the attributes and values of each coin.
Relying solely on the K-lines drawn by the market makers, if a coin rises today, hurry to follow; if it falls, sell quickly. If you win, you think you are a stock god; if you lose, you curse the market makers. Without your own objective judgment, this leads to frequent trading and ultimately makes it hard to earn money.
Moreover, the various bearish and bullish news in the crypto space is dazzling; what you see is merely what the big players want you to see.
4. Trading is immature.
If you go all in when trading, you will get trapped, and once trapped, you will have to take losses; or if you can’t hold onto profits but hold onto losses, without a fund plan or averaging strategy.
If you want to get rich overnight, don't come to the crypto space; because the mentality of 'getting rich overnight' is doomed to yield no results in crypto. Nowadays, making money in crypto is not about risking 100,000 for a chance at 1,000,000, but rather about risking 1,000,000 for a chance at 1,000,000, or even 500,000.
Newbies entering the crypto space with a few thousand are likely to lose money, while entering with a million has a chance to make money.
In fact, the amount of money you have has no relation to whether trading cryptocurrencies can be profitable, but it reveals some logical facts. These two statements may seem contradictory, but they are not.
Yuhui will delve deeper into this:
Newbies entering the market with a few thousand are mostly testing the waters. The characteristics of new retail investors include being blind; they buy this coin because someone said it’s good, and that coin because another said it has potential, simply following the crowd. Due to lack of understanding, without undergoing market trials, their trading is immature, they do not understand value investing, and they lack subjective judgment.
Even if newbies know that buying Bitcoin is safe and reliable, they don’t understand why Bitcoin is safe and reliable. Even if newbies make money from Bitcoin, they cannot resist the temptation of high returns and will buy other coins, resulting in losses. Newbies also have a characteristic of wanting to make quick money; obviously, the returns from investing in Bitcoin are not as high as those from other coins.
The above are the issues faced by newcomers!
However, newbies trading cryptocurrencies with a million have greater opportunities to make money.
Think about it, a newbie entering the crypto space with a million must have done some research before entering; most importantly, they must be someone who has made a lot of money before, and they must have more money. Those who have made significant profits surely have a better understanding of the logic of making money, are more knowledgeable about fund allocation, and understand self-control, thus will not let short-term losses affect their judgment.
Wealthy individuals understand how to make money better than poor individuals! This statement carries no discrimination; the mindset, resource background, successful cases, execution capabilities, perspectives on issues, and understanding of social truths that wealthy individuals possess far surpass those of an ordinary person earning a monthly salary of 5,000.
Moreover, the most important point is that a newbie entering the crypto space with a million, even if facing losses, still has more money to average down, achieving eventual profitability. For seasoned retail investors, the amount of money has no bearing on whether they can make a profit in trading.
Thus, seasoned retail investors are more likely to make money than newcomers, and wealthy individuals are more likely to make money than those with limited funds.
After reading all this, if you still want to enter the crypto space, Yuhui suggests you find an experienced trader to guide you.
Is trading cryptocurrencies legal?
The 924 document explicitly prohibits trading virtual currencies, but as long as you are purely trading on exchanges, it is not illegal and does not constitute a crime. Trading virtual currencies goes against public morals and is a situation of self-assumed risks; in simple terms, if you lose money trading cryptocurrencies, it's your own fault—don't seek protection from relevant parts claiming there is no regulation; if you make money and, in the withdrawal environment, receive funds from an involved account that gets judicially frozen, you will need to refund the involved funds to unfreeze your account.
Regarding this issue, Yuhui once confronted the authorities directly. In 2020, during a practical case unfreezing, due to a card receiving involved funds, the card was frozen. At that time, Brother Huo fearlessly said loudly in the criminal investigation team office: 'Trading cryptocurrencies is legal; what I do is legitimate business...' Initially, the authorities were still polite, but upon hearing this, immediately retorted, 'Who told you that trading cryptocurrencies is legal and compliant?'
Yes, to date, the policy towards virtual currency speculation remains strict, including the People's Bank of China, which has a significant crackdown on virtual currency settlements. As long as the bank knows you are trading cryptocurrencies, it is likely that they will ask you to cancel your account.
