I have seen too many scripts of overnight wealth in the crypto space, but only two types of people can truly change their fate. The crypto space indeed has open windows, but 99% of people climb the wrong ladder. You must have seen stories like this: a college student turns 5,000 yuan into tens of millions, or an unemployed uncle makes a comeback through DeFi. But no one tells you that behind these survivors are three fatal rules:
1. Only with money that you won't miss if it goes to zero can you gamble for a hundredfold return. The true underdogs I know started with initial capital not exceeding 30% of their monthly income. Conversely, those who bet their houses or cars end up unable to pay for gas fees during a crash and watch their NFTs crash down.
2. Those doing dollar-cost averaging in a bear market are now in Sanya, while those chasing prices in a bull market are still delivering takeout. In 2020, I created a group called "Bear Market National Currency Party," where we only discussed the market every Thursday. As a result, when I opened the group last year, five out of seven members had retired early. Meanwhile, in another group filled with "technical analysts" who analyzed K-lines all day, 80% of the members had exploded their contracts three times or more.
3. It's not code that changes fate, it's the information gap. During last year's lockdown in Shanghai, a lady at the vegetable market made more profit from exchanging USDT for groceries for her neighbors than selling three years' worth of cabbage. She didn't understand TVL+ or hash rate+, but she knew that the wealthy ladies in Jing'an District were afraid of starving and were willing to pay 20% more to buy groceries with stablecoins. The three gates of life and death for ordinary people.
1. Cognitive tax (the IQ tax collected from every story of sudden wealth). "Bitcoin will hit $100,000" and "the state will soon ban it" essentially evoke the same FOMO emotion. I have seen the most unfortunate brother, who in 2021 believed that "Filecoin would replace Alibaba Cloud" and exchanged his wedding house down payment for FIL, and now he is being chased by his fiancée every day.
2. Liquidity trap. Last year, when a certain animal coin surged, a group friend made enough to cover a down payment at the peak. Then the exchange suddenly "maintained" for eight hours, and after the price halved, he couldn't even buy toilet paper with his account balance. The harsh truth in the crypto space: Paper wealth only counts as money when it can be withdrawn.
3. Survivor's curse. One of my early apprentices made his first bucket of gold on Dogecoin, and now he scoffs at everyone, saying, "Technical analysis is all crap." As a result, he lost all his five years of profit in just three days trading AI in Luna coin last year. The most frightening aspect of the crypto world is not losing everything, but that those who made quick money can no longer appreciate grounded approaches. Risk warning in the crypto space: Risk is eternal. Someone once asked Livermore: With your rich experience, how can you still do such foolish things?
Livermore said: It's simple; I am human and have human weaknesses. Like all speculators, sometimes my impatience clouds my judgment. The crypto space, in my view, is a place where one competes against a market that can even be negative; your profits come from others' losses, and your happiness is built on others' pain. This is a battlefield against human nature. Why is it so difficult to make money in the crypto space? It's hard because it is challenging for humans to break through the shackles of their own nature, which is akin to the five poisons of Buddhism: greed, hatred, ignorance, arrogance, and doubt. The existence of these five poisons allows us to profit in a zero-sum game; if all coins were correctly priced, it would mean that every participant lacks humanity. Therefore, the market would have no arbitrage space, and there would be no speculative market. True speculative masters are not only adept at mastering their own human nature but also skilled at utilizing the human nature of the masses. Therefore, cultivating one's character is crucial for market operations; for all participants, the crypto space is the best testing ground and training ground for human nature. Each of us will expose our human flaws to some extent during investment trading. Below, I list the five most common personality disorders leading to investment failure for self-examination.
1. Gambler type. Win and you get a model from a club; lose and you have to work in the fields. Each of us is a gambler; gambling is human nature. Throughout human history, despite significant suppression, the strong demand for gambling has never changed. Although the crypto space is different from a casino, it must be admitted that most people's speculative methods in the crypto world are essentially similar to gambling. Losses often arise from initial winnings; after unexpectedly gaining profits, gamblers become overly confident. After experiencing a setback, gamblers attempt to recoup their losses, and in such situations, their bets grow larger, desperate to retrieve their initial capital. Wanting to win more, trying to recoup losses, being stuck and hoping for a rebound, fearing missing out, chasing prices, killing dips, etc., all reflect a gambler's mentality. They preset a virtual imagined target in their minds, completely ignoring current market trends and operating based on their greed, fear, and hopes. Why is it sometimes that fortune-telling is so accurate? Because it is habits, behavioral inertia, and karma that determine what ordinary people refer to as "destiny." Karma shapes the cause of an event and also forms its effect; karma is the process from cause to effect. The moment one enters the market with a gambler's mindset (cause), one is already bound by the web of karma, leading to a tragic outcome (effect). Stubborn mule type.
2. Hold on; the team is working. The most typical behavior of a stubborn mule is to hold on stubbornly, especially in the face of massive losses during a significant drop. Minor fear causes panic, while major fear leads to paralysis; the greater the drop, the more they hold on. For example, one of my group friends faced a massive drop but did not stop loss in time, resulting in a liquidation of assets worth millions. I was curious and asked why he didn't stop loss in time; he said that after seeing the massive loss, his mind went blank, and he was completely frozen. People have a much stronger emotional reaction to results caused by taking action than to results caused by inaction. Therefore, people often choose "not to take action" out of fear of regret. What if I sell, and it rebounds? Wouldn't I regret it even more? So they stubbornly hold on. Another situation is that position size influences the brain, as if falling in love with the project. After buying a certain coin, they automatically block out negative news about the project and changes in market trends. They refuse to listen to any advice, selectively searching for information to validate their so-called correctness and truth. Does the market fear a mule's temper? The main players love these stubborn mules.
