After losing 1.7 million US dollars in counterfeits such as LUNA, AI16Z, I learned five major investment lessons

Podcast source : Miles Deutscher

Original title : How I Lost $1.7 Million In Crypto (IF*cked Up)

Broadcast date : February 17, 2025

Background information

In this video, I will share five big mistakes I have made in my cryptocurrency trading career and valuable lessons I have learned from them. At the same time, I will analyze common pitfalls for beginners and senior traders in the crypto market and explore why these mistakes, while expensive, ultimately helped me succeed. Hopefully through my sharing, you can avoid similar problems and become a better cryptocurrency trader or investor.

Main discussion content

• Bitcoin (BTC)

• Altcoin

• Copycat market trends

• The latest updates to the counterfeit market

• Copy trading strategy

• The projects involved include: BEAM, MODE, AI16Z, LKY, LUNA, LMT, SUNDOG, PEPE

Introduced

Miles:

In the crypto space, most people like to talk about their success. They are happy to showcase the huge gains they have made in the market, but few are willing to disclose their failure experiences.

But in fact, my success in the crypto market has largely come from the lessons I learned from those major losses . Even in this current market cycle, I have experienced a lot of failures, and these experiences once again remind me that some core principles need to be followed to become a successful investor.

Today, I want to change my perspective and not talk about my five successful cases, but focus on the major losses I have suffered in my crypto career. These losses represent the biggest mistake I have made and also make me realize the "pits" I have repeatedly stepped on in the market. The reason why I was able to become a profitable investor is largely due to the heavy blow in 2021. Even in the current cycle, I have several transactions that have not been able to do it, but it is these failures that allow me to be more calm in the future market cycle, especially in the next round of counterfeit bull market.

Ignore market risk signals

Miles:

I have to start with the biggest loss I have suffered in the cryptocurrency market - Luna. This experience made me deeply realize the importance of the investment psychological problem of "position prejudice" . The so-called "position bias" refers to the fact that when you hold a large position on an asset and see its price continue to rise, it is easy to develop a subjective belief that the fundamentals of the asset are improving. However, this belief is often not based on objective fundamental analysis, but simply an illusion caused by rising prices. In other words, you may mistake the price rise as a proof of the fundamentals becoming better.

It is this position bias that makes me ignore many potential warning signs that actually indicate that Luna's fundamentals are gradually failing. I actually realized at the time that while algorithmic stablecoins like UST are valuable because they are scalable and decentralized, unfortunately this also leads to the possibility of decoupling (i.e. stablecoins cannot maintain their anchored assets). value balance) risk.

Although I was optimistic about Luna at the time and held a lot of Luna and UST, I also knew that there was a risk of "decoupling". However, I underestimated the actual possibility of this risk, even viewed it as an event of minimal probability, and thus did not take any action, or did not take timely action.

When the UST price fell to 96 cents, the market had already shown signs of a clear crisis and I should have cut my position at least 50% immediately to avoid risks. But due to the influence of "position prejudice", I chose to ignore these warning signals, and this psychological misunderstanding ultimately cost me a heavy price. We all know what happened next. Once UST starts to decouple, both Luna and UST will eventually return to zero.

This huge loss in 2021 has dealt a serious blow to my portfolio, but it has also become an important turning point in my investment career . In fact, I made huge gains through my investment in Bitcoin in early 2021. I bought a whole bitcoin for $5,000 in 2019, then turned the investment to $500,000 and further grew to more than one million dollars in the bull market. However, by 2022, due to the drastic market fluctuations, my assets shrank from one million dollars to tens of thousands. This psychological gap from life-changing wealth to a sharp shrinkage is indescribable.

I firmly believe that without experiencing a heavy blow to the market, it is impossible to truly grow into an excellent investor. If you are experiencing similar losses, remember that while you may not be able to see the positive side right now, these experiences will make you stronger and smarter.

This is why I decided to make this video today. Rather than talking about 10 times, 50 times or even 100 times the return on investment, it is better to focus on my failure experience, because the lessons contained in these failures are truly valuable. My goal is to help you become a better investor, and learning how to learn from your mistakes is the key to achieving this. This is also the reason why I was able to succeed today - because I kept learning from failure.

