After losing 1.7 million US dollars, I learned five major encryption investment lessons

To maintain consistency in investing, you first need to recognize the problem. This article is based on a podcast by Miles Deutscher, compiled, translated, and written by TechFlow. (Background: Former Meta employees share a survival guide for investing in the meme frenzy) (Background: Evaporated 2 million U in 45 days: A dark moment and rebirth declaration for an encryption OG) Background information In this episode, I will share the five major mistakes I made in my cryptocurrency trading career and the valuable lessons I learned from these mistakes. At the same time, I will analyze the common pitfalls in the encryption market for newbies and seasoned traders, and discuss why these mistakes, although costly, ultimately helped me succeed. I hope that through my sharing, you can also avoid similar issues and become a better cryptocurrency trader or investor. Main topics BTC (BTC) altcoin (Altcoin) Altcoin market dynamics Latest updates on the altcoin market Altcoin trading strategies Projects involved: BEAM, MODE, AI16Z, LKY, LUNA, LMT, SUNDOG, PEPE Introducing Miles: In the encryption field, most people like to talk about their successes. They are eager to show off the huge profits they have made in the market, but few are willing to publicly share their experiences of failure. In fact, my success in the encryption market largely stems from the lessons I learned from those major losses. Even in the current market cycle, I have experienced many failures, and these experiences have once again reminded me that becoming a successful investor requires following some core principles. Today, I want to take a different approach and focus on the major losses I encountered in my encryption career. These losses represent the biggest mistakes I made and made me realize the pitfalls I have stumbled upon in the market. I attribute a great deal of my ability to become a profitable investor to the period of severe turmoil in 2021. Even in the current cycle, I have had several trades that did not go as planned, but these failures have enabled me to be more composed in future market cycles, especially in the next bull market for altcoins. Ignoring market risk signals Miles: I have to start with my biggest loss in the Cryptocurrency market — Luna. This experience made me deeply aware of the importance of 'Holdings bias' as an investment psychological issue. The so-called 'Holdings bias' refers to the subjective belief that an asset's fundamentals are improving when you hold a large position in an asset and see its price continually rising. However, this belief is often not based on objective Fundamental Analysis but solely on the illusion brought about by rising prices. In other words, you may mistakenly consider price rises as evidence of improved fundamentals. It was this Holdings bias that made me overlook many potential warning signals, which actually indicated that Luna's fundamentals were gradually deteriorating. At that time, I realized that although algorithmic stablecoins like UST were valuable because they were scalable and decentralized, they also brought the risk of depeg (i.e., stablecoins unable to maintain balance with their anchor assets' value). Although I was optimistic about Luna at the time and held a large amount of Luna and UST, I was aware of the risk of 'depeg.' However, I underestimated the actual likelihood of this risk and even considered it an event of extremely low probability, thereby not taking any action or not taking timely action. When the price of UST dropped to 96 cents, the market had already shown clear signs of crisis, and I should have immediately cut at least 50% of my position to mitigate the risk. But due to the 'Holdings bias,' I chose to ignore these warning signals, and this psychological trap ultimately cost me dearly. We all know what happened next. Once UST started to depeg, the values of Luna and UST eventually both went to zero. This huge loss in 2021 dealt a severe blow to my investment portfolio but also marked an important turning point in my investment career. In fact, I made huge profits through BTC investments in the early part of 2021. I bought a whole BTC for $5,000 in 2019, then turned that investment into $500,000, and further rose to over a million dollars in the Bull Market. However, by 2022, due to the market's drastic fluctuations, my assets shrunk from a million dollars to tens of thousands of dollars. The painful experience of going from life-changing wealth to a significant decline is indescribable, and the psychological gap is difficult to describe. I firmly believe that without experiencing heavy setbacks in the market, it is impossible to truly grow into an excellent investor. If you are experiencing similar losses, remember that although you may not see the positive side at the moment, these experiences will make you stronger and smarter. This is also why I decided to create this video today. Rather than talking about those 10x, 50x, or even 100x investment returns, it is better to focus on my experiences of failure, because the lessons contained in these failures are truly valuable. My goal is to help you become a better investor, and learning from mistakes is the key to achieving this goal. This is also why I have been able to succeed today — because I constantly learn from my failures. Lack of a clear stop loss strategy Miles: My second mistake was not having a clear stop loss strategy. I believe this is a common problem for many investors, especially in the case of altcoin markets with extreme fluctuations. Let's take Beam as an example. In this cycle, I had a significant position in Beam, but unfortunately, I did not set an effective stop loss strategy for it. This morning, when I reviewed my portfolio, I found that the value of Beam had shrunk to a few cents, even though it was once one of my largest investments in the market. Looking back, I found that the price trend of Beam had long issued warning signals. After the initial high point, the price began to enter a series of lower highs and lows, with momentum clearly stagnating. Although technically the price was still above the Moving Average at the time, when it first broke below, this should have alerted me, but I chose to ignore this signal until the price further dropped. Looking at the daily chart, I had days or even weeks to take action, but I did not set a stop loss in time. For coins I hold long-term, I usually do not set a 100% stop loss but adjust the stop loss ratio based on the fundamentals of the coin and my investment horizon. For example, for short-term trades, I would set strict stop losses, while for long-term holdings, I might allow a 50% drawdown. However, in the case of Beam, I should have at least cut half of my position because even if I missed the rebound, I could re-enter when the price trend improved. Therefore, setting stop losses is crucial for both short-term and long-term trading. You can determine key support and resistance levels based on high-time frames (such as weekly or monthly charts) as references for stop losses. For example, Solana's key support level is at $175, and if the price falls below this level, I would start to worry. Similarly, BTC's key support may be at 75K. Even though these levels may not necessarily be reached, setting stop losses early can...