In the investment field, the slogans of "Investing to Get Rich" and "Picking Up Money at the Bottom" echo like a spell in every investor's ear. But today we are going to reveal a cruel mathematical truth - behind those exhilarating bottom-fishing stories lies a noose woven with numbers.
1. The terrifying arithmetic of loss recovery: Wealth consumption effect from a percentage perspective.
The first math lesson in the investment world often begins with "drawdown recovery":
Loss of 10%: Need to profit 11.1% to break even (100,000 → 90,000 → need to earn 10,000, 1/9 ≈ 11.1%).
Loss of 50%: Must double (100% increase) to return to the original position (100,000 → 50,000 → need to earn 50,000, 5/5=100%).
Loss of 90%: Requires an astonishing 900% increase (100,000 → 10,000 → need to earn 90,000, 9/1=900%).
This means: when assets plummet by 90%, it takes a tenfold increase from the bottom to return to the starting point. Most people only see "90% drop is very cheap," but ignore the abyss that needs to be crossed behind this number - it is not a simple "rebound," but a capital rebirth comparable to a miracle.
2. Psychological traps: A fatal illusion on the rebound path.
When assets finally begin to rise, the market weaves a cage with two voices:
Diamond hand believers: "Hold on! The bull market has just begun!" (implying there is still 10x room for growth).
Technical optimists: "Breaking through key resistance levels, a parabolic trend is about to start!" (using graphics to create fantasies of wealth).
But please calculate calmly: the "break-even line" in your eyes is just the "ninefold profit realization point" in others' eyes. When an asset drops from 1 yuan to 0.1 yuan and then rises back to 1 yuan, early bottom fishers have already gained 900% profit, while you barely escape losses - at this point, who is more likely to sell? Who is advocating for "long-term holding"?
3. The fatal blind spot of "discount from historical highs".
People are often attracted by the label "down 80% from historical highs," but forget to ask three soul-searching questions:
Demand question: Are users still using the product? Is there real market demand?
Case study: The metaverse concept coin $SAND dropped from $4.8 to $0.3, with daily active users down 73% year-on-year.
Team question: Is the founding team still continuously developing? Is the technology roadmap updated?
Data: After a crash, a certain public chain project's core developer loss rate reached 65%, and code submission volume dropped to 12% of its peak.
Attention question: Is the industry media still discussing it? Is community activity being maintained?
Reality: A certain DeFi protocol's Twitter engagement plummeted by 92%, and Google search index dropped to historical 1%.
A decline may be a pullback, or it may be the beginning of value destruction. Just like a boulder falling off a cliff, not every pause is called "bottoming out"; it may just be stuck halfway down the mountain.
4. Effective bottom fishing vs. ineffective bottom fishing: Three principles to discern true and false opportunities.
✅ Signals worth positioning:
Healthy trend: In a long-term upward channel, short-term pullbacks have not broken key support levels (such as the 200-day moving average).
Volume-price coordination: Reduced volume during declines for washout, significantly increased trading volume during rebounds (indicating main force intervention).
Solid fundamentals: Stable revenue growth, continuous increase in users, orderly technology iteration.
❌ Dangerous traps:
Zombie projects: Trading volume consistently below $10 million, daily active users below a thousand.
Crash continuation: Dropping over 90% from the peak, rebounding only to fall below previous lows again (forming a "death cross").
Emotion-driven: Buying solely due to market rumors or short-term hotspots, without substantive value support.
5. The three soul-searching questions before bottom fishing: Test your risk immunity.
Assuming another 50% drop: If the account net worth shrinks to 1/4 of the current value, is there still capital to average down? Will it affect quality of life?
Value test: If we strip away the speculative mentality of "bottom fishing," is the asset itself worth holding long-term?
Stop-loss bottom line: If the judgment is wrong, can you decisively exit when losses expand to XX%?
Investment master Howard Marks wrote in (cycles): "Bottom fishing is not about buying cheap, but about buying right." Real opportunities are never just a numbers game, but rather a precise judgment of value trends - just like distinguishing which saplings are temporarily buried in the snow during a snowstorm and which are already decayed branches.
