Summarizing the investment failures in the cryptocurrency market over the past year. From value investing traps, position management errors to PE valuation misconceptions, these lessons learned with real money can only be truly understood through personal experience. This article is adapted from a piece written by Cj_Blockchain, organized, translated, and authored by PANews.
(Prequel: Michael Saylor: JPMorgan, Citi, BNY Mellon, Wells Fargo and other major banks start offering “Bitcoin collateral loans”)
(Additional background: Standard Chartered slashes Bitcoin forecast! End-of-2025 target halved to $100,000, it will take another five years for BTC to reach $500,000)

Table of Contents

• A paradise for speculators, a graveyard for investors
• All in during the prelude, stop at the climax
  • AI Agent market
  • BSC market
• Beware of PE and buyback burn traps
• Final thoughts

As the year ends, let’s review the mistakes made over the past year and summarize some lessons learned. Sharing them serves as a wake-up call for myself and also hopes to give others some参考.

The principles are actually quite simple, but only after losing money can you truly understand. Just like the moment your position blows up, you regret why you opened such high leverage.

A paradise for speculators, a graveyard for investors

Humo, a hedge fund manager, has a very precise definition of investment and speculation:

If your returns depend on the price difference of the same asset at different times, that’s speculation.
If it depends on intrinsic value increase and dividends, that’s investment.

In the first few years when I just entered the crypto space, I was a pure BTC holder, and I got pretty good results. This strong positive feedback led me to seek a “sleepable investment” most of the time in the crypto world.

This is the so-called “security” brought by value investing.

I look at teams, whitepapers, and fundamental data, trying to find assets I can hold for one or two years. The so-called TVL, active wallet addresses, trading volume—seemingly detailed data—are the best sleeping pills for me to hold assets and sleep well.

But this is not much different from meme players on BSC who buy assets and hold them blindly, responding to CZ, heyi’s replies.

I sleep with data that may grow today and become zero tomorrow. They sleep with expectations based on celebrity effects.

I am no better than them.

The reason is, [in the crypto space, fundamental-based pricing has never been the norm]

• In a bull market: sentiment pricing may account for 60%, capital structure for 30%, and so-called “fundamentals” only 10%.
• In a bear market: sentiment pricing accounts for 40%, capital structure for 50%, and fundamentals still only 10%.

We are in a market that is excessively efficient according to behavioral finance, where the pendulum effect of emotions is very obvious. In such markets, speculation is far easier to profit from than investing.

If that’s all, value investing in crypto is far from being called a “graveyard.”

The most frightening aspects of “value investing” are two points:

1. When you deceive yourself into buying a coin from a value investing perspective.

If it drops 10%-20%, you comfort yourself: “The market is stupid, I am sober while others are drunk, spot holdings are safe,” you don’t cut losses, and you even want to add to your position.

If it drops 50%, you vaguely realize you might be wrong, but since you’ve already lost too much, you are reluctant to stop loss.

If it drops 90%, you silently transfer this coin to an unused wallet. Next time you see it rise 100% in a group, you realize you still need it to rise tenfold to break even.

2. When your initial motivation was to buy coins for speculation, and after losing, you switch to value investing:

Drop 10%, “This coin still has potential, wait for a big holder.”

Drop 20%, “I’m actually a value investor, holding this spot won’t lose much.”

You know the rest of the story.

So how does the money disappear?

I saw this principle long ago, but only after experiencing GMX, DYDX, JUP, MET, PUMP, CLANKER, BONK, and others did I realize one thing.

All in during the prelude, stop at the climax

Regarding position management, GCR had a principle that many overlooked but is extremely important:

During altcoin cycles, you should maximize risk exposure when the trend just reverses, and gradually protect capital over time.

This goes against most people’s intuition.

I have made this mistake countless times over the past two years.

AI Agent Market

During the AI meme season that just started last year, I participated with small positions in goat, ai16z, and some other meme projects, achieving decent multiples but average absolute gains. Until swarms, when friends around me started making hundreds of thousands of U in gains, I increased my bets. Started losing wildly. I think many people, like me, if not for TRUMP later, would barely beat BTC returns.

TRUMP saved many lives early in the year. Most people’s fate would have started to go underwater after the AI agent tide receded. But TRUMP appeared abruptly when AI agents started declining, giving many an opportunity to retreat swiftly and switch from AI meme to TRUMP for a clean exit.

BSC Market

In September, I was not actively chasing chains or meme projects anymore, just happened to see CZ’s tweet about 4 in the afternoon. I bought 4bnb for several million and then stopped paying attention, leading to the spectacular BSC market later. I realized too late that I missed the chance to increase my position early on. To compensate for missing the early multiples, I was forced to use profits from 4 and on-chain funds to buy Binance tokens.

Reflecting afterward, if I had increased my risk exposure early on, everything later would have been much easier. Even if I was wrong, losses would have been small.

Most of the time, our instinctive reactions are:

• When the trend just starts, and the future is uncertain, we should wait and observe;
• When the trend is hot, and consensus is established, we should hold heavily.

Because at trend reversal points, the market is still haunted by the trauma of the last bear market, and all “stories” sound like scams. At the peak, stories are perfect, and consensus reaches its zenith.

But from the perspective of risk-reward ratio (Odds), the reality is the opposite:

• At trend initial (reversal point): Although full of uncertainty, this is the highest odds, with limited downside, worth betting heavily for gains.
• At the climax (consensus point): Although it looks “stable,” prices have overextended future expectations, and downside risk is greatly increased. This is the time to “stop,” not go all in.

Beware of PE and buyback burn traps

All PE and cash flow valuation methods rely on a key assumption: long-term performance sustainability. But from the birth of BTC until today, nothing besides BTC itself has been truly sustainable.

The leading projects in all sectors have changed repeatedly. Looking back five years at the CoinMarketCap Top 10, over half are now unfamiliar or defunct.

The leader in the PERP sector has shifted from dydx, gmx to hyperliquid.

Countless sectors have been discredited. Most projects have a lifespan of less than a year.

PE valuation and buyback/burn strategies are my most frequent and painful pitfalls—much like the earlier discussed “value investing.”

When some projects are presented at 5x or even 3x, it’s extremely hard to resist buying.

Because I still hold a bit of hope, I can only warn of PE traps, but I believe many can completely avoid these pitfalls.

As for me, I still feel I haven’t lost enough, still hold some illusions about the industry, and will persevere for another year.

Final thoughts

Humans learn lessons from history but never truly learn from them; as 0xPickleCati’s recent article clearly states.

Some pain can only be understood and instinctively reacted to through personal experience.

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Tags: AI Agent Position Management Value Investing Traps Cryptocurrency Investment Crypto Experience