How to STOP Losing Money in Crypto!
Use these tricks to stay afloat and keep them close to your heart.
Winning in crypto is great and everyone likes to talk about it. It’s sexy and boosts engagement. However, losing money is rarely discussed.
One way or another, everyone experiences that moment in crypto. How you overcome it decides if you end up a winner. In what follows, I share with you my best tricks:
How to protect profits
Buy panic, sell euphoria
Don’t trust altcoins
Don’t quit your job to do crypto
Avoid quick gains, they lead to ruin
Embrace failure and losses
Let’s look at each next.
This newsletter is sponsored by XDEFI, the most powerful multi-ecosystem wallet with over 1,800 supported chains! Check it out using this link.
Their next generation mobile wallet will launch soon and is about to disrupt the market! A single wallet for everything on-chain.
How to protect profits
It is not enough to take profit and sell. You also have to protect those profits! If you don’t have a clear system in place, the crypto casino will likely take them from you in no time.
A recent example was this guy that lost $400,000 in one trade. He didn’t start with $400,000. He started trading with $500. What he lost was ALL his profits in one trade.
Besides the greed that took over his trading, everyone that gets lucky will eventually run out of luck and the inevitable happens. You lose it all.
To avoid this, do as follows:
If you get lucky and turn $500 into 400k like the guy above, your first priority is to protect those profits. That means you DO NOT trade with the profits, you take them off the table. You keep them in cash (more on that later) or buy gold or BTC with it. That’s it!
After you secure your profits, you continue trading with your principal. In this case, the guy above goes back to trading with $500 or maybe a little more since he can afford it. Either way, those profits should NOT touch the market.
By doing this, even if the market turns against you, and you lose your principal (the $500), you still have the 400k in your bag smiling at you. That will make you a better trader/investor over time and allow you to re-focus faster after a loss.
You only increase your principal, trading stack, or investment portfolio when you get good results on your strategy over long periods. Only then you may consider taking a SMALL part of your profits to add to your trading stack or investments. That’s it.
What to do with your profits? Keep reading.
Buy panic, sell euphoria
You only deploy your profits in a bear market, ideally when people start tweeting that Bitcoin is dead. That’s the perfect time to start buying and taking risks. Always aim to maximize your risk / reward ratio aka find asymmetric bets!
Continuing with the above example, in the current market conditions where BTC shows weakness, I would keep that 400k in USDC and farm passive yields like in this guide from Alpha Post #29.
At 29% yield per year right now, that 400k would have made that guy around $10,000 per month doing nothing. This is a real yield from trading fees and liquidations. If the market drops more, he’d make even more in yields.
I would not buy Bitcoin or any coins right now. I’d wait for discounts should the market continue to fall. Remember, you lose nothing by not buying, you still keep your 400k profits! Protect them at all costs.
Once the market gives hints of a bottom, like in a bear market, you dollar-cost average (DCA) in and buy Bitcoin with those profits. This way, even if BTC moves lower or sideways, you reduce your risks with a good chance for the price to eventually recover and make new highs. If you’re patient, a good entry could easily double that 400k or whatever amount you deploy.
Look at this current cycle. If you had taken a good entry on Bitcoin back in the previous bear market, say under 20k, you would have beaten most of the market. The bigger your portfolio, the more BTC you should have in your bag. See my guide for more on that.
For example, I used my profits in the last bear market to buy BTC under 20k. I didn’t time the bottom at 15.5k perfectly, but looking back now, any buy under 20k was a prime entry. If you need help to better time the market, then join our Patrons group. You can also read more about our Patrons group here.
You can definitely play with altcoins, but they should be a small percentage of your total portfolio if you have size. Anything more is irresponsible and you will get burnt. See why below. Either way, when you spot euphoria in the market, start selling, and don’t buy back. Protect those profits!
Don’t trust altcoins
Altcoins are not sound money! At best, they are a good piece of tech. Most do not even need a token and are a very poor store of value over time. You don’t go and buy $10,000 worth of tomatoes to store your wealth, do you? Altcoins are more like tomatoes. They spoil quickly.
A good way to lose money in crypto is by buying the latest altcoin that's been released and holding it long term. Please don’t do this. It’s like buying tulips and hoping to get rich.
