The crypto market itself is actually like a big game. If it is a game, there will be game manipulators, and various news (positive or negative) will often become one of the most advantageous manipulation tools in this game.
Many people like to read the latest news and even dig up all kinds of gossip, but most of the time, news should be regarded as a reference tool rather than a result of action. If you chase highs when you see good news and sell at a loss when you see bad news, then you have fallen into the trap set by the manipulator.
1. The market is impossible to accurately predict
At the beginning of last month (July), I also believed in my article that the probability of Bitcoin falling below $57,000 was low. However, it fell to $54,000 in a few days. This misjudgment, in fact, from a certain perspective, also means that the market manipulators have successfully deceived me. Of course, compared with those professional analysts, I am still a primary school student. It is precisely because the short-term market is difficult to predict that I rarely conduct short-term swing operations.
Similarly, when you see anyone’s short-term analysis, it is recommended that you try not to follow blindly and make your own judgment.
Hualihuawai mainly shares methodologies, but we have also recently written a lot of topical articles targeting the current market conditions, so I found that some cute people started to appear again, and some people even attributed the main reason for their loss of money to Hualihuawai. If you lost money because you read Hualihuawai’s past 500 articles, then I can only say that we are not the same kind of people at all. It is recommended that you unfollow it as soon as possible before you lose all your capital.
But before I unfollow you, I will still give you one last sentence: If you cannot make your own effective judgment on investment, then the easiest thing to do is to invest in Bitcoin (including Ethereum) through DCA, because from a long-term perspective, these two are also one of the simplest and least error-prone investment paths for you in this field.
Some people may not be angry if their BTC/USD exchange rate drops to zero, because they think it is their bad luck, and they will choose to continue to exchange BTC/USD exchange rate to satisfy their inner desire to cross the class (get rich overnight). But if these people bought a little bit of Bitcoin or Ethereum based on other people's opinions, and Bitcoin fell by 10% and Ethereum fell by 20%, then these people will become unacceptable and attack others. This is indeed a very interesting phenomenon.
2. The best one is the one that suits you
When everyone was communicating in the group yesterday, I saw a friend asked me a question: Dalong, since you were optimistic about SOL in September last year, why didn’t you hold a large position in it at that time?
My answer is: If I had known this, I would have gone all in, haha.
Of course, this answer is actually a bit of a joke. First of all, the all-in thing will definitely not happen to me, which is inconsistent with my investment strategy. Secondly, even if there is a similar opportunity again, I still won’t choose to invest heavily. It’s not that I don’t think highly of SOL (and other altcoins I bought), but it’s actually because of my position management and strategy.
I am quite strict with my position management and execution discipline because I have my own long-term goals. Before I achieve this goal, I will not change my strategy simply because of some possible opportunities.
In the last cycle, I mainly invested heavily in ETH, and in this cycle, I need to reinvest most of my funds (80% of the planned positions) in Bitcoin, because my long-term goal is just one: to stock up enough Bitcoin and Ethereum to meet my goals. As for other small-probability opportunities in this long-term process, such as various opportunities with dozens, hundreds, and thousands of times the possibility, I will not consider gambling heavily. I will only do what I am most confident in. Ensuring the overall security of funds is the first premise I consider.
Under the above premise, I will certainly not be idle. I need to find something new to keep myself busy every day, and writing and sharing through self-media platforms is something I want to do and am interested in doing.
In a broader sense, I can effectively summarize what I know and what I have newly learned, and share it with a small number of people who may also be interested in it. This can be regarded as a small contribution to the popularization of science in the field of cryptography.
On a smaller scale, I can also use this to maintain my attention and sensitivity to the crypto market. For example, when I’m combing through new project articles, I can simply interact with them to try out airdrops, or when I’m studying on-chain data or paying attention to the market, I can use 10% of my positions to buy some altcoins (but not too many, the 10% position will be divided into several parts, and I will not hold more than 5 altcoins at the same time).
Or to put it more superficially, I found that being a self-media person can also bring in some additional income. Without accepting any commercial advertisements (I have no plans to accept advertisements in the future), I currently only rely on the system advertisements automatically embedded in the self-media platform, and the red envelopes/transfers and rewards from my partners through WeChat. I can receive about 100,000 RMB every year. Although compared with those crypto big V bloggers, the income level of self-media may not be worth mentioning, but this is also a positive feedback for me to insist on writing articles every day and persist in output, so I still hope to continue to stick to writing as much as possible.
Yesterday, a few friends in the group joked: After this round of bull market is over, maybe the big dragon will withdraw from the circle, and we will no longer see the big dragon.
Maybe. But at present, the probability of this happening is not high, and because I like this field very much, as long as I still have the money in my wallet, I can't really leave this field completely. And as mentioned above, I still hope to continue writing as much as possible, unless I find another thing that interests me more than writing and has the same long-term value accumulation (at least I haven't found it yet).
