The current pace is: the Federal Reserve remains still, waiting for Trump to make the first move. Because if the Fed lowers rates first and Trump doesn't cooperate, it’s equivalent to a pointless reduction; if Trump acts first, the Fed has grounds to step in as the 'white knight'—cutting rates, expanding the balance sheet, stabilizing the market, following a series of processes.
It's worth mentioning that there are whispers about the potential easing of cryptocurrency regulations and the legislative process for stablecoins, which is already considered one of the rare 'signals' from the Federal Reserve, although they verbally express disinterest, their actions have already begun to acknowledge it.
How does the market interpret this? Short-term bearish, long-term bullish. The impending volatility cannot be avoided, but the eye of the storm often presents opportunities. The real market situation does not occur at the moment the Federal Reserve speaks, but rather in the moments before and after their turns. The biggest problem in the market currently is 'lack of clarity,' which causes money to shrink back. However, once the direction becomes clear, those who are well-prepared will get the first bite. So now, it’s about being calm, focusing on inflation, watching tariffs, and adhering to policies. Although Powell talks tough, he does not act slowly, and the real good show is yet to come!
The market may need to explore lower levels again. Ethereum just hit a new high and then turned down, completely as expected. This round of the market is quite unusual; Bitcoin is rising alone while altcoins remain stagnant at the bottom. If you are still using the strategies from the last bull market, you are likely having a tough time. The main forces are actually suppressing altcoins, making it unbearable for retail traders to relinquish their chips. Bitcoin's market control is already high, and it can pull up whenever it wants, but it needs to coordinate with the rhythm of altcoins. So overall, this wave of market conditions is unlikely to experience a crazy surge.
For instance, on April 1, Bitcoin was around 85,000; I suggested reducing positions and waiting for a new low to re-enter. As it turned out, on April 7, it really did break new lows. At that time, our strategy was clear: directly bottom fish without fear. I believed the market would dip again and then quickly rebound upwards. Because if it doesn’t rise, it won’t trigger the 'fear of missing out' sentiment, which means external funds won’t flow in. It’s important to focus on the 'fear and greed index,' as only when it approaches around 75 can FOMO truly explode.
The seven ways to 'die' from trading cryptocurrencies! Be alert in a bull market!
The virtual currency bubble has confused countless people, leading them to invest without hesitation. Some even choose to quit their jobs and invest all their savings into cryptocurrency trading, documenting their trading diaries online.
It is certain that those who start trading cryptocurrencies usually find it easy to make profits, and this quick profit feeling becomes addictive, further fueling their greed as they hope to acquire more wealth. However, even if the virtual currency bubble does not burst, speculators face significant risk of loss. Next, let’s take a look at the seven most common 'ways to die' for cryptocurrency traders!
The first type: died from contrarian bottom fishing.
The sharp drop in virtual currency prices often becomes a litmus test for traders' greed. Some traders eagerly see the market downturn and impatiently choose to bottom fish against the trend, but they fail to realize that the so-called bottom is not the end but a bottomless pit.
This pit may hide more uncertainties and risks beneath, like an abyss without a bottom; once fallen in, bottom fishers may find themselves trapped in endless dilemmas, buying repeatedly and getting stuck each time.
It can be said that contrarian bottom fishing is one of the main reasons many cryptocurrency traders incur losses. In a market with a clear downward trend, some traders mistakenly believe that virtual currency prices have fallen to an attractive level for new speculators, thus expecting a rebound.
However, the reality often is that the more one bottom fishes, the more one loses until overwhelmed, not only erasing previous profits but also completely depleting the principal.
Taking the volatility of Bitcoin in 2013 as an example, it soared from tens of dollars to about 1,000 dollars, then plummeted to over 100 dollars. This rollercoaster market caused countless traders to go bankrupt.
The strategy of bottom fishing can only succeed in a consolidating or retracing market, while at other times, such behavior is usually a shortcut to a dead end. This underscores the importance of following market trends; correct trend-following can lead to multiple successes during fluctuations, while contrarian trading can lead to irretrievable losses, even if done correctly many times.
The second type: died from leveraging.
In the virtual currency bubble, some traders have tasted sweetness and are eager to increase their investments to earn more profits. However, due to not having extra funds, they start considering borrowing money or financing to trade cryptocurrencies, thereby increasing their leverage.
Currently, the common leverage ratio is 5 to 10 times, meaning that traders can borrow more funds to invest with limited capital. For instance, with 5 times leverage, if the principal is 300,000 yuan, the trader can borrow 1,200,000 yuan and then buy virtual currencies at full margin. Whether the price of virtual currency rises or falls, profits or losses will be magnified by 5 times. Specifically, if the price of virtual currency rises by 10%, the trader's profit would be 50%; conversely, losses will also be magnified 5 times. This means that as soon as a trader's loss reaches 20% of their principal, a liquidation will occur, and both the principal and borrowed funds will be wiped out. Typically, traders do not start with high leverage but begin with a lower leverage ratio. However, repeatedly making profits will cause them to gradually relax their risk awareness, blindly believing that virtual currencies will only rise and not fall, ultimately leading to total loss. For example, from 2017 to 2018, Bitcoin continuously broke through significant price barriers, reaching a peak of 18,000 dollars, leading many to increase their leverage during this process, hoping Bitcoin would further rise to 30,000 dollars.
However, Bitcoin eventually fell from 18,000 dollars to about 10,000 dollars, leading leveraged traders to face liquidation and suffer heavy losses. In short, such behavior is seeing some traders getting rich overnight and then chasing short-term profits, only to bet on the wrong direction.
The third type: died from K-line charts.
Virtual currency trading employs K-line charts. Although this knowledge originates from the stock and futures markets, K-line charts for virtual currencies cannot be directly applied using stock and futures experiences. Due to various uncertainties, relying solely on charts for cryptocurrency trading may lead to significant losses.
