As everyone spends more time in the crypto world, they will inevitably encounter one word - 'mindset.'
Just today, while chatting with friends, we discussed mindset issues, and I'd like to share my thoughts. Many newcomers to the market idealistically believe that cryptocurrency should be like an ATM, but in reality, the crypto world is more like a casino. Many people may have heard the saying that in the stock market 'one makes money, two break even, seven lose,' but in the crypto world, this ratio is even harsher. If we extend the time frame to about 10 years, the percentage of people who can sustain profits may be less than 1%, with 99% ultimately leaving with losses.
Yesterday, a friend asked me about two AI concept tokens that had tripled in the short term, and whether he should chase them. I asked if he was prepared to lose 1/3? Or if he was mentally ready for a potential halving of his funds? He said that developing AI is definitely a future trend, supported by the government, and the tokens will continue to rise. This viewpoint is not wrong; AI is indeed at the core of the technological revolution, but the price of a token often becomes severely disconnected from the project's actual value. For example, a certain AI project's actual value might only be worth $1, but the token price has already been driven up to $3. Entering at this time could face the risk of a price drop to $1.5. The project's value may rise to $2 in the future, but can you withstand a 50% unrealized loss along the way? In such volatility, human fears and greed will be infinitely magnified, and those who can hold on until they break even are few and far between.
Buying low enough is the foundation of all operations. Too many people in the crypto world like to chase hot spots, buying in after seeing a token rise several times, resulting in high-position buying. True investment should be like what Buffett said: 'be greedy when others are fearful,' entering the market when the price is below its intrinsic value. For example, when Bitcoin fell below $16,000 in 2022, the mining cost was generally between $18,000 and $20,000, making the risk of buying in at that time far lower than chasing high. But many people only look at price fluctuations, neglecting to study the fundamentals of the project, resulting in increasing their positions as prices drop, ultimately losing everything.
The most important thing in investing is to know what you are buying. 90% of people in the crypto world have traded for 10 years without even reading the project's white paper completely, let alone studying on-chain data, token economics, and team background. If you don't understand a project's technical principles, application scenarios, and token distribution mechanism, how can you expect to make money in this market? Just like my friend's question about AI tokens, many projects are just riding the coattails of a concept with no actual application, and there may even be risks of smart contract vulnerabilities or team absconding. My approach is to only invest in areas I can understand. For instance, I only focus on public chains and DeFi projects, and I completely avoid unfamiliar sectors like NFTs and the metaverse. There are tens of thousands of projects in the crypto world, and I can't understand 99% of them; if I don't understand, I give up, which is the key to survival.
A good mindset is not innate, but is built on a deep understanding of the project. For example, if a DeFi protocol has a stable annual yield of 20%, with continuously growing TVL (Total Value Locked), but the token's market value is severely undervalued, would you panic buying in? No, because you know its value will eventually be recognized by the market. Conversely, if you buy a worthless token, constantly staring at price fluctuations, fearing a pullback when it rises, or fearing it will go to zero when it falls, how can your mindset be good? It's like a blind person riding a blind horse, nearing the abyss at midnight; it's a miracle if you don't lose money.
The risks in the crypto world are far higher than in the stock market. In addition to price fluctuations, there are risks such as smart contract vulnerabilities, exchange crashes, and malicious actions from project parties. For instance, a well-known exchange collapsed in 2022, causing millions of users to lose their funds overnight. My method of avoiding risks is simple: only choose top exchanges, store only mainstream coins, and avoid small-cap altcoins. Even so, I still only dare to invest up to 20% of my assets in cryptocurrencies, while keeping the rest in stablecoins and government bonds.
Many people think their poor mindset is due to a lack of willpower, but the root cause is actually insufficient understanding. Give me a DeFi protocol, and I can analyze its TVL, protocol revenue, user growth, and other data to know its reasonable valuation range, allowing me to hold long-term. However, if you give me an NFT project, I completely don't understand the artistic value and community operation, leading to natural anxiety. The essence of investing is the realization of cognition; you will never earn money beyond your understanding.
The temptations in the crypto world are too many; new hot spots and concepts emerge every day. But the opportunities that can truly change one's fate may only occur once or twice in ten years. For example, the ICO of 2017, the DeFi Summer of 2020, and the AI token craze of 2023. However, behind these opportunities are countless projects that have gone to zero. You see someone making 10 times their money with a token, but you don't see the 99 projects they lost money on beforehand. In the crypto world, learning to give up is more important than seizing opportunities. 90% of projects are garbage; capturing just 10% that are truly valuable is enough for wealth freedom.
Lower your return expectations and view investment as a long-term endeavor. Many people fantasize about multiplying their money several times in a year, but the reality is that even if the annualized return can stabilize at 20%, it can still achieve 5 times growth in 10 years. The crypto world is not short of wealth myths, but more often than not, it is filled with tragic liquidations. Contract leverage and hundredfold coin speculation may seem like attractive opportunities, but in reality, they are wealth smashers. True experts invest with a cash mindset, trading time for space.
Finally, I want to emphasize: the crypto world is not a casino; it is a battlefield of cognition. When you stop pursuing short-term profits and start researching project fundamentals, learning on-chain analysis, and building your own circle of competence, a good mindset will naturally come. At that time, your wealth will truly enter the realm of compound growth. Remember, surviving in the crypto world is more important than anything else, and the secret to survival can be summed up in eight words: don't invest if you don't understand, buy low and sell high.
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The market is clear, and only with operations can one have confidence. Steady gains are far more practical than fantasizing about getting rich.