3. Get-rich-quick type. It is undeniable that the vast majority of people enter the crypto space attracted by wealth effects, including myself. There is nothing wrong with getting rich; who doesn't want to achieve a class leap through investment? What truly harms is the fantasy of wanting to change fate through sudden wealth, as market returns do not come from mere imagination. Overemphasizing money itself makes it hard to stop losses when losing, and even unable to hold on when making profits. Those with a get-rich-quick mentality often exhibit three characteristics: In terms of coin selection, they tend to favor low-market-cap altcoins because the market generally believes that small coins have more explosive potential. However, the reality is that explosive coins are extremely rare; 99% of coins, compared to Bitcoin, are on a continuous downward trend. In terms of risk control, those with a get-rich-quick mentality often have small principal amounts, making it impossible to discuss diversification and risk dispersion. They frequently buy in with all their capital, greatly affecting their investment mentality. A slight decline in net value creates significant psychological pressure; the consequence is frequent trading, akin to a fan spinning back and forth, becoming a fat sheep for exchanges. In terms of profit-taking, the concept of taking profits is nearly nonexistent; they think, "Just a little more, then I'll sell," and ultimately, they can't escape at critical moments. This is also why many who became wealthy during the 2017 bull market fell back to the bottom, or even worse. Greed is endless; greed is akin to poverty, and greed is akin to burning.
4. Zhao Kuo type. Knowing so much, yet still losing money. After losing money, most people turn to learning and improving their understanding, reading books, and enrolling in courses. They learn a little more each day but often express lofty opinions in forums, while secretly suffering great losses. Why? Because they mistakenly believe that "analysis = prediction = trading." However, analysis and trading are completely different. Analysts adhere to the philosophy of making every prediction as correct as possible and like to exaggerate analytical skills; they belong to the theoretical school. The representatives of the trading school, traders never predict future trends; they focus on studying the distribution characteristics of prices to establish orderly trading rules from a chaotic market. Investing is different from pure theoretical research; the market is the market, just like a battlefield. Many people can analyze but cannot trade. In simple terms, their trading systems are vague; they see trends but do not know how to buy or sell, and even fail to control the most basic psychological fluctuations. "Those who can talk cannot do, those who can do cannot talk" probably refers to this reason. Do not become an analyst, but strive to be a trader. Bottom-fishing rule: When a strong coin falls for nine consecutive days at a high position, this is likely an excellent bottom-fishing signal. At this time, do not hesitate, act decisively. Such consecutive declines often yield real investment opportunities, known as golden pits. In the crypto space, significant corrections often present good opportunities to acquire low-priced chips; seizing such opportunities lays the foundation for subsequent wealth growth. Profit-taking rule: If the coin held rises for two consecutive days, one must consider reducing positions to lock in profits. The crypto market is unpredictable; there is no myth of forever rising prices. Timely taking profits is the most practical approach. Avoid missing the best profit-taking opportunity due to greed, leading to profit loss. Surge signal: When a coin experiences a 7% increase, this is merely the beginning of the trend. Under normal circumstances, the coin will continue to surge the next day due to inertia. Therefore, investors should closely monitor the market and avoid rushing to exit. Be patient and wait for the price to rise further to obtain greater profits. Trend password: For those coins with long-term upward potential, the end of a pullback is the best entry point. In crypto investing, one must refuse to blindly chase prices up or down. Patiently wait for the market to pull back adequately and enter in line with the trend, much like waiting for the wind to come, to easily catch the ride of wealth growth. Trend change warning: If a coin's price remains flat for three days, further observation is needed. If it continues for six days without breaking through, investors should decisively choose to change positions and not cling to the battle. A prolonged flat period that cannot break through often indicates that a market change may be imminent; timely adjusting investment direction can effectively avoid risks. Stop-loss iron rule: If the coin bought does not recover costs the next day, one should immediately liquidate their position. In crypto investing, stop-loss must be decisive; once an investment direction is found to be wrong, one must quickly cut losses. Hesitation often leads to greater losses; strictly implementing stop-loss strategies is essential to preserve strength in the market. Continuous increase law: When a coin rises for three consecutive days, it often signals a possible five-day increase to follow, on the fifth day, investors should take profit. In the crypto space, knowing when to sell is key to successful investing. Precisely grasping the timing of selling can maximize profits. Volume-price scripture: When a coin breaks out with increased volume at a low point, this is a clear entry signal. Increased transaction volume indicates active market participation; prices are expected to rise continuously. Conversely, if there is increased volume but stagnant prices at a high point, this is a strong signal to escape the peak; at this time, investors should exit decisively to avoid falling into a price decline trap. Moving average strategy: In technical analysis, the 3-day line can be used to judge short-term trends, the 30-day line assists in observing mid-term trends, the 80-day line is often related to major upward waves, and the 120-day line can serve as a reference for long-term investments. Investors should choose coins with upward-trending moving averages for investment, follow the trend for operations, achieving steady profits while avoiding fatigue and risks from frequent operations. Counterattack mindset: Even with a small amount of capital, one can achieve considerable returns in the crypto space. The key is to reject the interference of FOMO (fear of missing out) emotions and strictly adhere to trading discipline. Persistently learning and practicing daily allows oneself to make 1% progress in investment knowledge and skills, creating a miracle of wealth growth through the power of compound interest.
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