Financial freedom at 38! Entered the crypto world at 25, earned 8 digits in 10 years.
Blood and tears warning: 99% of people fail due to 'mentality', not technology!
'At 25, I entered the crypto world with all my savings of 50,000; at 38, I made enough trading to spend a lifetime— assets over 10 million. No team,
No insider information, and even have never worked a day—now I wake up naturally every day, walk the dog, drink tea, watch K-lines, and have no worries? Nonexistent.
But if you think this is a 'feel-good article', you can scroll past it now.
The truth I want to tell may send chills down the spines of 80% of people in the crypto world.
Crypto pitfall avoidance guide: 3 types of deadly risks (unlimited volatility + contract traps + scams leading to zero), use discipline and filtering to survive through bull and bear markets.
After spending a long time in the crypto world, you will find: making money is hard, staying alive is harder. 70% of liquidations stem from extreme market conditions, 90% of newcomers fall victim to the gambler's mentality, and over 2,000 scam projects each year leave investors with nothing.
Today, I will dissect the three deadliest risks in the crypto world, from case studies to coping strategies; each point hides the core logic of 'survival'— understand these, and you can avoid 90% of loss traps.
1. Market volatility risk: extreme conditions are 'harvesters', controlling positions and stop-losses are 'amulets'.
The 24-hour continuous trading mechanism of cryptocurrencies makes volatility the norm— daily price fluctuations over 20% are common, and in March 2024, Bitcoin even plummeted 35% in a single day, instantly liquidating countless leveraged accounts. This 'no limit on price fluctuations' characteristic makes 'volatility risk' the number one killer in the crypto world, with over 70% of liquidations stemming from this.
The essence of risk: volatility has no upper limit, leverage is an amplifier.
The 2022 LUNA coin zeroing incident still terrifies people: it dropped from $119 to $0.0001 in just 7 days, countless investors who added 10x or 20x leverage exploded their positions in the fantasy of 'bottom fishing' and 'holding on', with some even owing money to the exchanges. This is the terrifying aspect of volatility risk: you never know how far the market will drop, and leverage will amplify this risk by 10 times or 100 times.
Practical response: 3 strategies to lock in volatility risk.
1. Position + leverage 'double limits', giving insurance to the account.
No single trade position should exceed 10% of the principal: even if you think 'it will definitely rise by 100%', don't go all in— with a principal of 100,000 U, invest a maximum of 10,000 U in a single coin; in extreme conditions, the most you can lose is 10,000 U, not harming the foundation.
Leverage must be strictly kept within 5x: Leverage above 10x is 'gambling your life', 5x leverage + 10% position is equivalent to using 50% principal to seek profit, even if the market fluctuates 10%, it won't be liquidated (under 5x leverage, a 10% fluctuation corresponds to a 50% change in account equity, leaving a 50% safety margin).
2. Dynamic stop-loss system, allowing losses to have a 'ceiling'.
Spot stop-loss: set a hard stop-loss line at -15% (for example, if you buy coins at 100 U, immediately cut losses if it drops to 85 U), don't trust 'long-term holding will rebound'— LUNA holders lost everything while 'waiting for a rebound';
Contract stop-loss: In addition to price stop-loss, also monitor funding rates— when the funding rate of a certain coin remains >0.1% for 3 consecutive hours (e.g., in 2023 the PEPE contract rate reached 0.5%/8 hours), it indicates overheating among longs, so reduce positions by 50% in advance to avoid 'the longer you hold, the more fees you lose'.
3. Volatility hedging, 'stable + risky' combination to resist fluctuations.
Divide funds into 'stable positions' and 'volatile positions': 70% of the position buys mainstream coins like BTC/ETH (low volatility, strong resistance), and 30% of the position is allocated to high-volatility altcoins (seeking high returns). When Bitcoin plummeted 35% in 2024, my mainstream coin position fell but did not get liquidated, and the altcoin position controlled losses through stop-losses, resulting in an overall account drawdown of only 15%, far below the market average.
2. Contract trading risks: 90% of newcomers die from 'gambler's mentality', discipline is more important than technology.
Contracts are originally tools for hedging risks, but most people treat them as 'shortcuts to wealth'. Data shows: 90% of novice contract traders are liquidated within 3 months; the core issue is not poor technology, but falling into the 'gambler's mentality trap'— wanting to double profits when winning and recover losses when losing, ultimately being bitten by leverage.
Risk traps: funding rate arbitrage pit + crossing bottomless hole.
