I. The Essence of Volatility in the Cryptocurrency Market
1. Historical Perspective
The 519 Incident (May 19, 2021): China's exit policy triggered panic, Bitcoin plummeted 30% in a single day, Ethereum was halved, and altcoins generally fell over 50%, marking a historically significant black swan event. In contrast, the current declines (BTC -2%, ETH -8%) are merely normal fluctuations.
Long-Term Patterns: The crypto market is known for its "boom and bust" cycles, with 20%-30% daily fluctuations being common, necessitating the use of historical data to build awareness and avoid being misled by short-term volatility.
2. The Destructive Power of a Volatile Market
In March 2023, BTC traded sideways between $55,000 and $74,000 for several months, while the range of $86,000 to $104,000 in 2024 led to numerous high-leverage contract liquidations. Sideways markets are particularly deadly for contract players due to the erosion of time costs and funding rates, which far exceed spot trading.
II. The Essence of Risk in Contract Trading
1. Case Warnings
Cool Xie: Became wealthy by 50 million through high-frequency contracts at 17, but ended up with a debt of 10 million due to continuous all-in and a lack of understanding of profit-taking. Reflects the 'casino effect' of contracts—profits are like joy beans, mere numbers until realized.
Semi-Wood Summer: Made tens of millions in the bull market of 2021, but lost all profits in the bear market of 2022. This proves that relying on a single market cycle or strategy is difficult to sustain.
2. Core Differences Between Contracts and Spot
Leverage Amplifies Risk: Contracts are essentially zero-sum games, where exchanges, market makers, and players bet against each other, with mechanisms like stop-loss and liquidation inherently unfavorable to retail investors.
Time Cost: Spot trading can weather bull and bear markets, while contracts are restricted by delivery periods and funding rates, resulting in extremely high long-term holding costs.
III. Rational Investment Strategy Recommendations
1. Risk Precedence Principle
Position Management: The recommendation for spot allocation is to hold mainstream assets (BTC/ETH) at no less than 70%, with altcoins limited to small positions for excess returns.
Stop-Loss Discipline: Set a maximum drawdown threshold (e.g., a forced stop-loss at -20% of principal) to avoid emotional holding of positions.
2. Pathway to Profit Realization
Tiered Profit Taking: After achieving targets, cash out in batches (e.g., withdraw 50% of $100,000 profit for property purchase, reinvest the remaining 50%).
Cash Flow Mindset: Separate investments from daily life, converting profits into stable assets (fiat currency, gold, real estate) to avoid greed induced by inflated account numbers.
3. Long-Term Survival Principles
Counterintuitive Operations: Gradually reduce positions during market euphoria and accumulate in batches during market despair (referencing Bitcoin's 200-week moving average historical support).
Reject FOMO: Do not chase 'hundredfold coins' or 'mythical thousandfold returns', focus on opportunities within your knowledge scope (such as Bitcoin halving cycles, ETH ecosystem upgrades).
IV. Psychological Construction for Newcomers
Expectation Management: Accept that volatility is the norm in the crypto space, invest with idle funds, and avoid impacting quality of life.
Learning Curve: Prioritize understanding the underlying logic of blockchain (such as decentralization, smart contracts) before studying trading techniques.
Conclusion
The cryptocurrency market is a magnifier of human nature and a risk education ground. Living longer is more important than earning quickly—preserving capital to wait for major cycle opportunities is far more valuable than short-term gambling. Remember: the bull market is a stage for spot investors to realize profits, but a graveyard for contract players. Rational investment is key to long-term success.
