A popular Reddit post this week tells a cautionary tale for any cryptocurrency traders sitting on huge gains. The anonymous poster tells the story of how he traded his way from $3,000 worth of bitcoin to nearly $4 million in gains before losing every last cent.
According to the poster’s story, his venture into the bitcoin trading world began when he won 3 bitcoin in a poker game. When he started trading bitcoin, those three bitcoins were worth about $3,000. Over time, he slowly traded his way up to 200 bitcoins, worth nearly $4 million at the peak of the bitcoin market.
“I thought I was a trading genius, a god, whatever,” the poster wrote. As they often do in day trading, things quickly went south.
What Goes Up…
The poster says he made a series of ill-timed trades during the recent period of volatility following the peak in bitcoin price at around $19,000 that cost him 50 bitcoin overall. He began shorting bitcoin at $12,000 and added to his short position at $13,000, $14,000 and $15,000 before liquidating at $17,000, a series of trades that cost him another 50 bitcoin.
He then transitioned to a long position at $17,000 only to ride the price back down to $13,000 and lose another 50 bitcoin.
At this point, the poster described himself as “devastated, unsure, no clue what’s going on.”
Yet remarkably, he made the decision to leap back into the market by taking a long position at $11,500 only to liquidate at $10,500. After the price again climbed to $13,000, the trader went long one final time. He liquidated his bitcoin position earlier this week for another loss that would cost him his last bitcoin.
Cautionary Tale
“At this time I am still in shock,” the poster said, adding that “the last few months I’ve neglected relationships and school, and I’ve been daydreaming about living the high life rich as fuck with my millions.”
Unfortunately, these types of stories are all-too-common when it comes to traders attempting to jump into day trading with relatively little experience and nearly no risk management skills.
The cryptocurrency market is one of the most volatile and unpredictable financial markets in history, and even extremely experienced traders are struggling to predict its movements or even begin to potentially value cryptocurrencies like bitcoin.
Buying and holding bitcoin is enough of a gamble, considering how deeply divided regulators, hedge fund managers, traders, economists and financial experts are on the future of the currency. Attempting to day trade bitcoin on gut feel alone is one of the most dangerous moves a trader can make at this point in time.
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