1. The 'invisible harvesting' of funding rates.
When a certain coin's funding rate is continuously positive (e.g., PEPE contract rate 0.5%/8 hours), it means that longs must pay 0.5% of the principal to shorts every 8 hours. If held for 1 week (21 intervals of 8 hours), the fees alone would lead to a loss of 10.5%, making long-term holdings a must-lose. In 2023, many retail investors held longs for 'bullish PEPE', only to see the market not rise, and the fees wiped out their principal.
2. The 'crossing nightmare' in extreme market conditions.
During the '519 crash' in 2021, many exchanges experienced automatic margin reduction mechanisms failing due to extreme market fluctuations, leading to users' accounts 'crossing the margin'— not only losing all the principal but also owing money to the exchanges. A certain investor who longed Ethereum with $500,000 was chased by the platform for $200,000, precisely because they did not calculate the 'crossing risk under extreme conditions'. Practical strategy: Use discipline to counter gambling tendencies, let contracts return to their 'tool essence' 1. Inverse leverage multiple rule: increase leverage on profits, decrease leverage on losses.
When profitable: use 3x leverage to roll the position (for example, after earning 10,000 U, use the profits to open a 3x leverage position, keeping the principal unchanged), allowing profits to run.
In case of losses: immediately switch to 1x leverage or close the position, never 'increase leverage to recover losses'— Countless people have fallen into the trap of 'losing 10,000 trying to leverage back', only to lose 100,000 instead.
2. Time cycle 'tightening spell': holding positions not exceeding 4 hours.
Data shows: holding contracts for more than 6 hours increases the liquidation rate by 3 times. My iron rule is: short-term contract positions should not exceed 4 hours, and regardless of profit or loss, positions should be closed at that time. This can avoid 'overnight market risk' and prevent the 'holding mentality' from taking root— on the night Bitcoin plummeted in 2024, I closed positions 3 times within 4 hours; although I did not make a lot of money, I preserved the principal.
3. Inverse indicator hedging: If the long-short ratio exceeds 3:1, take opposite actions.
When the long-short ratio of exchange contracts >3:1 (for example, 3 longs correspond to 1 short), and the position size hits a 30-day high, it indicates that retail investors are 'collectively going long'. At this time, take opposite actions (or reduce longs); historical accuracy rate reaches 68%. In 2023, when the SOL contract long-short ratio reached 4:1, I decisively closed longs and opened shorts, avoiding a subsequent 20% crash.
3. Project fraud and zeroing risk: over 2000 scams annually, 3-layer verification filters out 'real projects'.
The most disgusting thing in the crypto world is not losing in the market but losing in scams. Each year, over 2000 projects collapse, rug pulls (pump and dump), and false DeFi protocols abound; in 2023, DeFi scams led to losses exceeding $4.2 billion, with countless investors 'losing everything the moment they bought coins'.
Types of scams: from 'pump and dump' to 'code backdoors'.
1. Rug pull (team runs away)
The TOMO project in 2024 is a typical example: after private equity, the team sold 90% of the tokens at a high price, dropping from $2 to $0.1 within 24 hours, with a market value evaporating by 95%. The common traits of such projects: anonymous teams, no actual landing, relying on 'hundredfold expectations' marketing to pump prices, once retail investors take over, they immediately dump and run away.
2. False DeFi protocols.
Clone projects are best at hiding backdoors in 'code': on the surface, they are 'staking mining' protocols, but in fact, the contract code hides 'transfer permissions'. After users stake tokens, the project can withdraw all assets with a single click. In 2023, a 'clone of Aave' protocol went live for 3 days, stealing $120 million in staked assets, and the code audit report was found to be forged. Screening criteria: 3 layers of verification + position limits to leave no room for scams 1. 'Physical examination' of the project in three steps to avoid 99% of scams.
Check contract audits: Must pass audits from top institutions like Certik, PeckShield, etc., focusing on Chapter 3 'Risk Vulnerabilities' in the report— projects with highlighted 'high-risk vulnerabilities' must be avoided, no matter how hot the marketing is.
Investigate team background: Core members of the project must disclose real name information, LinkedIn can verify blockchain work experience (e.g., former Google engineers, former Ethereum core developers), anonymous teams are '99% scams'.
Focus on on-chain data: must be listed on exchanges within the top 50 by market cap (e.g., Binance, OKX), with 24-hour trading volume > 10% of circulating market cap (to avoid 'air coins' with a market cap of 1 billion but daily trading volume of only 1 million).
