Why does Bitcoin’s rise to 0,000 have nothing to do with most people?

Author: hidden cloud

01

Outside the circle activated by price

In mid-January, the WeChat group of Garage Coffee Maker Circle became active again. When sharing an article “Bitcoin plummeted by 10%, 110 thousand people lost their money”, they said: Bitcoin is crazy, soaring and falling. . This is after 2018, they rarely talked about Bitcoin again.

In the previous month, the unit price of Bitcoin has risen from around USD 20,000, the highest point of the bull market at the beginning of 2018, to USD 40,000. Bitcoin has been listed on Weibo hot searches several times. With its strong price trend, Amber has been excited again inside and outside. .

Yu Man (pseudonym), who bought Bitcoin at a unit price of $13,000 in 2018, is a member of the group. In the same year, Bitcoin fell to more than $3,000. With public opinion that went to zero, she sold Bitcoin.

Now the news and developments of Bitcoin have re-entered Yu Man’s vision. Looking back on the scene of buying Bitcoins, she laughed at herself.

I didn’t read the white paper at that time and didn’t know the basic principles of this complex species. Yu Man said that the only reason to buy Bitcoin is that Bitcoin is a digital currency invented by the mysterious Satoshi Nakamoto. It has deflationary properties and is more valuable as time passes. Today’s price seems to have verified this again, and she has hope again in her heart. Ready to return to Ye Qing.

Not only the old Xiaobai like Yu Man, but the new Xiaobai who first heard of Bitcoin is also eager to try.

I have been interested in Bitcoin recently, but have never understood the blockchain. In the summer of working for an advertising company, after listening to friends talking about mining bitcoin, I also wanted to try it.

A bunch of codes drove an industry and made so many people rich, it is amazing. Xia Xia said that after a stable year, he will start working with two months of salary to buy coins. Now he just downloads apps like BitUniverse, and occasionally pays attention to the market to prepare for the next.

However, as the price of Bitcoin fell below $30,000, the scene mentioned at the beginning appeared: in the Garage Coffee WeChat group that was re-ignited, someone posted a screenshot of the account with a loss of 200,000, and someone came. For comfort, some people are showing off that they have done a good job of risk control in advance.

02

In a circle filled with anxiety

The eyes are red outside the circle, and the inside is very anxious.

Faced with the huge fluctuations in the price of Bitcoin, the vocabulary of transaction failures such as liquidation and selling is flying all over the world.

It’s like clearing stock, preparing to go home for the New Year, the more the pie is falling, the more we have to buy, the blockchain has killed people, panic, and jokes are flooding the major WeChat communities and circle of friends.

Even in the bull market, many troops are also buried. Senior coin speculator Guo Ahua (pseudonym) vomited.

Guo Ahua exchanged more than 2 BTC in his hands for some popular DeFi tokens around August, when the DeFi market was the hottest. However, in the high gas fee and full routine, the income became a feather.

Really slap the thighs, it is more uncomfortable to see others making money than you are losing money. The bull market is not coming. Waiting for the bull market. Now that the bull market is coming, I am not in the car. After hesitating again and again, Guo Ahua decided to open a contract to blog. She has made more bitcoins, hoping to make a big gain.

However, such a risky operation has a very small chance of winning in the huge correction of the Bitcoin price. Guo Ahua’s long contract ended with a loss of 7500 USDT. There are many investors with similar ideas to Guo Ahua. In the hugely volatile market, it is easy to become emotional slaves and make aggressive trading decisions.

And this kind of decision, the most direct result is the huge liquidation data again and again.

Since January, there have been 4 large liquidations in futures contracts, with a total amount of tens of billions of dollars. On January 11 alone, the amount of liquidation on the entire network was about 14.1 billion yuan, which can almost be a river of blood. describe.

03

Stuck in a price illusion

But in fact, whether it is spot or futures, as long as it is a transaction, it will inevitably be confused. The bull market is most prone to price illusions. Investors panic when they see a large increase, and do not realize the nature of the transaction at all. Mu He (a pseudonym), who is also a senior leek with Guo Ahua, confided to the chain catcher that he is now gradually realizing that every transaction is making money in proportion to price fluctuations, but now ordinary investors are more led by prices.

In the past few months, Mu He has been watching Bitcoin in the circle of friends every day, and he has witnessed Bitcoin breaking through $40,000, but he didn’t start to build a position until Bitcoin retreated to around $29,000.

