The crypto world is like a digital 'wealth meat grinder,' with data showing that **99% of retail investors ultimately lose money** and only 1% of institutions and professional traders continue to profit. This extreme polarization is not coincidental but a result of the interplay of market rules, human weaknesses, and capital games. This article will analyze the underlying reasons by combining the latest market dynamics in 2025 and point out paths for breakthroughs.
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I. Asymmetry in market structure: The 'innate disadvantage' of retail investors
1. The cruel reality at the end of the information chain
- Insider information monopoly: Project teams, exchanges, and venture capital form an 'information iron triangle,' and retail investors often receive good news (like airdrops, exchange listings) more than 48 hours late, missing the best entry opportunities. A typical case: In July 2025, a Layer2 project airdrop leak allowed institutions to average in at $0.15, while the price had risen to $1.2 when retail investors entered, creating an 8-fold profit gap.
- Valuation trap: The current token's **MC/FDV (Market Capitalization/Fully Diluted Valuation) ratio is at a three-year low**, high FDV projects peak immediately upon listing, and retail investors face significant unlocking pressure after taking over. For example, a recent ZK project plummeted 70% due to VC sell-offs after listing, deeply trapping retail investors.
2. Survival rules of zero-sum games
The essence of the crypto world is **negative-sum gaming**: Exchange fees, leverage funding fees, project team cuts, etc., annually consume 30% of market liquidity. In Q1 2025, the liquidation amount in the contract market reached **$8.6 billion**, with retail investors contributing over 90% of the losses.
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II. Cognitive traps: Self-destructive 'thought viruses'
1. The fatal loop of behavioral biases
| Type of bias | Typical performance | Loss cases |
|----------------|---------------------------|------------------------------|
| Survivorship bias | Only focus on the myth of getting rich quickly | Blindly imitate 'hundredfold coin' strategies, ignoring 99.99% projects that go to zero |
| Anchoring effect | Fixated on historical highs | ETH holders stubbornly hold at $3,800, missing the $2,400 stop-loss opportunity |
| FOMO emotion | Fear of missing the last wave of market | After SOL broke $200 in July 2025, it chased up, but within two weeks, it corrected to $150 |
2. Self-deception in technical analysis
- Indicator pile-up syndrome: Using 10+ indicators (MACD + RSI + Bollinger Bands) simultaneously leads to frequent stop losses due to conflicting signals;
- Cycle mismatch: Entering positions on a 4-hour chart but using a 5-minute chart for stop losses, resulting in single trades exceeding 20% drawdown.
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III. High-risk behaviors: The 'accelerated vaporizer' of wealth
1. Leveraged contracts: A perfect tool for institutional harvesting
- High leverage liquidation formula: `Liquidation probability = Leverage multiplier × Volatility`. In April 2025, BTC had a daily volatility of 15%, leading to a complete wipeout of 20x leveraged long positions;
- Funding fee erosion: The overnight fee rate for perpetual contracts reaches 0.1%/day, with annual losses exceeding 36%, far surpassing spot returns.
2. Dogecoin betting: Countdown to zero
2025's typical scam project characteristics:
- Promising fixed returns (e.g., Marscoin promised a 30% monthly return, then ran off after raising 5.2 billion in six months);
- Referral mechanism: Three-level distribution commission, essentially a Ponzi structure;
- Zero innovation in code: Copy-pasting ERC-20 tokens without practical applications.
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IV. Systematic suppression of the market environment
1. Liquidity stratification and siphoning effect
- BTC/ETH ETF capital absorption black hole: In July 2025, a monthly inflow of **$21 billion**, severely bleeding small and medium market cap tokens;
- 'Reservoir theory' failure: Funds cannot overflow from BTC to altcoins, with leading tokens like SOL and ADA seeing significant weekly volume drop.
2. The dual strangulation of regulation and institutional games
- Policy black swan: The China-US tariff war in Q1 2025 triggered a liquidity crisis in the crypto market, leading to panic selling by retail investors;
- Institutional manipulation of the market: Market makers create false breakouts through algorithms, inducing retail investors to chase prices and panic sell. For example, ETH repeatedly spikes in the $2,400-2,450 liquidation zone.
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V. Breakthrough path: Transformation from 'chives' to professional players
1. Cognitive reconstruction: Establish three counterintuitive principles
- Reject leverage: Contracts are gambling; only spot trading is investment;
- Noise shield: Remove KOLs shouting orders, focus on on-chain data and economic models;
- Reverse layout: Regular investment during 'no one talks about coins in the friend circle' (e.g., fear index at 20 in August 2025).
2. Strategy upgrade: Institutional-level risk control framework
```mermaid
graph LR
A[Capital Diversification] --> B(Mainstream coins 70% + Cash 30%)
B --> C{Drawdown control}
C -->|Single coin loss>10%| D[Forced stop-loss]
C -->|Account drawdown>15%| E[Rest for 30 days]
```
3. Seize structural opportunities
- Final sprint after ETF approval: Historical data shows that mainstream coins surge at the end of a bull market (e.g., BTC surged from $6K to $60K in three months in 2021);
- Full circulation tokens for hedging: Avoid high FDV projects, prioritize tokens with MC/FDV>80% (e.g., DOGE).
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Conclusion: Ignite the fire of reason in the dark forest
The wealth distribution in the crypto world follows the **power law** — 90% of profits flow to the top 1% of cognitive elites. The root of retail investors' failures lies not in the market, but in participating in a war that requires a 'mathematician's rigor + philosopher's clarity' with a 'gambling mindset.' Only by placing **cognitive evolution** before **profit chasing** can one capture that 1% of certainty in chaos.
> 'In a bull market, there are many liquidations; in a bear market, there are many scams. Those who survive are not lucky, but the sober ones who refuse to become fuel.'
