The Truth About Crypto Investing: My Experience and Advice
As someone who has been in the crypto space for more than a decade, I often encounter friends asking me about investing in Bitcoin, Ethereum, and other cryptocurrencies. Especially when the market is hot and Bitcoin is approaching $100,000, giving advice becomes more difficult, especially when the other party is an inexperienced investor. Today, I would like to share some of the experience I have summarized from years of observation and practice, hoping to inspire you.
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You are responsible for all your actions.
No matter how much experience I have, it doesn’t mean I can make accurate predictions about the future development of the market. In fact, no one can fully see the whole picture of the crypto market. If someone claims to "know everything", he is probably lying. So, my first piece of advice is to make sure that every investment decision you make is based on your own judgment and willingness to take responsibility.
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Market cycles: Understand where you are
We are currently in the third year of this bull market cycle. From the bottom in November 2022, Bitcoin has risen over 6 times, Ethereum has risen 4 times, and Solana has astonishingly risen 30 times. This explosive growth naturally attracts a lot of attention, but remember, the more attention flows in, the greater the market risk will be.
Simply put, the best entry timing is often when no one is paying attention, rather than when the market is hot and everyone is rushing in. However, if you have already missed the best timing and still wish to enter the market, what should you do?
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Entry suggestion: Steady allocation and risk management
For novice investors, my personal suggestion is to maintain a simple strategy. For example, you could allocate 50% to Bitcoin, 25% to Ethereum, and 25% to Solana. While this combination may not be perfect, it at least maintains a certain level of stability amid market fluctuations. If you want to try other small coins, be sure to keep this portion of funds within 10% of the total investment and consider learning as part of the investment.
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Set a reasonable exit plan
Based on the current price, I suggest you set clear profit-taking points. For example, when your investment doubles, consider taking out your principal, so that even if the market reverses, your losses will be minimized. If your funds triple, you can choose to cash out entirely, or take out twice the profit, leaving the original principal to continue risking. But be sure to recognize that the drops that a bear market may bring can be staggering.
Exiting in a bull market is often more difficult than selling in a bear market. You may regret 'selling too early,' but I can assure you that in the future, you will be grateful for your rational decision at that time.
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Beware of the traps of market sentiment
When the market rises, investors often fall into the 'fear of missing out' (FOMO) emotion. If you take profits at a high point and can't resist re-entering, the sudden risk of a market crash may catch you off guard. Worse still, you may find that the taxes on realized gains exceed the value of the remaining assets you hold. This situation is not uncommon in the crypto market.
Every sale of a crypto asset is a taxable event. Even exchanging cryptocurrency for other tokens is considered a taxable action. Therefore, after making a profit, I tend to transfer funds into low-risk principal-protected accounts in the traditional financial system, such as 12 to 18-month deposit plans, rather than keeping them in crypto stablecoin accounts. I only look for investment opportunities again when the market cools down and the heat dissipates.
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The frenzy of a bull market and the fantasy of 'super cycles'
Whenever a bull market arrives, people always find various reasons to prove that this time it will rise to the sky, and there won't even be a bear market. But history has repeatedly shown that 'super cycles' are nothing but collective delusions.
Any asset in the market that grows 100 times will almost invariably experience an 80%-90% deep correction. Taking Solana as an example, even if it rises to $800 in this cycle, it may still drop back to the range of $80-$160 in the future. If you buy in at $240 and hold long-term, you are likely to face paper losses during a bear market. This may be hard to accept, but after experiencing several cycles, you will understand: the crazy growth in a bull market always lays the groundwork for a deep correction in a bear market.
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Multiplicative thinking vs. Dollar thinking
Novice investors often tend to think in dollars rather than multiples or percentages. For example, if I say 'Solana may rise to $1000,' they might think the increase is 'only $760,' not realizing that this is just a 4-fold increase. Meanwhile, an increase from $8 to $240 represents a 30-fold increase. This cognitive bias may lead them to have an incomplete understanding of risks and returns.
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Summary: Education and patience are key
The charm of the crypto market lies in its high volatility, which is also its danger. As an experienced investor, my goal is not to tell you what to buy or sell, but to help you view this market with a more rational and clear attitude. Careful planning, reasonable allocation, and learning and growing are the keys to long-term success.
Finally, remember that every investment decision is your own risk. Whether you succeed or fail, it is worth taking responsibility and learning from it. May you find your own bright future in this tumultuous and opportunity-filled market.
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