The recent market trend can be considered textbook; you must review it. We can see that when BTC falls by 2%, ETH falls by about 3%, platform tokens fall by about 4%, and altcoins generally drop by 10%. When BTC falls by about 5%, altcoins generally drop by 20%.
When BTC rebounds, especially during a V-shaped reversal, altcoins may not move much, falling with BTC but not rising.
This phenomenon has not just occurred now; it has been the case since the birth of cryptocurrencies over ten years ago. The financial market has no new tricks; it’s just the same old wine in a new bottle—you just may not have realized it.
In choosing targets, many people's thinking is based on how much can be earned under good conditions; they think more about the returns, which is why altcoins become the first choice. This is because altcoins can surge explosively, with daily increases of 20%, 50%, or even 100% being common.
Usually, when we see such an increase, the brain becomes exceptionally excited and impulsive, regretting not buying when initially thought about it. When seeing altcoins plummet, because of not holding any, human nature makes the brain automatically choose to ignore it.
However, what investment must counter is human nature. The first factor we should consider in choosing targets should be risk: what the potential loss might be in bad situations or during corrections, and how likely it is that the investment will recover if held on. Only then should returns be considered.
Just like when we hunt in the primitive forest, our primary consideration should be whether we can hunt some prey under the condition of personal safety, rather than recklessly pursuing a tiger or a big elephant regardless of our safety.
If we could almost risk-free hunt some wild rabbits every time we go out, such sustainable returns could fill our granaries over time. Why take the risk to hunt a tiger or a big elephant and risk ending the game?
BTC and ETH are like this; spot trading can be said to be almost a risk-free target, while altcoins are like targets that could be a fierce tiger or a big elephant. There may be a chance for sudden wealth in a short time, but the greater probability is game over.
Once BTC and ETH are trapped, you can wait; someday they will return. But altcoins are completely the opposite; almost 90% of altcoins are a trap for a lifetime. Most people end up failing by using different targets to execute the same strategy.
Once trapped by altcoins, even if it’s just a loss of 100 yuan, it must be made back. This is actually the loss aversion effect; the core concept of behavioral economics’ expectation theory reveals that people are 'averse to loss'.
People’s decision-making under uncertainty seems to depend not on the result itself but on the 'gap between the result and expectations'.
That is to say, when making decisions, people always measure them from their own perspective or reference standards, thus determining the trade-offs in decision-making.
For example, when a gambler goes to the casino with $3000 and wins $100, asking them to leave the casino may not be a big deal. But if they lose $100, asking them to leave the casino at that point may become very difficult.
Why is this? When winning 100 yuan, the cash on hand is 3100; when losing 100 yuan, the cash on hand is 2900. These are two independent results: winning 100 means principal + 100; losing 100 means principal - 100.
However, in this case, the gambler's 'feeling' is not much related to the two different results of 3100 and 2900 but rather to the 'gap' between these two results.
In other words, losing 100 yuan is simply losing 100 yuan, but psychologically, the gambler 'feels' like they lost not just 100 yuan, but like they lost '2 (3100-2900) = 200 yuan'. This illustrates why many gamblers 'lose more and more'; both 'psychology' and 'economics' are at play simultaneously.
This reveals that people are very sensitive to the 'changes' in wealth!
Moreover, once people exceed a certain 'reference point', such as the price of a coin, their 'feelings' towards the same amount of loss and profit are quite different.
Near this 'price reference point', the 'negative effect' caused by a certain amount of 'loss' is greater than the 'positive effect' brought by the same amount of 'profit'.
Taking the above example, in short: the 'unpleasant feeling' brought by a person losing 100 yuan is much stronger than the 'pleasant feeling' from winning 100 yuan.
As the 'value quantity' increases, this 'positive and negative feeling' will also upgrade similarly. The 'feeling' of 'loss aversion' is much stronger at a certain stage than the 'feeling' of 'gaining value'.
The pain caused by losses is far greater than the satisfaction gained from returns; this is the core concept of behavioral economics’ expectation theory.
People are 'averse to loss'.
Thus, 'loss aversion' can lead some gamblers to have a 'psychology' of 'spare no effort' to avoid losses at all costs when losing money.
Holding this 'psychology', unable to grasp the gradually lost 'rationality', yet unwilling to let go of the 'already lost situation', ultimately leads to 'losing more and more' until 'losing everything'. This also explains why most people in the crypto circle are always on the road to recovering losses.
As for now, whether you are holding altcoins, experiencing losses, in cash, or a newcomer not yet in the market, there are corresponding strategies suitable for you to recover.
Just like being sick, there are many types of diseases, most of which are not cancer, but everyone’s situation is different, so the strategies needed naturally differ. Here are two sentences I want to tell you.
Assets like BTC and ETH are investments, while many altcoins are essentially gambling.
So, you understand why big capital all choose targets like BTC and ETH, because what they want is investment, sustainability, and they understand that nine out of ten bets lose.