"2018-2024, thoughts and response strategies after several sharp declines"
This article was written on the evening of August 5, 2024. I mainly wanted to record my mood today, but I thought that today's situation has happened six times since I entered the crypto. This is the sixth time, so I thought it would be a good opportunity to summarize my state and psychology during the previous crashes.
I entered the crypto on December 25, 2017, and bought my first ETH at a price of around 9,500 RMB. This money was given to me by someone else. After entering the circle, I also experienced ups and downs, which I will skip and start directly from the first crash.
The first crash: around November 10, 2018. I had just entered the crypto not long ago, and there were no projects to work on. I was very poor, and the target of my fixed investment was still EOS. I remember very clearly that on November 10, I had just received my salary and had a bonus of about 10,000 or 20,000 yuan. At that time, I was in debt, so I paid part of it, and then I bought ETH and EOS with all the remaining money. At that time, the price of BTC was around 6,000, and then I All In. The next day after I bought it, it was cut in half, directly to more than 3,000. At that time, I didn’t know anything, so I bought blindly. Fortunately, there were only three targets at that time, BTC, ETH, and EOS.
At that time, I hated myself for not having enough money to buy enough assets, and I began to have some ideas about regular investment to buy the dips and hoarding cash.
The second crash: Around 2020/3/12, the epidemic was going on and I was resting at home. At this time, I had already learned how to use OTC leverage, which is to use credit cards to buy coins. After using up all the few thousand yuan I had on hand that day, I planned to cash out another 5,000 All In, but my mother stopped me. At the same time, I looked at Bihu and saw that Guru wrote that he would wait before buy the dips. I didn’t buy more assets at that time. Looking back now, it was a very good opportunity to buy the dips. I bought BNB and ETH at that time.
That time I learned: it turns out that big guys also make mistakes and cannot accurately predict the market. Also, for the second time I realized how good it is to have cash in extreme market conditions. Even if you can use leverage, you can still buy cheap assets.
The third crash: Around 2021/5/19, I had already accumulated my first pot of gold. I made some money from the increase in BNB, IEO, and BSC's defi, but I didn't know how to control the drawdown, so this time the assets fell by about 60%. On 519, I was drunk and went to the hospital for infusion because of the end of my last National Games. This time, I felt that it was too painful for me to control the drawdown of my assets from such a high level. At the same time, because I began to realize the importance of cash, I consciously started to convert the profits of the project into cash from that time.
At that time, because my large position had withdrawn too much, I just lay flat and went to Zhihu to promote products. I started writing articles to sell sports goods, hoping to make a big splash on Double Eleven. As a result, the market recovered before Double Eleven, and I returned to the crypto. I basically did not make any moves during this crash, and the currency standard did not decrease. At that time, I felt numb and didn’t take it seriously. I thought it was okay to keep a full position.
The fourth crash: Around June 2022, this crash was the liquidation of LUNA. My position was still fully withdrawn, but because I started to have some cash in my hands, I began to slowly buy a few thousand dollars. Because I was timid, I didn’t buy much. My experience at the time was to continue playing dead, it would come back anyway, but because I was afraid of not being able to live, I also left some cash, but did not buy the dips. This time I had some money, but I didn’t dare to move seeing the low price.
I tried not to look at it or think about it. Because I had leveraged to survive a bear market before, I didn’t dare to buy it this time even if I had some money, because I felt safe with cash in hand. Of course, I missed the bottom.
The fifth crash: around November 2022 (only four pictures can be posted)
At this time, I was just about to leave for Shenzhen to develop my career. I really didn’t want to buy any stocks at that time. After arriving in Shenzhen, I lived in poverty and didn’t dare to spend money. At this time, I had cash in my hand, which was about 30% of the total position. But I still did the same thing. I bought a little bit of ETH at around 880, really a little bit, and also bought a little bit of BTC. As a result, I spent this period of buy the dips hunting with cash in hand.
My experience then was the same, because I had been poor before and never wanted to go back. Even though I knew this was the bottom, I didn't dare to buy it. I no longer had the courage to All In , and I just wanted to grow slowly. This was the most regrettable operation I had ever made. I clearly had cash, but because I didn't dare to take the risk, I watched the low-priced assets slip away from my eyes.
After this crash, inspired by my friends, I began to learn the concept of daily MA120, which is to sell when it falls below it and buy when it rises above it.
Of course, there were several times when the price fell below and rose above during this period. It was very difficult for me personally to execute them. There were also times when I executed halfway and then got severely frustrated because I really couldn't do it.
The sixth crash: August 5, 2024, which is today I will focus on the mentality and operations of this time. Because I discovered the problem that I didn’t dare to buy before, this time I buy the dips part of the bottom of Ethereum at 2200-2300 and BTC at 4.9-5.1. A large part of the reason is because it is related to the book I read, and I also want to practice the strategy in it. Although the purchase price seems okay at present, there are many issues worth thinking deeply about.
What is the prerequisite for buy the dips?
It seems that Wang Chuan said that when the market is bloody, it depends on who has cash in hand. If we think about it more deeply, several questions will arise:
Where does cash come from? My personal thinking is that cash can come from three places:
1: I don’t have a full position, I have cash
2: I have good cash flow, so it doesn’t matter if I have a full position
3: I sold part of my position to cope with the market. Every question is worth thinking deeply about. Let’s look at the first one first: I didn’t have a full position. If I didn’t have a full position, it means that I may not have bought at a low price like me before, or I bought but made some cash through the project I did. I have a deep understanding of the fact that projects can make cash. Take one of the projects as an example: MUBI
During the Inscription bull market, I won 9 MUBIs. After distributing them to the team, the chips in my hand had a profit of nearly 300,000 US dollars at the peak. At that time, I didn’t know how to control risks, or I was confused. Fortunately, I did sell part of it and exchanged it for some ETH, but I still kept a part, which I haven’t sold until now.