3. Don’t play a game you can’t afford.
Many people are concerned about the opportunities in the alt season. There are big differences of opinion on the issue. Some analysts believe that the alt season will continue to come soon, and the current decline is still one of the best opportunities to enter/increase positions. Some people think that there is no chance and suggest selling out as soon as possible.
As for ordinary investors, some have already fully invested in altcoins and cannot move, while others continue to hold their positions and wait for lower bargain hunting opportunities or bigger black swans.
But the market will not listen to any so-called analysts, nor will it sympathize with any ordinary investors.
The market often goes against human nature. For example, when most analysts and KOLs are shouting that the big bull market has not yet arrived and the current decline is the best opportunity to buy at the bottom, the market manipulators will also realize that people may not easily throw away their chips, so they will considerately arrange a flash crash or a spike for everyone.
Just like two days ago, ETH fell by more than 20% in one day. How can such a drop not cause panic? Only in extreme panic can people surrender their chips. Of course, a large amount of liquidity will be created based on this. Therefore, in this rapid decline of the market, some interesting phenomena will appear:
- Profits are about to return to the principal line, and people surrender their chips in panic
- The investor has lost a lot of capital and has no extra cash position. In a panic, he chooses to close the position and hopes to find a new opportunity to turn things around with the capital he gets back.
- The position has already incurred a loss of 60% or even more, and it is a bit unwilling to cut losses, so I just play dead and lie flat
- Originally, I hoped to achieve greater returns through leverage, but the bulls have been blown to pieces
- Market operators took the opportunity to buy up these chips in large quantities
- A small number of stubborn investors and long-termists will also get some of the bloody chips of others.
- People who quit the industry because they lost all their money say: Cryptocurrency is a scam
- People outside the industry continue to gloat: Cryptocurrency is a scam
There may be some lucky people in this process. For example, they are busy with work and do not pay attention to the crypto market, or they are hiking in the wild and the signal is bad and they miss the market...so they miss the "reason" to cut their losses.
But when they return to the market, they will definitely be affected psychologically. Even if the market starts to rebound, they will worry about falling again. So they will choose to sell directly when they break even, hoping to keep enough cash to wait for another bottom-fishing.
Although the above process is only my hypothesis and theoretical summary, one thing is certain, that is, in the whole process, what is traded is not just price, but more about emotions and human nature.
So, how can we overcome this emotion?
The simplest thing is to do a good job of position management and planning. We have actually sorted out this issue many times. In other words, only those investors who can stick to their strategies and avoid emotional decisions can ultimately win in this long-term game.
As for the specific position management and strategy execution, this has been sorted out many times in Li Huawai’s previous articles. In short:
- You need to classify your position management
I have actually mentioned this above. For example, before the start of this cycle (in 2022), I had divided my positions into 10 parts, 8 of which were used for fixed investment in Bitcoin, 1 for altcoins to improve my diversified portfolio, and 1 remained unchanged.
You can set specific position management according to your own risk preference. For example, if your risk preference is relatively large, you can adopt the principle of 2:2:4:1:1, such as 20% to Bitcoin, 20% to Ethereum, 50% to altcoins, 10% to MemeCoin, and 10% in cash (to deal with extreme black swan events). And so on. This division is completely free to decide. Our advice to everyone since 2022 has not changed. At least 50% of the position is given to Bitcoin (and Ethereum). This will apply to most people. I don’t know how many people will still remember this advice.
- You need to execute the strategy in batches
The market is volatile and unpredictable. No one can always buy at the lowest point and sell at the highest point. This is a very idealistic state.
In specific investment operations, 1/3 depends on strength, 1/3 depends on luck, and 1/3 depends on strategy. There are many types of strategies, but for most people, they only need to remember two points:
If it is a short-term swing operation, then you must set up a take-profit and stop-loss and strictly follow your own plan. Just reach your goal, don't buy more when the price drops, and don't chase more when the price rises. Short-term swings execute multiple operation plans, rather than executing (or modifying) multiple operations on one plan.
If it is a medium- to long-term operation, then it must be operated in batches, that is to say, you should buy in batches and sell in batches, and never go all-in. At the same time, try not to destroy your position casually because of unexpected losses or profits. For example, if you find that a certain altcoin in your position has risen very well, you can simply sell 50% of your original Bitcoin position without saying a word and switch to the corresponding altcoin. Because if you win the bet, you may indeed make dozens of times, but if you lose the bet, you may not be able to recover for several years (or simply have nothing). Investment is not just about the current results, but more importantly, who can survive longer in a field.
But whether in the short term or long term, investment always involves risks, so we should not enter a game that we don’t understand, and we should not play a game that we cannot afford.
We will share the content of this issue here. You can view more articles and content through the homepage of Huali Huawai. The above content is only a personal point of view and analysis, which is only used for learning records and communication, and does not constitute any investment advice.