My expectation is that Bitcoin will be sold after it returns to 40,000. A retail investor like me cannot hold it even if Bitcoin rises to $100,000. He deeply understands the cruelty of the market, and at the same time understands the difficulty of hoarding coins in such a volatile crypto market.

The practitioner Peter also has a deep understanding of this.

I started playing blockchain games in 2018. At that time, my investment philosophy was to experience the product in depth, understand it, and make value investments. But after entering the industry, my values ​​were subverted. The industry is too noisy and difficult to do. Peter said that his goal before joining the industry was to invest in bitcoins every month, and look at it after ten years, but as bitcoins soared, he successfully sold them.

Compared with Guo Ahua’s uncomfortable not buying, uncomfortable when he bought it, and uncomfortable when he bought it but didn’t sell it, Peter and Mu He are more sensible. They understand the excitement of the market and understand the truth of the market better.

04

Common trading traps

Excitement is self-evident, but the truth is that it is difficult to make money.

However, similar problems are difficult to be taken seriously by investors in the crypto market filled with wealth stories. It is very deadly for investors who have no trading experience and have not experienced industry cycles.

The bull market is about picking up money, and Stud is right. When Xiaobai asked his friend to enter the market by himself, his friend answered like this. However, in trading, the most terrible thing is not your technical error, but you fall into the trading trap created by yourself like a friend of summer.

In general, there are 5 common trading traps:

(1) Confirmation bias

Confirmation bias, also known as confirmation bias, means that most people tend to selectively recall and collect favorable details and ignore unfavorable or contradictory information to support their existing ideas.

Investors with such cognitive biases are more inclined to collect confirmation evidence when making decisions, rather than evaluating all available information. For example, when a trader prepares to buy a certain asset, he sometimes comes up with a conclusion early, and then tries to find information that can prove his point of view, and naturally ignores information that contradicts his point of view.

In severe cases, when there is a loss in the transaction, they will still refuse to accept the facts, but will still frantically search for all the evidence that may support their views. This kind of cognitive bias is very common in our daily trading, especially for novices. For example, when you are very optimistic and decide to go more gold, you can always find various reasons to convince yourself.

Confirmation bias may be more lethal when investors hold a priori views. If the information cannot objectively reflect the full picture of the transaction and fall into confirmation bias, then it can only strengthen the a priori view. In this sense, we want the information to be unbiased.

(2) Gambler’s fallacy

The gambler’s fallacy is the mistaken belief that if something happens more frequently than normal within a certain period of time, then it will happen less frequently in the future (and vice versa).

In investment, the gambler’s fallacy means that when a trader has experienced several consecutive losses, he will mistakenly believe that the probability of winning the next trade will be higher. If the result of each trade is independent, then the winning rate of the next trade has nothing to do with the previous consecutive losses (or consecutive profits).

In this case, the correct approach is still to adhere to the strategy, rather than human intervention due to false overestimation of the probability. In daily transactions, many people have this psychology. When you continue to be long or short with losses or gains, your next trade will subconsciously tend to choose the opposite direction.

(3) Herd effect

People like to follow the crowd because the group has a self-reinforcing mechanism. If a certain point of view is repeatedly emphasized in a group, the members of the group will gradually accept this point of view.

The herd effect occurs every day in the market. Due to information asymmetry, investors speculate on their private information by observing the behavior of most people, or rely too much on public opinion to imitate the decisions of others.

The most important factor affecting people’s conformity is not the correctness of the information itself but the number of people who agree with the information.

Individual irrational behavior leads to collective irrational performance. Herding behavior means that individuals disregard private information and take the same actions as others. Many Xiaobai who have just entered the market like to listen to some analysts calling for orders, which is actually the embodiment of the herd effect in the market.

Some well-known analysts or big Vs in the market are often the ones who lead the flock. Since ordinary investors have less information, when more people choose to believe in them, the rest will follow. The footsteps of the masses.

(4) Recent deviation

Near-term deviation means that people are more inclined to recall and infer recent events, and believe that the same situation will continue indefinitely into the future. This phenomenon often occurs in investment. Generally speaking, human memory is very short, but in terms of investment cycles, memory is particularly short.

During the bull market, people tend to forget the bear market. People will subconsciously think that the market should continue to rise because it has been rising recently. Therefore, investors continue to buy stocks and feel good about their prospects.

