Does the rise and fall in the cryptocurrency market really scare people?
Yes, taking the classic example of Luna, you have 10,000 Luna, and when you went to sleep yesterday, it was worth 1 million USD. When you woke up, it had dropped to 700,000 USD. You might say, I've been in the crypto world for so long, a mere 30% pullback, and UST only depegged by 10%. I believe in Do Kwon, so I went to sleep with peace of mind. The next day, I woke up and it was down to 10,000 USD. At this point, you think it has already dropped 99%, it should have hit rock bottom, right? If I buy the dip now and it goes back to 10 USD, that’s a tenfold return. So, you sell everything and gather another 200,000 USD to buy 200,000 Luna. At this moment, you can't sleep; you're constantly watching the price, hoping it will go back up, but you can only watch the price drop from 1 to 0.1 all the way down to 0.000001 before it gets delisted. In the end, in just three days, your 1.2 million USD in assets shrank to just enough for a meal. You are completely devastated.
Aside from Luna, there are many differences between the cryptocurrency market and traditional financial markets:
1. 24/7 without rest
2. No price limits on rises or falls
3. Extremely low entry barriers
4. A large number of people abusing leverage
5. Altcoin price fluctuations are limitless
Especially the third, fourth, and fifth points together make it very normal to become rich one night and go bankrupt the next. Be cautious with leverage, everyone. You might think that 5x leverage is low, but you don't realize that there are days when the volatility exceeds 20% every year. Because of leverage, the more it falls, the harder it is to stop, ultimately leading to a chain of liquidations. Why did ETH fall to over 800 during that bear market? Isn’t it because the liquidation prices on-chain were clear, and there was capital available to scoop up the cheap assets?
Additionally, a friend of mine bought a coin called CDC Consumer Chain* for 0.4 USD each, investing 40,000 USD. Then:
It dropped to 0.3 USD, and he started averaging down.
It dropped to 0.2 USD, and he averaged down again.
It dropped to 0.1 USD, and he averaged down once more.
It dropped to 0.05 USD, and he averaged down again.
It dropped to 0.0005 USD, and he averaged down one more time.
It dropped to 0.000005 USD, and he averaged down once again.
The team behind this coin had long since run off, and now he is the largest holder of this coin.