It does not work like that.
Altcoins are good for speculation on short to medium time frames. That’s it. Anything over one year and you are likely going to get burnt. There are a few exceptions, but generally, altcoins are not your ticket to success on a long time frame.
They can make you rich overnight, but if you don’t follow the first point in this post, it won’t last. Most altcoins crash 90% to 99% in a bear market as buyers vanish. The reason altcoins pump and dump fast is because they are illiquid.
That means insiders can easily pump them. Once they make their profits, there’s no one to hold the price from crashing. Bitcoin does not have this problem as the most liquid cryptocurrency.
At a fundamental level, only Bitcoin is sound money and mirrors gold in certain ways. Ethereum does not qualify even if they like to call it ultra-sound money. In fact, Ethereum is more like oil. It goes up and down based on its network usage.
Don’t quit your job to do crypto
95% of traders are net losers. Only 5% are winners. Trading crypto is harder than your job and is 24/7. Likely a bad trade-off. Instead, keep your job or find one that you love and INVEST in crypto (which mostly means Bitcoin).
A good way to avoid a lot of losses is by not trading crypto. Instead, invest in this emerging sector. When you invest, buy the casino, don’t play its games like trading. That means you invest in its infrastructure with a long time horizon.
In that sense, Ethereum and its decentralized finance (DeFi) spinoff is one great example. It was hard to predict, but DeFi made Ethereum what is is today (the oil of DeFi). In the same vein, Bitcoin is and will remain sound money.
If you want to protect your wealth, buying Bitcoin at a discount will never be a bad bet. When you buy it, you don’t buy it to sell it tomorrow. No. You buy it to hold it long term and retire with it.
How?
You borrow against it or you farm yield with your BTC like in this guide I made some time ago. When Bitcoin hits $1 million within the next 10 years, that’s when you retire.
As for altcoins, strive to buy the infrastructure of crypto, not its memes. That’s where the real opportunity lies. Don’t bet too much on alts either, but a good bet can yield 10x to 100x returns.
I can’t tell you which coin is the next Ethereum, but do take some risks, depending on your age. As you grow older and richer, reduce exposure to altcoins and focus on BTC for peace of mind. It’s worth it.
Avoid quick gains, they lead to ruin
A quick 10x on an meme can mean euphoria and greed taking over which will likely lead to a bad trade soon after. Don’t go all in on such plays. Never go all in on some altcoin. Feel free to speculate, but keep it small vs your total portfolio.
Making your yearly salary in one trade can be life changing, but so is losing it all in one trade. Meme coins are attractive because of how fast you can get rich (or poor). They are high-risk and worth it only if your portfolio is small in size.
In such cases, risking more makes sense. If you already sit on a sizable crypto bag (which should be mostly Bitcoin), then speculate on meme coins or similar high-risk coins with only a few percentage points of your total portfolio. That’s it.
If you hit it big, sell, never look back, and follow the first point in this post. Never sell Bitcoin for an altcoin. If you catch yourself doing that you do it for only one reason: GREED. That never ends well.
Embrace failure and losses
They are inevitable in this space. But you can definitely mitigate them and reduce their size. That’s where you come into play. The market does what the market does. Your role is to manage the risks.
Making money should not be your end goal. Instead, you should aim to maximize your time and level of freedom. Bitcoin is part of that answer. Most need to lose quite a bit by playing with altcoins before they realize this point.
By embracing your losses you will be quicker to put into focus what matters and improve your risk management. The top 5% traders that win at this game are there because they manage risk properly. That means they lose often, but in small size, while they win big a few times a year.
That’s all you really need. Accept loses as part of the process, but make them small enough so they don’t throw you off balance. This comes with time and discipline.
Be patient with yourself and find your comfort spot. It may not even be related to crypto!
This newsletter is made possible with the generous support of our community Patrons and partners. Upgrade your experience to show your support by clicking the below button or reach out to us on X or Discord to partner.
All info is provided for educational purposes only and is not financial advice.
Solid approach.
Great tips! Appreciate hearing the strategy of someone who has "been there, done that" successfully. I didn't buy enough during all the time BTC was sub-$25k because I stopped paying attention/lost interest. That's obviously the time to buy...