Let's have some fun with clickbait titles. I started this post mainly because I was bored and wanted to chat about some risk management in the cryptocurrency world and share some investment thoughts (this does not constitute investment advice, does not constitute investment advice, does not constitute investment advice).
Many of my friends who follow me probably do so because I posted a screenshot of my current month of complete victories during the New Year. As a newbie in trading contracts, I turned 10,000 into 20,000 to 30,000 in a month with low risk. At that time, everyone probably wanted to learn something from me, but unfortunately, I was purely frustrated after being 'cut' in a spot trade and started trading contracts to short hedge (laughs). There was really no technical skill involved. Once I entered the short side, the market during that New Year period was like picking up money for shorts. Looking back now, my short-lived victory mainly came from the following aspects:
At that time, I was quite cautious when shorting. Before placing a bet, I would check the fundamentals of some coins to assess whether they were overvalued from a developer's perspective. Therefore, I maintained daily profitability. (As a programmer, being overly superstitious about technical strength is also one of the main reasons for the subsequent significant losses.)
At that time, luck was on my side. BTC was sucking blood from altcoins, and most altcoins were shit; it was easy to short them, and I didn't encounter market makers much.
Position control is quite good (cautious). Don't believe in the so-called nonsense about trading with 1/10 of your position. A 1/10 position is actually already quite large. Unless you are right most of the time, or strictly stop-loss, it is unlikely to execute well; most beginners can't achieve this. In fact, I recommend that if you short, try to keep the margin ratio below 5% (using a cross margin model). This way, even if a coin crashes, such as suddenly doubling, there is still a chance to cover, but it's best to set a stop-loss. However, many short orders are intentionally spiked to hit your stop-loss, and for those, you either have to endure or short with low leverage.
After the New Year, I went back to prepare for work. Indeed, earning 30,000 a month is higher than my salary, but not by much. I know it can't be sustained, so I am very aware that I still need to keep working. Now, I have easily lost about 3/4 of my profits.
Meme coins. Maybe even the market makers took a break during the New Year, and after the New Year, I suffered a triple hit from IP, BERA, and KAITO. IP was the biggest loss, losing 7700; BERA lost about 1000, and KAITO was profitable, but following the market makers' rhythm and doing high-frequency trading every minute exhausted me. Recently, I was also liquidated by TUT for 4000 U. At that time, I had almost stopped trading contracts and wasn't paying attention to coin news. I had set a limit order when I was making waves, but I didn't close it. As a result, that night TUT shot up from 0.01 to 0.04, directly liquidating me. Since then, I tend to avoid coins with trailing zeros as their price is too low, and the market maker's cost of pushing up is very low. Chasing those several coins in the short position basically meant staying in front of the computer all night, which my already weak body couldn't handle. From then on, I felt like I was out of breath, and every coin looked like IP, which scared me.
ETH. Yes, as a programmer, I was overly superstitious about technical strength. I used to firmly believe in ETH's bullish potential because technical strength is everything. On February 3rd, during the first spike, I entered about 10 minutes before the spike, buying in around 2800. After entering, I was stuck due to the Bybit account being hacked for a few days because they bought ETH and I almost got unstuck. I was thinking about closing my position after getting unstuck, but the next day it plummeted, resulting in a loss of 10,000. As for IP, I genuinely feel that it's just a VC coin. Does intellectual property need to be on-chain? (Let alone the fact that people in the Celestial Empire have little awareness of copyright.) The situation with PARTI recently was similar; I thought its technology and business prospects were good, but it plummeted to the point where no one recognized it. The market only believes in price increases; it does not trust technology 😊.
Some hindsight experiences: try to do fewer meme coins, especially those with high funding fees. It's the most painful to trade against the trend while also paying funding fees. The best approach is to provide less liquidity to meme coins; they are not afraid of you taking a small bite out of the waves.
The summary of the contract part is almost done. Next, let's talk about some hedging measures, which might only be suitable for someone like me who has around tens of thousands of U in assets in web3. If you're not interested, you can skip this~
First is the control of the fund pool for contract accounts. The fund pool should ideally only hold an amount that I am comfortable operating with, and then I can directly withdraw the daily profits to put into Binance's financial products, developing a mindset similar to withdrawing funds. On one hand, it avoids playing like a game once profits are long-term, and on the other hand, it retains some seed capital. For me, I have gradually handed over contract trading to my trading bot, but I won't allocate too much capital to it. After all, before I started using the bot, during debugging, it had lost a lot. Although it seems that the modifications I've made are effective, the market changes rapidly, and no one can be sure. My plan is to extract 50% of the profits weekly if there is a profit, leaving the rest in the account to continue growing.
Risk-free arbitrage. So where to put the profit funds? First is Binance's financial products, but now Binance is too stingy; the interest is not even worth withdrawing and putting in a bank. You can look at the staking financial products in some web3 wallets; the interest rates will be higher. Try to choose well-known ones to avoid risks. For me, I am currently using Gate; the several financial products inside offer extra incentives for amounts under 1000 U. Calculating the annualized yield is about 6-8%. I have two accounts each investing 1000 U, totaling about 15,000, which is more convenient than looking for staking on-chain.
High-risk investment. Everyone comes to the cryptocurrency world to seek greater returns, and I am no exception. I have already experienced contracts and have dealt with airdrops before, but I didn't like it very much; it was too exhausting, and the returns were not as good as the few bucks I make from coding. Therefore, I turned to DeFi. Currently, I have put about 2800 U into berapaw for mining. It's called mining, but in reality, it's about providing liquidity and then engaging in staking. I refer to this money as a risk investment fund because it's overly speculative, with annualized interest rates between 500%-1000%. I will run away at any sign of trouble. I started mining on April 10th, and combined with the increase in BERA, I have already earned 100 BERA in 5 days. Watching the mining process is a bit like chasing after a meme coin; my current expectation is for BERACHAIN to last a bit longer so that I can mine for a few more months. However, this type of thing is indeed a bit difficult to understand. I started trying to do LP around the Qingming Festival, and only on the 10th did I begin to enter some high-risk pools. The entire process involved many things that I was learning as I went along, while also reading their documentation to understand.
Finally, I hope everyone never gets liquidated. Even if you do, there is still a way to make a comeback.