Almost 300,000 RMB
First, I want to clarify that this is a story of a friend of mine. With his consent, I share his experience as a warning to new investors.
1. Entry
In mid-November 2017, I faced obstacles switching careers, and I had already quit my job, putting immense economic pressure on me. Out of desperation, I conceived the idea of making quick money. While scrolling through Weibo, I discovered that some people had made a lot of money from Bitcoin, which piqued my interest. I had heard about Bitcoin from Li Xiaolai two years ago, and at that time, I thought 3000 RMB for one was very expensive, and I didn't have that much money, so I paid no attention. Under such circumstances, Bitcoin appeared in front of me again; could it be fate? With this naive thought, I began to study Bitcoin. I read a few articles online and had a vague feeling that Bitcoin was a great invention that would shine in the future. Buying it couldn't be wrong. But I had no money; what to do? Borrow! I first borrowed a thousand from Ma Baba, and it was clear that I was still quite cautious at that time. I used that thousand to buy Bitcoin in two transactions at a domestic exchange.
2. Getting Rich
Two days later, the price rose, and the money in my account increased! A poor kid like me had never seen such a scene! I continued to buy! I borrowed another 6000 from Ma Baba and bought immediately.
Two more days passed, and the account balance increased again! Incredible! CCTV News was also reporting that Bitcoin's price continued to rise, reaching a new high of $9000. This was a provocation against the crackdown policy in mainland China in September, and this was one of the reasons I was exceptionally excited— I successfully participated in the action against a powerful force (manual side-eye smile).
Two days later, Bitcoin's price fell back, and the chance to hop on the ride came! In the first two days, I had bought too little; I wished the price would drop even more since it would rise sooner or later. I felt inflated, and borrowing more money became inevitable. But my Alipay credit was already maxed out, luckily the bank was very generous, lending me tens of thousands all at once, which I bought in that night. When I clicked the purchase button, I felt like an invincible general.
While waiting for the price to rise, I discovered that most altcoins had much more significant gains than Bitcoin. Wasn't this another opportunity from heaven for me? I had just borrowed tens of thousands from the bank, and then I borrowed the maximum amount I could from another bank, using it all to buy altcoins.
10000! 11000! 12000! 13000!! 14000!! 15000!! 16000!! 17000!!! In the following two weeks, the daily record-high Bitcoin quotes on CCTV News were like a strong stimulant, each dose stronger than the last. The altcoins I bought had even more astonishing gains, multiplying several times in just a week! During this period, the thing I did the most was check my wallet balance; those rapidly growing numbers were simply too adorable! I even told my close friend about this and urged him to buy too. But my friend is a more cautious person; he hesitated for a long time before buying three thousand, and I remember mocking him at the time, saying it was foolish to turn down free money.
Later, I discovered leveraged trading. The Pandora's box was opened.
It has been more than two weeks since I made my first trade. During this period, every time my account balance significantly increased, I borrowed more money to buy. In the end, I put half of my money into the margin account and opened a 3x leverage. During the first week of leveraged trading, my account total assets doubled! I couldn't wait to tell my family. I thought they would be happy for me, but unexpectedly, they were extremely worried about my large borrowings. They ordered me to stop immediately and repay the principal. At that time, I couldn't listen. I was determined to believe Bitcoin would reach $20000. Wouldn't selling now mean letting the bird I had caught fly away? So, I superficially agreed with my family but secretly resolved to hold on.
3. Plummeting
The night I called my family was in mid-December 2017 when news broke online about a certain exchange being hacked with a massive amount of Bitcoin stolen. When I saw the news, a hint of concern crept into my heart, but I quickly comforted myself, thinking that the market was doing great. What’s a little negative news? Bitcoin would definitely surge to $20000.
Later that day, Bitcoin's price fell back.
The next day, the price dropped a bit more.
On the third day, the price plummeted by $2000! I started checking the price more frequently. The margin account had little room left before liquidation, and my account's profits had retraced by half. Yet, the delusion of luck started to play tricks on me. I remembered that after the last surge to $17000, there was nearly a $3000 retracement. This time might also be a retracement; add margin and hold steady!
In the next three days, Bitcoin's price continued to avalanche while the altcoins plummeted even more. I sold all my altcoins for USDT, moved half into the margin account, and added margin. Watching my account assets shrink drastically, I wanted to cut losses, but I was reluctant. I had already invested so much; why not hold on a bit longer? Perhaps the next day it would continue on an upward trend.
On the morning of the sixth day, I woke up early, and the worrying thing eventually happened. The lock screen of my phone displayed a message from the exchange sent in the early morning—liquidation happened.
4. Struggling
I lost most of my earnings, and coincidentally that day I received the first repayment notice for my installment loan. This time, I felt the pain. My family called me, and I told them I had paid off all the loans and promised not to touch digital currencies again. After hanging up, I began to reflect. I then joined many cryptocurrency trading groups and started following the orders of others in the group. This kind of following trading continued for several months, during which I lost more than I earned, especially during the sharp drop at the end of January and the subsequent strong rebound, where I suffered huge losses on futures trades, with less than a third of my capital remaining. At that time, I would wake up around six or seven every day and couldn't sleep until midnight because there often were major market movements in the early hours, and catching them could yield small profits. I learned from the group that some people achieved stable profits by self-study in six months, and I felt like I had grabbed a lifeline. I bought a stack of books and spent almost all my time reading and watching the market. I did learn a few things, but under immense pressure, I couldn't easily feel satisfied; every profitable trade felt too precious to close immediately, and in the end, I still lost and exited.
5. Bankruptcy
In the last few months, those fixed repayment dates each month pushed me toward the edge of a cliff like a beast. I had to borrow a little from friends to pay off the smallest debts, and then I borrowed from the recovered available credit to repay my friends and other loans. It just kept snowballing, and the total debt kept growing.
During that period, I had to keep my phone by my side even while engaging in intimate activities with my girlfriend. Whenever the price alert rang, I had to switch to trading mode immediately.
At this point, my trades were generally no longer losing, but the fatal flaw was that the profits were insufficient to cover my monthly repayments. It continued like this until one day when I couldn't repay anymore.
I tried every possible way but still couldn't repay. I even thought about whether I could take legal action to reduce part of my debt. Later, I found out that this route was also impossible since my loan interest was within the legal protection range. In despair, I opened up to my parents.
6. Rebirth
My parents helped me pay off most of my debts. I now have a stable job and finally have time to seriously reflect on the gains and losses from this experience.
This friend's mistake lies in thinking that all vehicles with wheels are similar just because he just learned to ride a bicycle, and he jumped straight onto the highway driving an F1.
Trading master Li Fo Mo said, the secret to successful trading can be summarized in one sentence: control risks and let profits run.
Most people who have traded know the sentence above, but knowing is easy and doing is hard. So how should we control risks while maximizing profits?