Lack of clear stop loss strategy

Miles:

My second mistake is that there is no clear stop loss strategy. I believe this is a common problem for many investors, especially when the counterfeit market is volatile.

Let me take Beam as an example. I have a larger position on Beam during this cycle, but unfortunately, I don't set up an effective stop loss strategy for it. This morning, when I looked at my portfolio, I realized that Beam’s value had shrunk to a few cents, and it used to be one of my biggest investments in the market.

When I looked back, I found that Beam's price trend had already issued a warning signal. After the initial highs, the price began to enter a series of lower highs and lows, and the momentum was significantly stagnant. Although technically the price was still above the moving average at the time, it should have caused me a high alert when it first fell below, however I chose to ignore this signal until the price fell further. Judging from the daily chart, I also have a few days or even weeks to take action, but I did not set a stop loss in time.

For currencies that I hold for a long time, I usually do not set a 100% stop loss, but adjust the stop loss ratio based on the fundamentals of the currency and my investment period. For example, for short-term trading, I will set strict stop loss, while for long-term holding, I may allow a 50% retracement. However, in Beam’s case, I should have cut my position at least half because I can re-enter when the price moves improve even if I missed the rebound.

Therefore, whether it is short-term or long-term trading, setting a stop loss is crucial. You can determine key support and resistance levels based on high time frames such as weekly or monthly lines as references for stop loss. For example, Solana 's key support is currently at $175, and if the price falls below this level, I will start to worry. Similarly, Bitcoin’s key support may be at 75K. Even if these levels may not necessarily be touched, setting stop loss ahead can help us take action in a timely manner when there are major changes in the market.

In order to better execute the stop loss strategy, I recommend combining a variety of technical indicators, such as moving averages, relative strength index (RSI), etc., to improve the accuracy of the strategy. When the indicator of the high time frame is triggered, you can switch to the low time frame (such as the daily or hourly line) for further analysis of the price trend, thereby deciding whether to execute a stop loss.

In addition, I would like to share a practical tip, which is to set a price alert on TradingView. By simply right-clicking on the moving average or key support level and adding an alert, you can get notifications when prices hit critical levels, taking action in a timely manner. In this way, you will not find that your assets have fallen sharply after leaving the market for a long time.

Finally, I would like to remind everyone that stop loss strategies are not only technical, but also fundamental. For example, Luna's collapse is a typical case of fundamental failure. When the market shifts from risk preference to risk aversion, changes in fundamentals can also become the basis for stop loss. Therefore, whether it is technical signals or fundamental changes, we need to remain alert and adjust our investment strategies in a timely manner.

Here is an example of how I did a little better with the stop loss strategy, let me take MODE as an example. At the beginning, my operation was very successful. I bought it in the Discord community for $0.014 and then rose to $0.06.

At that time, its price trend showed a significant upward trend. From a technical point of view, as long as this trend remains, the market situation is favorable. However, the situation changed after the trend was broken. Both signals indicate that market momentum is changing when prices fall below the trend line and moving average. These signals should have caught my attention, but I was too optimistic at the time to think it might be just a false breakthrough and therefore didn't take immediate action.

However, in the next few days, the price trend further deteriorated. The market has seen a series of backtests, and prices have failed to break through key support and resistance levels again. Subsequently, the price rebounded failed and eventually fell below its previous low. Throughout the process, the market actually sent up as many as 6 stop loss signals. These signals include a break below the trend line, a loss of support levels, and a complete failure of the structure.

Here I took the method of gradually stopping the loss. For example, when the price first fell below the trend line, I cut 10% of my position; when the support level fell, I cut 10% again; when the price structure completely collapsed, I cut positions further. This gradual stop loss strategy allows me to gradually reduce risks when the market falls, rather than clearing the position in one go. The advantage of this approach is that even if the market rebounds, I can still retain some of my positions and reenter the market as the trend recovers.

Of course, not all currencies respect the support and resistance levels in technical analysis. In some cases, the market may go straight through these key levels, leaving you unable to react in time. But in most cases, it is always wise to act on a pre-set plan if the market sends a clear trend shift signal.