For example, in 2013 and 2017, the Chinese government cracked down on virtual currencies, leading to a sharp drop in prices; in 2017, the South Korean government also took action against virtual currencies, similarly resulting in a significant price decline.
In short, virtual currencies cannot gain formal recognition from central banks worldwide, and their lack of legal identity makes them susceptible to various policy shocks. These shocks cannot be predicted in advance by K-line charts, making it difficult to avoid risks. Furthermore, illegal activities such as market manipulation exist in virtual currency trading.
In regulated stock and futures markets, such behavior is explicitly prohibited and regulated. However, virtual currency trading exists in a relatively wild era, with all kinds of monsters rampant. The role of K-line charts in this environment is relatively minimal, and they may even become tools used by these monsters to bait traders.
The fourth type: died from buying high and selling low.
Due to the instability of K-line charts and the lack of other more reliable buying and selling methods, the vast majority of cryptocurrency traders tend to adopt a strategy of buying high and selling low. It is well-known that this strategy may yield substantial profits in the short term, but in the long run, the probability of losses is greater.
In the stock market, the probability of long-term profitability is about 10%, including some value investors. In the futures market, the probability drops to 1%. In comparison, trading virtual currencies is even more challenging. Although many current cryptocurrency traders claim to have made some profits, whether the proportion of those who can sustain profits will exceed 1‰ is a significant question. Most traders may ultimately incur losses in the market.
Additionally, while some people realize the instability of buying high and selling low and wish to hold virtual currencies long-term, human nature is inherently driven by greed and fear. Fear of falling prices and greed for rising prices leads to a disconnection between actual operations and rational expectations.
Only a very few can overcome this nature and conquer greed and fear. However, most people find themselves trapped in a cycle of repeating their mistakes, much like a goldfish with a 7-second memory, making it difficult to truly change.
The fifth type: died from not cutting losses.
For some cryptocurrency traders, they firmly believe that regardless of how sharply virtual currency prices drop, they will eventually rebound. They hold onto the belief that they will not sell, even if it leads to their demise, maintaining calm in the face of any crash, convinced that miracles always exist.
However, for certain virtual currencies, refusing to sell even at a loss may indeed lead to severe losses. Take Zhonghua coin as an example; it once fell from a peak of 35 yuan to 0.5 yuan, subsequently collapsing and being investigated for pyramid scheme activities, resulting in 260 million yuan evaporating. This can be said to be one of the most tragic ways for traders to 'die.'
The vulnerable cryptocurrency traders can mainly be divided into two types: one type is the newcomers who, due to their ignorance, are unaware of the brutal nature of this 'death' and unwittingly exhaust their funds; the other type is the veterans who have been in the cryptocurrency circle for some time and have experienced multiple trades, overall achieving some profits.
Many have become accustomed to the extreme fluctuations of virtual currencies, even viewing crashes as opportunities, growing bolder without realizing that the vast array of virtual currencies means one misstep could lead to liquidation or collapse. Many tokens have experienced liquidation due to policy crackdowns, causing previous gains to plummet.
The sixth type: died from high-frequency trading.
Many cryptocurrency traders are keen on high-frequency trading, frequently buying and selling to pursue considerable profits from price differences. However, the end result is often sustained losses. Why does this happen? Theoretically, if each trade earns 1%, as long as one ensures a successful trade once a day, the daily return rate would be 1%.
Within a year, this could yield a profit of 365% or even more, and if considering compound interest, the figure is even more astonishing. However, in reality, achieving this goal of successful trading once a day seems simple, yet the actual operation is an extremely difficult task.
This is because virtual currency prices are extremely volatile, making accurate predictions for short-term trading very challenging, and high-frequency trading leads to decreased success rates. Lower success rates lead to more losses, and an increase in losses affects traders' mindsets; a deteriorating mindset further leads to more and larger losses, creating a vicious cycle.
For example, imagine the consequences of frequently changing lanes on a highway; almost everyone knows that such behavior will inevitably lead to trouble. High-frequency trading of virtual currencies is similar. Moreover, high-frequency trading can lead to more transaction fees, and the actual money earned may not cover these fees, which is a common issue.
The seventh type: died from blindly following the crowd.
Many cryptocurrency traders lack a deep understanding of virtual currencies; they rush in just because they’ve heard about the potential for profit. Upon engagement, they often blindly worship the statements of certain influential figures, such as the belief that Bitcoin will eventually become fiat currency, that the quantity of virtual currencies is limited and thus won’t devalue, and that the future of the 21st century belongs to virtual currencies. This viewpoint is widely prevalent on social media platforms like Weibo, Xueqiu, and Zhihu, leading to the emergence of some 'spiritual leaders' who promote cryptocurrency trading.
Many believe it to be true, leading some to resign from their jobs to trade cryptocurrencies, and some even sell their homes and borrow money to invest. Yet, the end result is often no profits made, and their jobs and careers wasted.
Take the well-known figure in the cryptocurrency circle, Li Xiaolai, as an example. He once promoted the token EOS, helping it raise 185 million dollars in just five days. However, later EOS issued a statement clarifying its relationship with Li Xiaolai, denying him as a co-founder or director of the project, which was shocking. Many virtual currencies seek out influential figures to promote themselves to enhance their perceived value, leading traders to mistakenly believe that the virtual currency is technically solid, has vast prospects, and will experience a surge. The blind faith in fictitious endorsements and the supposed bright future of emerging virtual currencies is usually just the prelude to death.
I have navigated the market for many years, well aware of the opportunities and traps within. If your investments are not going smoothly and you feel resentful about losses, leave a 111 in the comments! I will share insights.
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