2. Altcoin 'Position Rule': No single position over 5%, reduce position immediately after a surge
Holding any single altcoin must never exceed 5% of total funds: even if you are optimistic, do not put all eggs in one basket— with a principal of 50,000 U, the maximum you can invest in a single coin is 2,500 U; even if it goes to zero, you only lose 5%;
After a 5x surge, forcibly sell 70%: If an altcoin rises from $1 to $5, immediately sell 70% of the capital (lock in profits), leaving 30% profit to 'run along', which locks in gains without being greedy for the last wave of increase.
Finally, I want to say: The core of survival in the crypto world is 'respecting risks'
From market fluctuations to contract traps, and then to project scams, risks in the crypto world are everywhere, but the response is quite simple: use position control to limit risk, use stop-loss discipline to lock in losses, and use screening criteria to avoid scams. 90% of losses are not due to 'bad luck', but because of 'no rules'— full positions, reckless leverage, and blind trust in anonymous projects are the root causes of losses.
Remember: the crypto world lacks opportunities, what it lacks is the capital and mindset to 'survive to wait for opportunities'. Controlling positions, strictly adhering to stop-losses, and carefully selecting projects—these three seemingly simple rules are precisely the 'survival code' to navigate through bull and bear markets. May you step on fewer pits, earn more money, and walk steadily and live long in the crypto world.
The secret that the main players want retail investors to be unaware of is their two major characteristics before they run away.
First, remember that main players always run away after continuous surges to high positions.
The first characteristic: a significant volume increase or a large high opening followed by massive fluctuations, meaning it hasn't increased much anymore, also known as self-increasing volume.
The main players primarily drive large volume increases or significant openings, which can attract a large number of followers to enter the market. They can take the opportunity to sell at a good price. However, the main players have too many chips. They cannot sell out all at once like retail investors.
So what to do? Next comes high-level fluctuations, jumping up and down, creating a false appearance of main players absorbing liquidity, attracting retail investors to continuously enter. For example, on the day it first surges, it retraces; the main player sells a portion first, and after a significant drop the next morning, it violently tests the bottom again in the afternoon, creating an illusion for retail investors that it cannot drop further. After several rounds of this, retail investors relax their vigilance and increase their positions. Just like calling 'the wolf is coming' several times, and then there is no crash, so there is no silver lining. During this process, the main player can smoothly unload their positions.
The second characteristic: although it has the highest accuracy, it is also the most complex and difficult to understand, summarized in six words: the stronger, the closer to the top.
You may wonder, isn't that wrong? If the main players have sold off, how can it still become stronger? The chips in the hands of the main players are massive. They cannot sell everything at once like retail investors.
In fact, being a main player is very hard. Especially during selling, it becomes even more challenging. They need to maintain confidence in retail investors while secretly selling. If they are not careful and the act fails, allowing retail investors to escape first, the main player may also fail to sell at high prices, which is why they must repeatedly push down and pull back up, even continuously creating new highs to stimulate the highest desire of retail investors. Therefore, the higher the selling area at the top, the harder the main player must perform.
This reflects in the price movements where the trend feels very strong, and in technical indicators, it will show divergence after fluctuations or continuous adjustments that create new highs. This is the logic of divergence and counter-trend.
From 'dreaming of wealth' to 'just wanting to break even', my emotional journey in the crypto world 💔.
Once rushed into the crypto world with dreams of wealth, watching K-lines, researching white papers, chasing hot trends, the result 💰 turned into 💸, and dreams became nightmares. Now I just want to break even, hoping my experience can bring you comfort.
1. Recognize reality, let go of obsession
In the crypto world, those who make money are a minority; the majority are 'chives'. Let go of unrealistic dreams of getting rich quickly to face reality directly.
2. Stop-loss is more important than profit.
Set stop-loss points and decisively sell when the points are reached. Reluctance to stubbornly hold on will only lead to more losses; stop-loss is key to protecting the principal.
3. Refuse to follow the crowd, delve deep into research.
Do not blindly trust; spend time understanding the project background, team, and technology; your own judgment is the most reliable.
4. Adjust your mindset, learn to wait.
Crypto market volatility is high, do not panic and act due to short-term fluctuations. It takes time to break even; patience is more useful than impatience.
5. Diversify investments to reduce risks.
Do not put all your money into a single coin; diversifying investments may not yield high returns, but it can effectively control risks.
Accept reality, let go of regrets. Breaking even is important, but life and mindset are even more important.