I don't object to those who invest based on long-term fundamentals and do not set stop loss. It is also a strategy if your plan is to hold an asset for a long time and be willing to accept the risk of its possible zeroing. But the key is that you have to clearly recognize the consequences of this choice. If you decide not to set a stop loss, you must accept the psychological preparation that you may lose all your investment.

I have had similar experiences myself, such as investing in certain Memes. At that time, my plan was to "either return to zero or skyrocket." Although these currencies were eventually reset to zero, because I had a clear plan in advance, I was able to accept the results calmly.

Regardless of the strategy, the most important thing is to have a clear plan. Even if the plan is "I am willing to bear all the losses", it is much better than having no plans. Investing without a plan often leads to emotional decision-making, and this is one of the most dangerous behaviors in investing.

Failed to make profits in time

Miles:

The third mistake is that I failed to make a profit in time , which is probably the worst mistake I have made in years.

Depending on the currency, there will be different price targets. Generally speaking, if I make money on a certain currency, I will try to make a profit when the price keeps rising. However, there were several times in this cycle that I broke my rules and cost me.

There are two examples. The first one was from November to December last year. I kept promoting it on the show that if you make a profit, you have to make a profit. But I actually didn't do this myself, and I was a little overly addicted to the market optimism at that time. Obviously, the market is very hot during this period, and the market from November to December is very good. Everyone is excited about the copycat season, and many memes have also skyrocketed. And complacency is deadly in the crypto market, so you need to act when things happen.

When the market falls, you need to take action, maybe stop loss or reduce positions, or even choose to buy. This is also the action you can take. Or when the market is rising, you can raise the stop loss to protect your trade, or start taking profits. But complacency means you do nothing, let things develop naturally, and you basically just passively watch things progress.

I saw the number of investment portfolios rising, and I developed a false sense of security, thinking that the market would continue to rise. However, when the market started to turn at the end of December, the bubble burst and my portfolio value shrank significantly in a short period of time.

The second example is the Lucky Coin I traded . I mentioned this case several times in previous shows and analyzed my mistakes in detail. Lucky Coin was an important investment project I had at the time, but I was not profiting from it at all. At that time, the Lucky Coin I held at the peak was worth about $1.7 million, but all of these gains evaporated due to failure to settle the profit in time. I didn 't make a penny on Lucky Coin.

Of course, there are some reasons why I failed to withdraw $1.7 million from Lucky Coin. The first reason is that when I was making content related to Lucky Coin, I followed a personal rule: I would not sell a coin for 24 hours when I talk about it publicly. This is to avoid being accused of "pulling up shipments", that is, selling immediately after publicly optimizing a certain currency to make a profit. I think this practice is morally unacceptable and will also undermine my credibility as a content creator. Therefore, I strictly abide by this rule. However, this also led me to miss the opportunity to make a profit at the high point.

In addition, insufficient liquidity is also an important reason . Small-cap currencies like Lucky Coin have generally low market liquidity, which means it is difficult to sell large assets at one time without significantly affecting the price. If I try to sell a $1 million position at one time, it may cause a sharp drop in the price, which is obviously not what I would like to see. Therefore, in such cases, the sale can only be carried out in batches and may take several weeks to complete.

Despite these limitations, I still think I made a fundamental mistake in this deal. When I first mentioned Lucky Coin on Discord, it was about $3; when I first mentioned it on YouTube, it had risen to $9. And before that, I had hinted at its potential at a price of $4 to $5, and then the Lucky Coin price surged all the way to $17. Despite this, I myself did not make any profit from it.

I was confused by the rapid rise in front of me and mistakenly believed that the price still had more room for growth, so I failed to follow my investment rules. By my rules, when the price of a certain currency doubles, I should at least withdraw the initial investment to make sure the principal is safe, but this time I didn't do that.

Unfortunately, Lucky Coin later encountered problems such as Replay Attack and failed blockchain migration, causing its price to fall rapidly. At that time, I obviously could not foresee the emergence of these technical problems, but this did not become an excuse for failing to make profits in time. Regardless of what happens in the future, once the price of a certain currency doubles or even triples, withdrawing the initial investment is a wise choice.