However, to date, there has not been any law or regulation stating that trading cryptocurrencies is illegal!
Why suppress virtual currency speculation?
There are two reasons: 1. Difficult to regulate, becoming a tool for criminals to transfer funds illegally. 2. Foreign exchange outflow.
Difficult to regulate! Virtual currencies provide convenience for black and gray industries because of their anonymity, difficulty in tracing, decentralization, and global payment, which has attracted many criminals into the crypto space. In the past, scammers targeted RMB, using bank cards for receiving. When victims report to the police, the authorities can freeze bank cards immediately, quickly identifying the scammers and intercepting the funds.
Now, scammers are scamming in USDT; how do the authorities track them? Even if tracked down, the scammers might be overseas. USDT cross-border transactions are difficult to regulate. The legal issues arising from 'decentralization': the ambiguity of cross-border transaction regulation and the difficulty in determining jurisdiction. User anonymity complicates accountability.
Foreign exchange outflow! Since the birth of Bitcoin, after years of development, virtual currencies have gained wide recognition. Some 'criminals' have used virtual currencies to transfer domestic funds abroad, evading foreign exchange regulation, making money domestically and spending it overseas, resulting in foreign exchange outflow, severely harming national interests.
Don't forget who invented Bitcoin and where the USDT issuing company is located. The crackdown has never been on blockchain, but on the illegal activities behind it.
Why doesn’t China take the initiative to establish compliant virtual currency exchanges?
It has already been established, in Hong Kong.
Prohibit the use of virtual currencies for illegal activities!
Every exchange will cooperate with the authorities and token issuing companies, such as Tether... These will collaborate with the authorities to investigate cases. As long as your virtual currency assets are involved in a case, the exchange and the authorities can restrict your account. Exchanges have your detailed information, and as long as you are in the country, it is easy to find you; the crypto space is not a lawless area!
Will trading cryptocurrencies and making millions trigger a bank investigation?
It depends on what kind of money you are receiving: whether it is a transfer or cash deposit.
If you are selling coins through an exchange and receiving clean funds, the transaction won't be investigated. However, if you receive black money, it will be frozen by judicial authorities; even if the funds are not involved in a case, the account transferring the money could be flagged as a 'fraud risk account.' The bank will also risk-control your account, requiring you to explain the incoming funds, and in more serious cases, you might be asked to sign documents at the anti-fraud center.
Therefore, the counterparties and funds in cryptocurrency sales are very crucial. There have been too many cases of exchanges encountering problems selling coins; the lighter ones result in frozen accounts, while the heavier ones lead to arrests, with the hard-earned money from selling coins being deducted.
If you are receiving large cash amounts from off-market trades, the bank will definitely investigate.
Currently, financial transactions are mostly digitized. Unless it’s a large official transfer like demolition compensation or lottery winnings, these won't be investigated. If it’s a huge cash sum like yours, the bank will ask you to clarify the source of the funds or provide tax payment proof, especially since your account has been frozen multiple times before.
If you previously had little money saved and are a wage earner, the amount you save does not match your identity, the bank will check more rigorously.
If you had ten million in your account, and now you cash out a few million, the bank will ask you to fill out a form explaining the source. Even if your deposit is successful, the bank will still report this transaction to the People's Bank of China’s anti-money laundering system, which is linked to the Ministry of Public Security, the disciplinary inspection, and supervision departments; in other words, these departments will also see your deposit. All these operations are handled by bank tellers internally, and the depositor will not know.
I advise everyone to stay away from all illegal activities, use your cards properly, and avoid unexplained funds.
Now Yuhui will share his insights and experiences from trading cryptocurrencies over the years:
(Suggested to bookmark and reread)
1. Trading cryptocurrencies is not a 'zero-sum game.' Many people think that the money they lose must have been earned by someone else. In a bull market, most people make money, while the losses of a few do not come close to the total amount made by many.
In a bear market, most people lose money, while the amount made by a few can be countless times more.
Thus, no one is harvesting retail investors.
2. Trading cryptocurrencies must understand the concept of 'fixing the barn after the sheep are lost.' Do not take all your money to buy coins as soon as you enter the market. Allocate your funds reasonably, so even if you enter at an incorrect point, you can still gradually average down and turn the situation around.
