Don't believe the nonsense that 'one day in the cryptocurrency market is ten years in the real world'!
Trading is against human nature; traders cannot succeed in one go, but they can fail all at once.
After ten years in the cryptocurrency market, with countless lessons learned, as someone who has gone from a monthly salary of 3000 to earning 100,000 a month, I will share the most down-to-earth survival strategies in the cryptocurrency world with you—no need to stay up late watching the market, no need to understand technical analysis, and you don't even have to spend too much time. As long as you avoid 99% of the pitfalls that newcomers typically fall into, you can steadily earn money in the crypto world.
1. The power comparison between the market and traders is stark.
Compared to traders, the capital and time in the cryptocurrency market are unlimited, while a trader's capital, time, energy, and luck are limited, so the power comparison between traders and the market is stark. Traders can only achieve a certain advantage over the market in a limited, temporary, or specific aspect. Most of the time, the cryptocurrency market is non-linear, chaotic, and even unsuitable for trading, yet those non-professional traders spend most of their time trading, just like Don Quixote repeatedly charging at windmills, ultimately returning empty-handed or even injured.
That day, I was chatting with a friend, and I said: In this cryptocurrency frenzy, with various tokens emerging endlessly, there will definitely be investors betting on certain popular tracks, and there will also be people heavily investing, even leveraging, in those altcoins that seem to have unlimited potential at the time. When the project collapses, countless funds will inevitably vanish beneath the K-line.
2. The weaknesses of human nature.
'Trading is against human nature' is not entirely accurate. More precisely, it should be said that certain universal weaknesses of human nature increase the likelihood of failure in cryptocurrency trading. For example, greed, fear, loss aversion, self-protection, short-sightedness, laziness, impulsiveness, herding, and superstition of authority...
The topic of human nature is indeed quite broad. Based on my observations and the knowledge I gained during my studies in behavioral finance, I will make some analyses.
Laziness. Before buying a particular cryptocurrency, one must understand everything possible about the project, the project team, and the competitors, as well as the current development status and future prospects of the project. Laziness leads us to not conduct thorough and rational investigation and research before buying cryptocurrencies, ignoring public information such as the project's white paper and team background. We take time to carefully choose a meal delivery for dozens of yuan, comparing options to maximize coupon usage, yet we decide to invest tens of thousands in cryptocurrencies in just a second. Laziness also prevents us from learning relevant knowledge. In the information age, most of the trading concepts and knowledge can be found online, yet many rely solely on passion when trading, following blindly the name of a cryptocurrency from someone who has no trading experience.
Herding. In behavioral finance, it's called 'herding'. As Lu Xun said, 'When favorable signs appear, they gather; when unfavorable signs appear, they flee,' which accurately reflects reality. Humans are social animals, yet trading often requires independent and solitary thinking. Herd behavior may be rooted in human genetic selection; in ancient times, once abandoned by a tribe, an individual could not withstand the harsh external environment. People tend to abandon the information they hold and follow others, even when rational analysis suggests they should act entirely differently.
The root of herd behavior is explained by behavioral finance as regret-aversion bias, which means that when people make poor decisions, they experience regret. If the failure is due to a new decision they made, the feeling of regret is even stronger. This could also lead to a superstition of authority; when investors believe they are following mainstream or authoritative opinions, they think that even if they fail, it's not their fault, leading to blind following. Especially when the market heats up during a bull market, people are more inclined to herd behavior. When those around them invest in cryptocurrencies and make money, the anxiety of not participating grows. In fact, the more frenzied the market, the more precious it is to maintain rationality. I once said, 'Constantly cultivate your ability to think independently, continually overcome personal emotional biases. Bull markets are rare; may the bull market take away money, not adrenaline and lessons.'
Greed and fear. Most people die from greed. Recently, a well-known cryptocurrency influencer experienced a margin call after heavily investing in a popular token. The logic seemed solid: the project was hot, the team background was strong, and the market cap wasn't high. Looking back over the years, it had significant gains and seemed full of potential. However, the drop of 50% from its peak caused even experienced investors to face liquidation. Since last year, whether some mainstream tokens or popular altcoins, holders have likely suffered heavy losses. I do not mean to take advantage of others' misfortunes; many of these investors have far more investment experience or professional knowledge than I do and may have gained multiple times in previous years. But as mentioned earlier, even if one is optimistic, holding a single token with high leverage is indeed overly aggressive.
Due to the herd effect, the cryptocurrency market experiences excessive phenomena during both overheated and overly cold periods. The ideal strategy for most people is to avoid participation in a 'bear market' or to minimally engage, or to build positions in cryptocurrencies that have been unjustly beaten down to reasonable levels over the long term and in phases, while cashing out during the bubble of a 'bull market'. However, in practice, many people enter the market during the collective frenzy at the peak of a 'bull market' and then stand by at high prices for years. At the most pessimistic moment at the end of a 'bear market', few dare to go against the trend and practice 'being greedy when others are fearful'.
Regarding traders' behavioral biases, many have been mentioned in behavioral finance knowledge, and some of these biases have also been discussed by other respondents, so I will not elaborate further here. I also recommend that everyone self-study behavioral finance knowledge; I find it very interesting and it can guide and remind one to continuously reflect and avoid similar mistakes.
3. A qualified cryptocurrency trader should be continuously self-disciplined and constantly learning.
In fact, a qualified cryptocurrency trader should be strictly self-disciplined, constantly learning and breaking through personal limits. If one wants to learn professional knowledge related to cryptocurrency investment to strengthen themselves, they can choose to take relevant courses, such as economics to help judge macro conditions, project analysis to understand the project value behind cryptocurrencies, technical analysis to learn how to judge market trends, asset allocation to reasonably distribute funds, and behavioral finance to understand behavioral biases and their impact on trading.
If you currently feel helpless and confused about trading and want to learn more about the cryptocurrency world and get firsthand cutting-edge information, click on my profile and follow me, so you won’t get lost! Clear market observations give you confidence in your trades. Steady profits are far more practical than fantasizing about sudden wealth.