This experience made me deeply realize the importance of making profits in a timely manner . When the currency price rises, if you don’t make profits in time, once the market turns, you will find that many currency types have very limited liquidity. This phenomenon not only happens on Meme, even large-cap currencies like Beam will appear insufficient liquidity when they fall. When prices fall, the market reacts very quickly, and if profits are not locked in when rising, it may be regretful.

Through these transactions, I learned to adjust my strategy quickly and avoid the same mistakes in my next big deal. The most important point is that making mistakes is inevitable, but we must learn from them . Make sure the mistakes made today don’t repeat in tomorrow’s deal.

When you get 10x your gains in a trade, don't forget the lessons learned by Luna or other failures. When the market price falls and hits your stop loss level, don't hesitate and stop the loss decisively, rather than passively watching the price continue to fall. Looking back on the lessons from the past often prompts you to take action at critical moments. Although these experiences can be painful, they do help me stay awake during this cycle.

In fact, many times, we need to experience similar lessons many times before we can truly understand the truth. This is like a "scientific experiment" that requires repeated trial and error, and traders will make some unnecessary mistakes in the market. But as experience accumulates, we can gradually reduce the frequency of errors. The double error rate for professional players may be only 4%, while for beginners may be as high as 20%. By the same token, excellent traders do not make mistakes, but make fewer mistakes and less impact.

One message I want to convey today is that making mistakes is acceptable, but the key is to learn from them and work hard to reduce similar mistakes in the future . Whether you are a novice or a veteran, making mistakes in the market is inevitable, but every mistake is an opportunity to grow.

Position management errors

Miles:

The fourth error is position management.

During this cycle, I sometimes invest too much money in a certain currency, and this excessive position makes me emotional in trading and difficult to make rational decisions. On the contrary, sometimes I am very confident in a certain currency but do not match enough capital investment, resulting in missing out on greater returns. This made me realize that the importance of position management is often underestimated.

If you can learn something from my experience, it is three things that must be done in investment: setting stop loss, timely profit-making settlement, and reasonable position management. These three points are the key to becoming an excellent investor . When you are bullish on a certain currency and the currency has strong fundamental and technical support, make sure your position is reasonable, but don’t invest too much money to avoid losing control of your emotions when you lose money.

I'm sharing an example, this is my October 28 Sundog deal. On October 20, I tweeted on Twitter that I thought Sundog was about to rebound and therefore established a spot position. As my confidence increased, I added another leveraged position, and my total position became very large.

At first, the transaction was going well, the price rose in a few days, and I made money. However, then the price began to drop sharply. Because I had enough margin in my account, I did not set a stop loss and was not forced to level it. But when the price fell to 10 cents, I started to feel a lot of pressure. I feel that I should close my position. But I hesitated at the time, and I didn't want to lock in hundreds of thousands of dollars in losses, so I decided to stick to my own judgment.

Fortunately, the market then rebounded, with the price rising from 14 cents to 26 cents, and I quickly closed the position after getting back. However, this experience made me deeply realize the risks and psychological pressures that may be brought about by excessive positions. Even if you are confident in a certain transaction, you cannot invest too much unless you can fully accept potential losses.

In investment, the issue of too small positions is also worthy of attention. If you are confident in a certain currency but do not invest enough money accordingly, this may cause you to miss potential major profit opportunities in the long run.

My advice is to not invest in a single currency more than 5% of your total investment portfolio. If you limit your position to less than 5%, you can effectively avoid major losses caused by excessive position. In some special cases, if you are very confident in a trade, you can increase your position to 10%, but this should be limited to one or two operations in one cycle.

In addition, as the coin price rises, your position ratio may naturally increase. For example, if you initially invest 4% of your money in a certain currency and its price has increased by 3 times, then this position may account for 12% of your portfolio. In this case, I suggest you make a profit in time. For example, you can reduce the position from 12% to 8%, retain some profits while withdrawing the initial investment so that the remaining portion can continue to grow.

For example, I made 100 times the profit on PEPE. If I initially invested $20,000 and eventually rose to $2 million, that would obviously account for a larger proportion of my portfolio, rather than the initial 1%. But as the price rises, you need to accept changes in position ratios and control risks by taking profits in batches.

