I often say that making money by speculating in cryptocurrencies is essentially making money from the difference in cognition.
Let’s first rule out the lucky bias
The law of the market is that people with high cognition make money from people with low cognition, people with low cognition make money from people with no cognition, and people with no cognition may make money from people with wrong cognition.
For example, people who understand the future trends of the industry make money from people who don't. People who can occasionally speculate and track hot spots successfully make money from people who blindly believe in getting rich quickly. People who don't understand and don't do anything make money from people who don't understand and do things randomly. For example, people who promote make money from people who play with Ponzi schemes, and people who promote and do rebates make money from the losses of new customers.
In fact, people who have high cognitive ability but turn cognitive errors into high-level people gain the most money.
Recently, many people have asked me, can I buy this? Can I buy that?
I basically don’t help people look at targets or recommend coins, but if you ask me if I can buy now that the market is plummeting, my opinion is “yes”
There are several factions in the market now.
The first group: The market continues to plummet, and the price of Bitcoin drops to $30,000-40,000. Only then can the bull market continue.
The second group: The market is just using the negative narrative to temporarily clean up the market, and institutions are frantically buying up funds and making money by blowing up long orders. There will be a rebound afterwards.
The third group: The market cycle is different, the bull market is over. Bitcoin has become like the US stock market, rising slowly and then plummeting rapidly. The Shanzhai stock market will no longer rise 10 times.
The different viewpoints at this time and stage are the so-called cognitive differences. The difference between high, medium and low is the profit.
For example, if the market is unanimously optimistic or pessimistic, it means there is no difference in cognition, and you and people who share the same opinion as you cannot make each other's money.
Only when there are disagreements and different opinions, there will be differences and profits. For example, if everyone says a target is good, it will be gone if you miss it. If everyone around you says so, you basically can't make money if you buy it. Unanimous optimism is equal to bad. Unanimous pessimism is equal to bad. It is a big good if a few people think it is good and most people think it is bad. It is a small good if most people think it is good and a few people think it is not good. What I mean by "see" is to do, not just to see with your eyes and think in your heart, but to vote with your money.
In the cryptocurrency world, all people want is the word “profit”.
My view is that the market is just using the negative narrative to temporarily clean up the market.
Institutions, market makers, and exchanges are not afraid of a falling market, but they are afraid of a stagnant market, so they must create momentum and use all existing market narratives to amplify emotions.
Why has it fallen so much recently? Let me explain it later.
First, BTC has not risen above 70,000 and maintained this level for a long time, which shows that the technical side is not strong enough.
Second, there are 14 compensations in Mentougou, and there are less than 10,000 in the hands of retail investors. Smart money should not sell, or should use bad news to buy more. Even if they buy and sell, they will buy back at a higher price unless they never buy again (this is my view that this compensation is not enough to affect the long-term rise in BTC prices)
Third, the Fed’s speech, these macroeconomic information was also used to add momentum to the negative narrative of BTC
Fourth, BTC has been on a downward trend in the past month, which may allow some funds to sell their chips in a bearish manner.
Fourth, the German government wants to sell the BTC that it got for free. It has to be said that BTC has a self-protection function. If you want to sell, BTC will not let you sell it for 70,000, but will let you sell it for about 50,000, so as to avoid you getting too much value from the BTC system in vain. Isn’t the decline a good thing? Use the decline to protect the excessive outflow of system resources.
Fifth, the market has added too much leverage. I think there are many people who use 3-10 times leverage from 50,000 to 70,000 yuan (the fact that the second largest amount of funds in history were lost in one day yesterday but the decline was not much is enough to prove that people have added high leverage). High leverage is a double-edged sword. If the person who uses 50,000 yuan with 10 times leverage rises to 70,000 yuan, he will definitely sell. The person who uses 70,000 yuan with 5 times leverage is eager to sell at 80,000 yuan, but the person who bought 50,000 yuan sold first and made money from the person who bought 70,000 yuan.
For those who don’t use leverage, the increase from 60,000 to 70,000 is only 16%, and the increase from 50,000 to 70,000 is only 40%. But for those who use 5 times leverage, it is 80%-200%.
This shows that people are very unfair. All markets face people who increase leverage. They will either sell first and then buy back at a higher price later.
Or they will explode.
At this time, people with good luck and high cognition will earn money from people with bad luck and high cognition or people with low cognition and bad luck.
Since I am a firm believer in the second group, I will hold on to my stocks tightly and not move them. I will take advantage of arbitrage if there is any, increase my position if I have spare money, and make some small money if there is a small hot spot.
Wait until the market clears out all these greedy leverages, so that those who want to sell can do so quickly.
The market will be clean and a violent bull market will begin.
I just don’t know how many twists and turns there will be when that day comes, how much leverage needs to be cleared, and how many people need to be cleansed.
All we can do is wait, we will eventually be able to clear them and wash them away.
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