3. In the crypto space. Many people discuss 'value investing,' claiming they buy value coins and are not concerned about current unrealized losses because they are already trapped.
The order of learning is very important; smart learners deeply understand before investing. Foolish investors only learn after being trapped.
4. Retail investors lack patience but lack capability.
Trading cryptocurrencies has two outcomes: profit or loss, each accounting for half.
However, an investor with a million in assets certainly has a better chance of winning than one with a hundred thousand. At the same point in time, if a hundred thousand investor takes out fifty thousand to buy coins and a million investor also takes out fifty thousand, the hundred thousand investor will be anxious while the million investor remains calm.
In the crypto space, winning or losing is determined not by luck, but by skill.
You must control your position.
5. The common problem with retail investors: when they lose, they refuse to admit defeat, risking everything; and when they make a slight profit, they immediately run to cash out, cutting off profits...
If you can’t hold on when the price rises, don’t hold on when it falls.
6. The reason why retail investors are retail investors is not only because they take risks without consideration of costs, but also because they love to learn—only they learn the 'gossip and insider information' way.
7. The higher the trading frequency, the closer it is to a zero-sum game. Retail investors are under the illusion that they can beat trading fees with their intelligence, but they do not realize that the platform’s cuts can gradually consume their principal.
You see the K-line in minutes, hours, days, weeks, and months... you will get different conclusions, influencing your trading frequency. (It is often seen that some retail investors like to post minute-by-minute K-lines.)
The shorter the trading period, the closer it is to flipping a coin, akin to gambling. The longer the prediction, the closer it is to real logic. Reduce trading frequency, reduce, reduce, again.
Or you can set a rule: don’t consider it until it doubles.
8. All retail investors are under an illusion: if I buy here and sell there, everything would be fine.
This illusion is inevitable for new retail investors, but seasoned investors tend to have it for a long time.
In fact, you can never buy at the lowest point or sell at the highest point.
9. Adjust stop-loss lines and lower your risk tolerance.
Reduce the proportion of each trade amount relative to total funds.
Choose better quality coins.
Choose the best trading timing (for example, buy after several crashes).
Hold for a long time (like crossing one bull and bear cycle).
Improve your ability to make money off-market (or fundraising ability).
10. If you don't know what coin to buy, you must give up your intelligence.
Only buy the two or three coins with the largest trading volume in the market.
Giving up intelligence is also a kind of wisdom; when your understanding of the crypto space is insufficient, trusting the market’s intelligence is far more reliable than your own 'self-perceived' intelligence.
11. In the trading market, what is rising rapidly will rise even more, and what is falling sharply will fall even more.
Therefore, when all coins are rising, you must choose the one that rises the most; the market is telling you it is more likely to rise.
When all coins are falling, you must choose the one that falls the least; the market is telling you it is the most resilient.
12. Retail investors lack sex lives; they frequently check the market, even keeping their phones within reach when making love to someone else's girlfriend.
While trading cryptocurrencies, you must also pay attention to real life; moreover, you should learn to make money off-market. At all times, you should hold a certain proportion of cash due to the risks involved.
When trading cryptocurrencies, never invest all your funds.
13. Understand cycles and grasp cycles. Many people rush into the market buying as soon as they enter, easily jumping in towards the tail end of a bull market. Retail investors like to talk about trends, but have no concept of cycles.
When you ask him why he is buying coins now, he will say it is an upward trend, or a downward trend, or this is a big trend...
An upward and a downward movement constitute a cycle; the real trend takes multiple cycles to truly manifest.
What many people consider to be a trend may not even be considered a trend by others because the latter pays attention to the trends that emerge after multiple cycles.
This also explains why those who 'chase highs and sell lows' inevitably suffer losses, because the trends they perceive are not real trends but merely their own fantasies.
14. Many retail investors inherently believe that the coins they are trading cannot sustain long-term growth, even Bitcoin believers think so when trading Bitcoin.
So, they will enter and exit quickly, trading frequently.
15. You are really lucky to have seen Yuhui's article. Even if you can comprehend all the above content and can operate in practice, I guess you will still make mistakes in trading.
Because controlling oneself is the most difficult thing in the world.
And trading cryptocurrencies is about controlling oneself.