Investors have increased their risk exposure and may not consider diversification or the cautious attitude of portfolio management. Then in the bear market, instead of reducing the loss of their portfolio as much as possible, investors watched their net worth plummet, and finally resisted until the market was down before selling the stock.

(5) Selective perception bias

Selective perception refers to the tendency of people to ignore or quickly forget those factors that make us unpleasant or that are contrary to our ideas. To put it simply and crudely, selective perception bias is what we usually call wearing colored glasses ” to see things.

For traders, selective perception bias is very dangerous. Because most traders are afraid of the pain caused by losses and often defend themselves when facing losses. This makes it very easy for traders to ignore their mistakes in trading decisions, but to find some insignificant excuses.

When the market conditions are good, basically everyone makes money. At this time, people with selective perception bias will mistake the market’s risk return as an additional return based on their own ability.

When the market is bad, most people lose money. People with this kind of deviation often fail to see their own problems, thinking that the loss is just a bad market. Good traders will not blame the market, complain about the environment and any external factors. Traders must be responsible for their trading results.

05

Triumph of values

In fact, whether it is the young Bai Yuman, the adventurous Guo Ahua, or the summer full of interest and doubts about Bitcoin, they will inevitably fall into the aforementioned traps in the past, present and future, just like Greg According to Mu, the trap itself is the trader himself.

I was just a small miner. I bought Bitcoin and Bitcoin mining machines, but I was stuck on the top of the mountain. The old leek small test ox knife (pseudonym) fell into the trap of the herd effect in the bull market in 2017. Now that four years have passed, he has seen the market cycle and understood that making money is not easy, so he has become more and more cautious in order not to repeat the same mistakes. , He chose to slowly recover his blood through the grid trading robot.

Grid trading robot is a trading tool that automatically executes trading strategies. Investors can programmatically and intelligently realize buying low and selling high and repeated arbitrage within the expected price range. This concept is derived from the traditional financial market and was mainly used by market makers with larger capital in the past. These market makers achieve arbitrage through high-frequency trading of grid transactions.

Moreover, compared with the traditional financial market, the grid trading in the encrypted market has innovative mechanisms. The platform that chooses Pionex to open orders is the representative grid trading platform, Pionex Global CEO Yang Shengjing told Chain Catcher, compared with grid trading in the traditional sense, the innovation of its product lies in the launch of a wide range of grid trading strategies-Tiandi Shan, thereby eliminating user thresholds and allowing non-market maker teams with small capital Can also participate in high-frequency arbitrage.

I opened a BTC-USDT world order of 6000-60,000 US dollars with a principal of 160,000 US dollars, and now the profit is about 60,000 US dollars. Although it has plummeted in the middle, at least I don’t panic, just take it back and sell it at the previous high. Pie. The small tester said that Pai.com’s products are very subdivided. They not only have world orders, but also reverse grids, infinite grids, leveraged grids, loan grids and other subdivision products for them to choose from.

Although the current popularity of grid trading robots in China’s encryption market is not high, early order openers such as the small test ox knife have successfully recovered their blood with the help of Tiandi, and even have a small surplus.

Users using trading robots cannot say that they can make money, but they can minimize the probability of loss. Yang Shengjing told Chaincatcher that their values ​​are to help users overcome the weaknesses of human nature and become rational investors.

Such values ​​are rare in the crypto market. At least in the Chinese market, investors like Guo Ahua and Yu Man are still easily trapped by the wealth effect. Paradoxically, once the wealth effect is destroyed, the market will push them to attribute the error to “I don’t know enough on my own .

The reason why Paiwang can nurture such rational values ​​in an impetuous market. The core reason lies in the team’s genes.

Yang Shengjing said frankly that there are two forces in Pai.com’s team. One is the rationality and restraint of core members with many years of traditional financial experience, and the other is the innovation of core members with mature software development and management experience. Product thinking.

We have achieved a market score of 100,000 people per month in mainstream Asian markets. Yang Shengjing said that the reason why Pai.com now chooses to focus on entering the mass market is due to the gaps in the innovation and use of grid trading by ordinary users, and on the other hand, it hopes that through the popularization of trading tools, more investors can understand rationally. The market, understand the transaction.

We believe that the end of the transaction must be a victory of values, and Pai.com is willing to go forward, practice and pass on such values. Yang Shengjing said.

Author/ Translator: Tae Kon Jung