Author: DUO NINE⚡YCC
Compiled by: TechFlow
Making money in cryptocurrency investing is exciting and everyone loves to talk about it. It’s not only engaging but also increases engagement. However, when you lose money, it’s rarely discussed.
No matter what, everyone will experience losing moments in the cryptocurrency market. How you overcome it will determine whether you end up being a winner or not. Below, I will share some of the best tips:
How to protect profits
Buy when no one is interested, sell when the crowds are busy
Don't trust altcoins
Don’t quit your job to trade crypto full-time
Avoid quick profits, they lead to ruin
Accept failure and losses
Let’s look at each one individually.
1. How to protect profits
It’s not enough to just take profits and sell, you also need to protect those profits! If you don’t have a clear system in place, the crypto markets can quickly take your profits away.
There was a recent case of someone who lost $400,000 in one trade. He didn't start with $400,000, he started trading with $500. He lost all his profits in one trade.
Greed aside, every lucky person eventually runs out of luck and inevitably suffers losses. You lose everything.
To avoid this, follow these steps:
If you are lucky enough to turn $500 into $400,000, your first priority is to protect those profits. This means that you don’t trade with those profits, but take them out. You can keep them in cash (more on this later) or buy gold or Bitcoin (BTC). It’s that simple!
After protecting your profits, continue trading with your capital. In this case, the person above can continue trading with $500 or a little more because he can now afford it. In any case, these profits should not be exposed to the market again.
By doing this, even if the market goes against you and you lose your principal ($500), you still have $400,000 in hand, which will make you a better trader/investor over time and refocus faster after a loss.
Only when your strategy produces good results over an extended period of time should you consider adding a small portion of the profits to your trades or portfolio. It’s that simple.
2. Buy when no one is interested and sell when the market is booming
You should deploy in a bear market, ideally when people start tweeting “Bitcoin is dead”, that’s the best time to start buying and taking risks. Always aim to maximize your risk/reward ratio, aka find asymmetric bets!
Taking the current market conditions as an example, in the event that Bitcoin shows weakness, I would keep that $400,000 in USDC and earn a yield (i.e. staking).
At the current 29% annual yield, that $400,000 would generate about $10,000 per month without him having to do anything. That's real income from transaction fees and liquidations. If the market falls further, his earnings would be much more.
I would not buy Bitcoin or any other coin right now. I would wait for a discount while the market continues to fall. Remember, you didn’t lose anything by not buying, you still kept your $400,000 profit! Protect them at all costs.
Once the market shows signs of bottoming, such as in a bear market, you can use those profits to buy Bitcoin through a DCA approach. This way, even if the price of Bitcoin falls further or moves sideways, you will reduce your risk and have a good chance of profiting when the price eventually rebounds and hits new highs. If you are patient, a good entry point can easily double that $400,000, or whatever amount you invested.
Look at the current cycle. If you bought Bitcoin in the last bear market at less than $20,000, you would have beaten most investors in the market. The larger your portfolio, the more Bitcoin you should own.
For example, I used my profits to buy Bitcoin below $20,000 in the last bear market. I didn’t catch the $15,500 bottom perfectly, but looking back, any buy below $20,000 was an excellent entry point.
You can certainly play with altcoins, but they should be a small portion of your total portfolio. It would be irresponsible to have too much and you will lose a lot. In any case, when you find mania in the market, start selling and don't buy back in, protect your profits!
3. Don’t trust altcoins
Altcoins are not sound money! At best, they are just a good technology project. Most altcoins don't even need a token and are a very poor store of value over time. You wouldn't buy $10,000 tomatoes to store your wealth, right? Altcoins are more like tomatoes, which will rot quickly.
A great way to lose money in the cryptocurrency market is to buy the latest released altcoin and hold it for the long term. Please don’t do this. It’s like buying tulips and hoping to get rich.
That's not the case.
Altcoins are good for speculation in the short to medium term. That's it. Beyond a one year time frame, you're likely to lose a lot of money. There are some exceptions, but overall, buying altcoins is not the way to long-term success.
They can make you rich overnight, but that wealth won’t last if you don’t follow the first point of this article. Most altcoins crash 90-99% in a bear market because the buyers are gone, and the reason altcoins rise and fall so quickly is because they have poor liquidity.
This means that insiders can easily push them up. Once they make their profits, no one can stop the price from crashing. Bitcoin does not have this problem because it is the most liquid cryptocurrency.
Fundamentally, only Bitcoin is sound money and in some ways similar to gold. Ethereum doesn’t meet this criteria either, even though they like to call it “ultrasonic money.” In reality, Ethereum is more like oil, where the price goes up and down with changes in network usage.
4. Don’t quit your job to trade crypto full-time
95% of traders lose money and only 5% are winners. Trading cryptocurrencies is harder than your job and is 24/7, which is probably a bad choice. Instead, keep your job or find a job you love and invest in cryptocurrencies (mainly Bitcoin).
A good way to avoid massive losses is to not trade in cryptocurrencies. Instead, invest in this emerging space. When you invest, buy the casino, invest in its infrastructure with a long-term perspective, rather than trading it.
Ethereum and its decentralized finance (DeFi) derivatives are a great example in this regard. While difficult to predict, DeFi made Ethereum what it is today (the “oil” of DeFi). Similarly, Bitcoin is and will continue to be sound money.
If you want to protect your wealth, buying Bitcoin at a low price is never a bad choice. When you buy it, you don’t buy it to sell it tomorrow. You buy it to hold it for the long term and retire with it.
How do i do this?
You can borrow against it or earn income on your Bitcoin (see more), and when Bitcoin reaches $1 million in the next 10 years, that’s when you can retire.
As for altcoins, try to buy into the infrastructure of cryptocurrencies, not the meme. That's where the opportunities are. Don't invest too much in altcoins, but a good bet can bring 10x to 100x returns.
I can’t tell you which coin is the next Ethereum, but you can take the right risk based on your age. As you get older and wealthier, it’s worth buying less altcoins and focusing on Bitcoin for the peace of mind it provides.
5. Avoid quick profits, they lead to ruin
A quick 10x gain on a meme can lead to mania and greed, which will likely result in a bad trade later. Don't go all in on this play. Never go all in on a single altcoin. Speculate, but keep it within a small range of your total portfolio.
Making your annual salary on a single trade could be life-changing, but so could losing it all on a single trade. Meme coins are appealing because of their potential for revenge (or impoverishment). They are highly risky and only worth a try if you have a small portfolio.
In this case, it makes sense to take more risk. If you already have a sizable cryptocurrency portfolio (mostly Bitcoin), then only speculate on meme or similar high-risk coins with a small portion of your total portfolio, and that’s it.
If you make a killing, sell, never look back, and follow the first bullet point of this article. Never sell Bitcoin for altcoins. If you find yourself doing this, there is only one reason for it: greed. This never ends well.
7. Accept failure and losses
Failures and losses are inevitable in this field, but you can definitely reduce them and shrink their size, and that's where you come in. The market works the way it does, and your job is to manage the risk.
Making money should not be your ultimate goal. Instead, you should maximize your time and freedom. Bitcoin is part of the answer. Most people need to lose a lot playing with other coins before they realize this.
By accepting losses, you will focus on the important things faster and improve your risk management. The top 5% of traders who win in this game do so because they do their risk management job correctly. This means that they lose often, but the losses are small, and they win big a few times a year.
That's all you really need. Accept that losses are part of the process, but make them small enough so that they don't throw you off balance. That takes time and discipline.
Be patient with yourself and find your comfort zone, it might not even be related to crypto!
