The deep connection between investment behavior and capital scale

Munger and Duan Yongping have pointed out the essence of investment from different perspectives: Munger bluntly stated that 'Chinese people excel in other fields, but often appear foolish in the stock market—too fond of gambling'; Duan Yongping retorted 'stocks are by no means gambling', but was met with retail investors' retorts 'if you have a fortune of billions, you naturally do not need to gamble, but we small investors can only gamble with our lives.' Duan Yongping's response was sharp: 'No wonder you all are always short of money.' (Note: This is a paraphrase of the main idea.)

This cognitive divide is essentially a reconstruction of investment behavior based on capital scale:

Hundred billion level capital: naturally becoming a 'global citizen', asset allocation transcends borders. There are few domestically appealing targets, only a handful of leaders like Moutai, Tencent, and Shenhua. There's no need to get involved with 'fruit chain concept stocks'; directly holding Apple and Nvidia is the optimal solution.

Hundred million level capital: strategies tend to be conservative. Some positions allocate to high dividend stocks as a safety cushion, while tracking cyclical opportunities in industries, planning to layout growth-oriented targets, forming a combination of offense and defense.

Million-level capital: strategies shift towards 'cigarette butt stocks' digging and restructuring games, or betting on 'ten-bagger' stocks in overvalued tracks. At this point, operations such as 'searching for dragon heads' and 'three days, one hotspot' begin to emerge—yesterday's chip frenzy, today's AI boom, tomorrow's pursuit of humanoid robots.

Funds below fifty thousand: gambling nature reaches its peak. The mindset of 'take a chance to turn a bicycle into a motorcycle' dominates decisions, and operations resembling a 'limit-up suicide squad' become the norm, even giving rise to extreme speculative memes like 'S3 season' and 'Putin throws a nuclear bomb'.

The core logic of this difference lies in: the smaller the capital, the higher the threshold requirement for returns. Large funds can boast of annualized returns of 15%-20%, while small funds see little change in life if they achieve the same returns. When the principal is only one hundred thousand, a 20% return is merely twenty thousand, naturally fostering the distorted expectation that 'doubling in a year is just the beginning.'

The special operational rules of the cryptocurrency market

In the realm of cryptocurrencies, traditional financial theories frequently fail, and market characteristics exhibit unique rules:

  1. The inevitable convergence of basis and options
    Although cryptocurrency prices fluctuate wildly, the basis (the difference between spot and futures prices) will eventually return to a reasonable range. Options are more constrained by time; the expiration date will inevitably settle at value and will not maintain a premium indefinitely.

  2. The liquidity nature of implied volatility
    The 'implied volatility' in the cryptocurrency market is not a reflection of real volatility but a pricing label of liquidity. When market liquidity is exhausted, this indicator will skyrocket; when liquidity is abundant, it may retreat, essentially reflecting real-time supply and demand of funds.

  3. The failure of the law of large numbers
    The traditional statistics 'law of large numbers' and 'central limit theorem' do not apply well in the cryptocurrency market. Factors such as small market size, susceptibility to manipulation by large players, and frequent policy changes lead to a non-normal price distribution, significantly reducing the reference value of historical data.

  4. The source of liquidity volatility
    The cryptocurrency market inherently lacks depth; a single large transaction can trigger massive price swings. Under limited liquidity, price stability becomes a false proposition, and volatility instead becomes the norm.

  5. The priority of risk control
    In the cryptocurrency market, the frequency of judging the correctness of trends is irrelevant.The efficiency of stopping losses when wrongis the key to survival. In extreme volatility, a single uncontrolled loss can wipe out the profits from dozens of correct judgments.

  6. The art of waiting
    Successful cryptocurrency traders spend 70% of their time 'waiting':

    • Waiting for the market to reveal itself, allowing various trends to fully expose;

    • Waiting for positive expected value to accumulate over time;

    • Waiting for extreme moments of liquidity exhaustion to capture opportunities for irrational pricing.

These rules reveal a truth: under the dual influence of capital scale and market characteristics, the 'gambling nature' of investment behavior is essentially a result of rational choice. Extreme operations by small funds are, in fact, a helpless move against the system's entropy increase; while the volatility characteristics of the cryptocurrency market amplify the brutality of this survival game.

BTC doubling may require holding firmly for 1-3 years to achieve that. Jumping from a rooftop takes only 8.8 seconds; this is the contract. To make money from contracts, you must first learn to lose.

Trading cryptocurrencies means repeatedly doing simple things, persistently using one method until it is mastered. Trading can be like other industries; practice makes perfect, allowing you to make every decision instinctively.

This year marks my seventh year in cryptocurrency trading. I entered with ten thousand, and now I support my family through trading! I can say that I've tried 80% of the methods and techniques in the market. If you want to treat trading as a second profession to support your family, sometimes listening more and observing can help you discover things outside your understanding and at least save you five years of detours!

Follow me @加密大师兄888 Many souls are lost on the crypto path, and only those with fate are ferried by the senior brother, recruiting disciples...