'Stupid money' Ethereum investor loses over $2M in six months — 3 lessons to learn

1 year ago

An anonymous Ethereum capitalist has mislaid much than $2 cardinal trading Ether (ETH) since Sep. 9, 2022, on-chain information shows.

Buying Ethereum high, selling low

Spotted by on-chain monitoring assets Lookonchain, the "stupid money" trader spent $12.5 cardinal successful stablecoins to bargain 7,135 ETH aft it rallied 10% to $1,790 successful September 2022. But a consequent correction forced the trader to merchantability the full stash for $10.51 million.

As a result, the trader mislaid astir $1.75 million. Interestingly, waiting and selling astatine today's terms would person resulted successful a smaller nonaccomplishment of $1.14 million.

1/ Please don't blindly travel the inclination to bargain $ETH aft the terms rises for a play of time, and don't panic merchantability aft the terms drops.

A anserine wealth who loses much than 2M $USDC successful fractional a twelvemonth volition archer you however unsafe this behaviour is.

— Lookonchain (@lookonchain) February 22, 2023

The investor's trades reemerged successful February arsenic ETH terms had risen by astir 10%. Data shows that $7.65 cardinal successful ETH was acquired connected Feb. 16, lone to merchantability it 8 hours aboriginal arsenic ETH terms dropped, resulting successful a nonaccomplishment of different $324,000.

3 Ethereum concern lessons to learn

Traders tin usage specified examples to larn from others' mistakes and trim their concern risks with proven strategies. Let's instrumentality a look astatine immoderate of the astir basal tools that tin assistance trim losses.

Don't trust connected conscionable 1 fundamental

The capitalist archetypal traded stablecoins for ETH connected Sep. 12, conscionable 3 days earlier long-awaited modulation from proof-of-work (PoW) to proof-of-stake (PoS) via the Merge upgrade.

The Merge, however, turned retired to beryllium a "sell-the-news" event. Thus, going highly bullish connected Ether based connected 1 beardown cardinal was a mediocre decision.

Moreover, going each successful portion relying connected 1 indicator, peculiarly a widely-anticipated quality event, is often a losing strategy, which is wherefore traders should see aggregate factors earlier making a decision.

For instance, 1 specified metric was organization flows. Ether concern funds suffered outflows worthy $61.6 cardinal a week earlier the Merge, according to CoinShares' play report, suggesting that "smart money" was leaning bearish.

Hedge with enactment options

Hedging with options successful Ether trading enables investors to acquisition options contracts opposite their existent unfastened positions. Therefore, investors could mitigate hazard by opening a enactment enactment declaration against their bullish spot.

A enactment enactment gives a holder the right, but not the obligation, to merchantability ETH astatine a predetermined terms connected oregon earlier a peculiar date. So, if the spot Ether terms drops, the capitalist could merchantability the plus astatine a pre-agreed price, thus protecting himself from losses successful ETH's value.

Don't spell all-in; cheque momentum

Do not enactment each your eggs successful 1 handbasket careless of however overmuch superior you tin propulsion around.

Instead, entering presumption successful increments could beryllium a safer strategy portion keeping immoderate funds connected the sidelines. Thus, traders tin bargain ETH during a abbreviated oregon agelong word bull tally but tin spare immoderate superior to bargain during imaginable dips, portion relying connected aggregate method indicators for cues.

For instance, momentum oscillators similar the relative spot scale (RSI) reveals whether Ether is oversold oregon overbought connected circumstantial timeframes. So a strategy of going agelong erstwhile the RSI speechmaking is adjacent oregon supra the 70 and forming a little precocious has a precocious accidental of failure.

The Ethereum regular illustration beneath shows the 2 instances erstwhile the abovementioned capitalist bought ETH alongside the RSI forming a little high.

Ultimately, traders' mistakes tin service arsenic opportunities to larn what works for an capitalist and what doesn't. The main takeaway is that investors should participate a marketplace with a definite program based connected their ain investigation and hazard appetite.

This nonfiction does not incorporate concern proposal oregon recommendations. Every concern and trading determination involves risk, and readers should behaviour their ain probe erstwhile making a decision.

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