At some stage, PEPE once accounted for a large proportion of my altcoin portfolio. However, I gradually made a profit as it kept rising and eventually recovered my initial investment and realized some profit. Although nominally, I had a 100-fold gain between my first purchase and my highest price, I might have made only 20 times in reality. This is common in the market. Even if you seize the 10 times opportunity, the actual profit may be only 4 times, because you cannot accurately grasp the best time to buy and sell, and you will make profits in batches during the rise.

However, this strategy has a good side. If a currency does not reach 10 times, but only rises 5 times and then falls back, you can still achieve 2 times or 3 times. Although this gradual profit method may reduce your potential returns, it can also effectively protect your investment when the market falls. Overall, it is always much wiser to make profits in time than to not make profits.

Hold too many altcoins

Miles:

Next, I want to talk about the last mistake, holding too many currencies . In 2021, I made this mistake primarily. At that time, I held up to 30 or more currencies in my portfolio. I remember that I not only hold Solana, but also invest in many decentralized exchanges (Dex)-related currencies, I also hold some proxy coins, some game-related currencies and various L1 projects. As a result, my portfolio expanded to 40 to 50 coins.

When the market started to turn, managing such a large portfolio became a nightmare. During this cycle, I limit my position to less than 20 types. But even so, I still felt that I had too many currencies in November. Although it is not as exaggerated as 40, there are still about 20. In fact, I think 5 to 10 coins are the most ideal quantity.

I've been working on compressing my portfolio over the past few months to reduce the amount of currency to a more reasonable range. Almost all adjustments have been focused on completing the last month. Instead of adding too many long positions, I focused on optimizing the existing position structure. The only exception is when the market experienced a large-scale liquidation one week, which I thought was a good opportunity to briefly increase positions and get some good rebound gains. But overall, my goal is to concentrate the portfolio to 5 to 10 coins instead of 20 to 30.

If you hold 20 coins now, it is not too late to reduce it now. 15 may be OK, but honestly, even managing 15 coins is difficult. For each currency, you need to set price alerts and stop-loss conditions, which is almost difficult to achieve among part-time investors.

In addition, it is not easy to truly establish deep confidence in a certain currency. For example, if you say you are optimistic about the gaming industry and therefore hold five game-related currencies, this practice is acceptable, but if you want to establish in-depth technical or product arguments for each currency, the difficulty will be greatly increased. There are not many truly high-quality projects in the crypto market. When you look at your portfolio carefully, you may find that you have only 7 currencies that you really like, and the other 5 to 6 are just invested because you are optimistic about certain narratives.

So my advice is to focus the portfolio on a small number of high confidence currencies rather than spreading it in too many currencies. By reducing the number of positions, you can focus more on researching and managing each currency, thereby improving the overall efficiency and return of your investment.

This issue becomes more prominent as more new tokens are launched. The number of altcoins is increasing and market liquidity is diluted, which leads to greater fluctuations when prices of all currencies fluctuate, thereby increasing overall investment risk. If you want to reduce risk, reducing the amount of currency you hold is an effective way to manage risk more easily.

To sum up, I think the following five core mistakes are the easiest investors make in this cycle:

1. Position prejudice : develop unreasonable obsession with existing investments and ignore market changes.

2. No invalidation conditions were set : Failure to set clear exit standards for each investment, resulting in an increase in losses.

3. Untimely profit : Failure to make profits gradually when the price is high and misses the opportunity to lock in profits.

4. Position management errors : The funds invested do not match investment confidence, resulting in psychological stress or insufficient returns.

5. Holding too many currencies : Over-diversified investment, difficult to concentrate on management, and increases overall risks.

Conclusion

Miles:

Like I did in the video, I shared my mistakes openly and now it’s your turn. Write down your mistakes and what caused them. Once the reason is found, future improvement plans can be listed and strictly implemented. Put this list in a prominent position, such as on your computer desktop, mobile phone, or print it out and paste it next to the trading desk. Always remind yourself to stick to these principles when market sentiment is high or sluggish.

To maintain consistency in investment, you first need to recognize the problem. Before solving the problem, it is necessary to be clear about what the problem is . Review these mistakes one by one, reflect on their root causes, and develop a solution. Maybe you will also think of some mistakes that I did not mention, which may have a significant impact on you. Record them, analyze them carefully, and plan out improvement steps.