1. The cryptocurrency market is highly volatile
It is common for cryptocurrency prices to fluctuate more than 10% in a single day, and extreme volatility of over 50% can also occur. If the position is too heavy, a significant drop can lead to a substantial loss of principal, or even liquidation (in the case of leverage), while reasonable position management can reduce the impact of such extreme risks on the overall capital.
2. High market uncertainty
The cryptocurrency market is greatly affected by factors such as policy regulation, technological changes, and market sentiment, with frequent black swan events (such as project delistings, etc.). Position management can help avoid 'losing everything' due to a single event by diversifying allocations or controlling the position in a single asset.
3. Protecting Investment Mindset
When positions are too heavy, investors are prone to anxiety due to short-term fluctuations, leading to irrational actions (such as chasing highs and selling lows); whereas reasonable position control allows for a calmer response to market changes, maintaining rational judgment and avoiding mistakes caused by emotional decision-making.
4. Retaining compound interest opportunities
The core of investing is 'surviving to have opportunities'. The cryptocurrency market has clear bull and bear cycles; only by managing positions to retain sufficient principal can one seize opportunities when the market arrives and achieve compound growth. If the principal is depleted due to uncontrolled positions, even the best subsequent market conditions will be irrelevant to you.
In simple terms, in cryptocurrency investment, 'not losing a lot of money' is more important than 'making quick money', and position management is the core means to achieve 'not losing a lot of money'. Position management is considered one of the most important factors, primarily due to the uniqueness and high-risk nature of the cryptocurrency market, making it a crucial element.