Five Deadly Mistakes of Crypto Assets Investors

During this market cycle, I have made some costly mistakes, but I have also learned valuable lessons from them. Today, I want to share the five biggest mistakes I have made in my Crypto Assets investment career, hoping to help everyone avoid similar pitfalls.

1. Ignoring Market Risk Signals

I suffered huge losses in the Luna incident, which made me deeply aware of the dangers of "position bias." When you hold a large position in an asset and see the price rise, it's easy to fall into the illusion that the fundamentals of the asset are improving. This psychological bias can lead us to ignore potential warning signals.

Before the Luna crash, I underestimated the risk of stablecoin decoupling, and even when the price of UST dropped to 96 cents, I did not take any action. Ultimately, both Luna and UST went to zero, dealing a severe blow to my portfolio.

This experience made me realize that it's hard to truly grow into an excellent investor without experiencing the heavy blows of the market. Although the losses at that time were painful, these experiences have indeed made me stronger and wiser.

2. Lack of a Clear Stop-Loss Strategy

During this cycle, my investment in Beam suffered significant losses due to not setting an effective stop loss. Looking back at Beam's price trend, I found that there were multiple warning signals that I had ignored.

Different types of investments should have different stop-loss strategies. Short-term trading may require stricter stop-losses, while long-term holdings can allow for larger drawdown space. Nevertheless, setting stop-losses is crucial.

I recommend combining multiple technical indicators to develop a stop-loss strategy, such as moving averages, relative strength index (RSI), etc. At the same time, you can also use tools like TradingView to set price alerts to receive timely notifications of market changes.

In addition, stop-loss is not only technical but can also be based on changes in fundamentals. When the market shifts from risk appetite to risk aversion, changes in fundamentals can also serve as a basis for stop-loss.

3. Failure to timely take profits

This may be one of the most serious mistakes I've made in years. When the market is rising, I often overlook the importance of taking profits in a timely manner due to excessive optimism.

Taking Lucky Coin as an example, the Lucky Coin I held at the peak was worth about 1.7 million USD, but due to the failure to take profits in time, all these gains eventually evaporated. Although there were some objective reasons that limited my actions, such as the ethical standards of content creators and insufficient market liquidity, I still believe I made a fundamental mistake in this trade.

This experience made me deeply realize the importance of timely profit-taking. When the coin price rises significantly, if you do not lock in some profits in time, you may miss a good opportunity once the market turns. Especially for some low market cap coins, they often face serious liquidity issues during a downturn.

4. Position Management Errors

During this cycle, I sometimes invest too much money in a certain coin, which leads to becoming emotional in trading and having difficulty making rational decisions. On the contrary, there are times when I have a lot of confidence in a certain coin, but I don’t match it with enough funds, missing out on greater profit opportunities.

I recommend keeping the investment in a single coin within 5% of the total investment portfolio, no more than 10%. As the price of the coin rises, your position ratio may naturally increase, at which point you need to make timely adjustments and control risk by taking profits in batches.

5. Holding Too Many Altcoins

In 2021, my portfolio once held up to 30 or more coins. When the market started to turn, managing such a large portfolio became a nightmare.

Now, I recommend concentrating the portfolio on 5 to 10 high-confidence coins. By reducing the number of holdings, you can focus more on researching and managing each coin, thereby improving the overall efficiency and returns of your investments.

Conclusion

Recognizing one's mistakes is just the first step; what is more important is to learn from them and formulate a plan for improvement. I suggest that everyone also write down their investment mistakes, analyze the reasons, and list future improvement plans. Keep this list in a prominent place to constantly remind yourself to stick to your principles, especially when market sentiment is high or low.

To maintain consistency in investment, it is essential to clearly recognize what the problem is. Only by identifying the root of the problem can we formulate effective solutions and continually improve our investment skills.