Looking back now, I have learned a few lessons from this experience:
1: When new assets are issued, the best time to exit is when liquidity is the best. In fact, the final outcome of most new assets is to return to zero. The purpose of playing with new things is to earn more mainstream coins.
2: At the same time, when an asset is sought after, the risk will increase sharply, because all optimistic factors are reflected in the price, and the source of risk is high prices, and high prices are often accompanied by optimism, so I should control the risk of my assets at the time. Controlling risk is also what should be done in a bull market, and "controlling risk" is specifically manifested as "giving up part of the profits", even if they are very high profits.
3: Prevent retracement. When my assets hit a new high, I found that I was blindly optimistic, which made me think that it would continue to rise. Most importantly, I really didn’t think about when to sell. This is the most terrible thing. I was happy when I saw the numbers increasing. I was not sensitive enough to my assets, which led to a huge retracement after making money. Although I sold part of it by mistake, it was definitely not this idea that guided me to sell.
I am just giving an example. Because too many assets have retreated and liquidity has dried up, why am I talking about this when talking about the big cycle? Because I found that obtaining cash is actually part of the closed loop of buy the dips. If the project does not make money during the bull market, then there will be no money to buy the dips when the market falls.
So "In order for me to have more money to buy the dips, I need to catch the alpha project and sell it well." My personal experience is that doing this part well will lead to the first option "I am not fully invested, I have cash", or "I am already fully invested, but I have made some cash."
After all, you need cash to buy the dips.
Second: I have a good cash flow, so it doesn't matter if I am fully invested. I believe that this situation is relatively rare for most people in the full-time crypto. They may have some defi income, or like 0xsun, they have hundreds of thousands of group fees every month. In this case, even if there is a sharp drop, I can buy the dips with the group fees for one month. Or I have a good business off-market. People who run community have some advantages in this regard. People like Teacher Li Xiaolai are the best, with super strong cash flow. They are not afraid of any drop and have money to buy the dips.
Therefore, in order to cope with extreme market conditions, cash flow is a very important link.
Third: I sold part of my positions in order to cope with the market. At this point, I need to mention the strategy of Brother Studio: Although the MA120 strategy is a simple strategy, I have tried it myself and it is really difficult to execute, because the more frictions there are, the more difficult it is to execute. This time, Brother Studio executed this strategy and achieved very good results. I admire them very much because my own experience of causing great friction after executing half of it makes it difficult for me to get started now.
This strategy is difficult, but it is really effective. I am now consciously practicing to implement this strategy.
Once this strategy really takes effect, even if the position is fully invested, you can "escape the top" and reserve some cash for risk hedging. Although the other half of the strategy is to buy back when it breaks through MA120, since "it has fallen a lot anyway, I will make a profit no matter when I buy the dips", it will be easier to buy at the bottom, because the coin base is increasing.
The above is my current understanding of “how to better buy the dips”.
My experience is that this is a closed loop. My strategy this time is the first one. I have cash from previous profitable projects, so I have money to buy the dips, but it is only a small part. The reason why I dare to buy is because I happened to read a book at this time. The book said that when I am willing to take risks that others are unwilling to take, when no one will buy this asset at any price, that is when the risk is the lowest. I personally also learned from reading books and then guided my operation this time.
The main points are as follows:
1: There are two types of risks. The first is the risk of loss, and the second is the risk of missing opportunities. I think the opportunities are greater than the risks now.
2. Risk control is not risk avoidance. Risk avoidance may also mean avoiding profits. Therefore, we must take risks that others are unwilling to take.
3. Most people in the market are waiting for a lower price. When most people think so, the price will not fall further.
4: Assuming the price really falls further, I can accept it because I know it is impossible for me to buy at the bottom. I tell myself that it is inevitable that the price will fall again after I buy, and I feel a lot less pressure.
5: Pay attention to the big cycle. I found that when I had many projects, I ignored the operation of the big cycle. I didn’t know that the big cycle is the most profitable, lowest risk and least difficult operation.
6: Believe in the wisdom of investment masters and practice what you see
7: Don’t follow anyone else’s operations, because my experience tells me that I cannot make the money that others can make. It is very important to have your own system, and it is even more important to stand firm, firmly believe in your own system, and not be led away by others.
8: Risks mainly come from overly high prices and overly optimistic sentiments, and vice versa. Opportunities come from crashes, low prices, pessimistic sentiments, and when a high-risk asset is very cheap, it can also be a good speculative opportunity.
These contents are summarized from my reading and learning, and can also be regarded as a record of my mood today.
In short, today's experience is:
The reason why I failed was that since I didn’t think through the previous closed loop, I didn’t have enough funds to buy at the bottom. I didn’t control the risk and prevent the drawdown when I was buy the dips money, so I didn’t have more cash to buy, and I didn’t execute the MA120 strategy that I approved of.
What worked for me was this: I learned some investment knowledge from reading books, then I wrote a lot of notes, backtested the situation at the time, and finally implemented what I learned, and stood my ground and firmly believed that what I learned was effective.
The above is a series of thoughts I have drawn from today's plunge. Finally, I wish my family members success in buy the dips and top-escape.
