Why Knowing Market Rules Doesn't Guarantee Profits: Understanding the Core Competencies of Crypto Investing
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Why Knowing Market Rules Doesn't Guarantee Profits: Understanding the Core Competencies of Crypto Investing
Most people who became wealthy through cryptocurrency happened to seize the opportunity at a critical moment.
Navigating Web3 tides with focused insightsAuthor: Puffy
Translation: TechFlow
Question: If the past were to replay itself exactly as it happened, wouldn't that make things too easy? How could everyone become rich so effortlessly?
Answer: Even if the past were to repeat itself identically, they still wouldn't get rich so easily. It's far harder than it appears.
Independent Thinking
Fewer than 5% of people are truly capable of independent thinking, a skill that typically requires several key steps:
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Establishing a solid epistemological foundation
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Collecting raw data
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Applying meta-rules to narrow down strategy options
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Clarifying relationships between entities
These steps are extremely difficult for most people. They’ve never attempted them, don’t know where to begin, lack relevant experience, and have no confidence in letting their views stand out amid external noise.
Without this ability, you’re essentially helpless in the cryptocurrency space. Even the simplest, most logically structured datasets—such as LTC charts (the first altcoin, serving as the "code" followed by all subsequent coins)—might appear as incomprehensible puzzles.
Intelligence and Relational Reasoning
In a sense, intelligence is a form of empathy—you must infer the intent behind the questioner and understand the relationships they aim to convey.
In the crypto market, the "questioner" is the collective market participants. Highly intelligent individuals can quickly discern relationships that others may never perceive.
For example, it’s meaningless to try explaining the equation 3x = 6 to a dog—it cannot grasp abstract concepts like “dividing both sides by 3.”
Likewise, can you look at a chart and “see” the distribution of sentiment, paper gains and losses, and the overarching trend behind it? If so, you can infer future market movements from it.
Strong Strategic Thinking (Meta Game)
Many intelligent people can think independently and detect patterns, yet remain weak in overall strategic thinking.
Here are some typical failure cases:
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Developers: Believe their technical skills alone will give them a market edge.
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Thought leaders: Despite high status, their historical investment records are dismal.
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Successful individuals: For instance, can someone like Paul Graham actually identify correct investment opportunities?
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The被淘汰 group: This happens to nearly everyone—like professional athletes who eventually lose their peak performance.
Humans are inherently flawed and unable to fully comprehend or accurately model complex market systems. To avoid these pitfalls, you need strong strategic thinking to filter information and assign proper weight to each piece.
Risks in Execution
Successful execution demands several fundamental capabilities:
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Most people with capital to invest are already relatively stable in life and cannot easily risk it on volatile crypto trading.
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If you have a fulfilling family life and a respected career, the potential gains from crypto trading may be vastly outweighed by the risks involved.
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There are classic traps in trading that even those with an edge can fall into, such as:
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Treating profits as "house money": Truly rational individuals view buying SHIB with $300 that grows to $30 million the same as deploying $30 million of family wealth into the same SHIB stack.
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Acting decisively at critical moments: Markets constantly repeat similar patterns. Many know they're in bad trades or positions but delay action. "Oh, it's down 40%... oh, down 70%... oh, down 65% from its all-time high... oh, now 85% down... what should I do?"
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How to Avoid Going Broke Due to External Factors
Look at the list of major Bitcoin holders—how many of them do you think still hold their Bitcoin?
Bitcoin Top 500 Holders: Top 50
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980,000 BTC*. Satoshi Nakamoto
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400,000 BTC*. HD Moore (AHA)
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400,000 BTC*. Dustin D. Trammell (AHA)
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400,000 BTC*. Tod Beardsley (AHA)
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350,000 BTC*. "Dread Pirate Roberts" aka "DPR"
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300,000 BTC. Roger Ver
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300,000 BTC*. "knightmb"
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200,000 BTC. Mark Karpeles
8.5 182,592 BTC. "Loaded"
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174,000 BTC*. FBI (Federal Bureau of Investigation)
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119,000 BTC. Three members of AsicMiner management team (names unknown)
Common causes of financial ruin include:
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Hacked
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Exchange misappropriation of user assets (countless such cases exist)
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Legal disputes
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Tax issues
Why does nearly every central figure in the cryptocurrency space eventually receive legal subpoenas, disappear under suspicious circumstances, fall victim to scams, or get arrested?
In truth, preserving wealth isn’t easy. If you want to keep your Bitcoin forever, apparently the safest method might be to “die early”—(this is sarcasm).
So how do people actually get rich through cryptocurrency?
The majority of people who became wealthy through crypto had significant misunderstandings about the market—but happened to catch the right opportunity at a crucial moment.
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Many invested in Bitcoin because “you can buy coffee with it,” or “it hedges against inflation,” or other trendy justifications that recur in every cycle—none of which actually materialized.
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If back in 2010 or 2012 you believed Bitcoin was a novel proof-of-concept technology that gained real demand via darknet markets, proving its viability and gradually triggering successive speculative bubbles, then you held a correct view.
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However, very few people held this perspective at the time.
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Some invested very early in ETH simply because their high school poker friend told them it could support decentralized games or other use cases. Others believed ETH would become an unstoppable smart contract platform (until the ETC fork occurred).
Yet almost none of these visions actually came true. The vast majority of early "whales" either sold at low prices or suffered drawdowns of up to 95%. This shows they lacked deep understanding of how the market works and had no clear investment strategy.
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