My assets have halved from their peak—how should I adjust my mindset?
TechFlow Selected TechFlow Selected
My assets have halved from their peak—how should I adjust my mindset?
A screenshot of your all-time highest earnings cannot pay your bills.
Navigating Web3 tides with focused insightsAuthor: Cred
Translation: TechFlow
Your portfolio peak or all-time high net worth does not represent real wealth.
Even your current portfolio or PnL (especially unrealized gains) should not be taken for granted.
The core idea is: It doesn't matter how much you earn; what matters is how much you keep.
As I mentioned in a previous article, most people—whether by active choice or passive outcome—end up in one of two situations: either earning little but keeping most of it, or earning a lot but keeping very little.
You must avoid the worst middle ground—earning little and keeping little. That’s the greatest failure.
Massive unrealized PnL and assets returning to zero deliver no actual value.
A screenshot of your all-time high profit won’t pay your bills.
When facing these numbers, you need to be cautious of some subtle yet dangerous traps.
Many people mistakenly assume that their portfolio growth rate will remain linear—or even accelerate further.
Yet the sobering truth is that the primary force driving your wealth growth is often the overall market environment, not your personal trading skill.
While the saying “everyone is a genius in a bull market” may be an oversimplification, people often fail to recognize how significantly abnormal market conditions impact their results when evaluating performance.
Sticking through favorable conditions and making money deserves credit—but humility is also necessary. Recognize that such conditions are temporary, not permanent.
The first trap lies here: Mistaking the current market environment as a "new normal," assuming your trading results will indefinitely stay at the same level, and expecting your portfolio to grow at the same pace forever.
In reality, this assumption is almost impossible to sustain. Why is this thinking flawed?
First, current market conditions won’t last forever. If you continue using the same trading approach, you might earn less—or even lose money.
Second, trading strategies eventually fail. Even if market conditions remained unchanged (which is nearly impossible), the effectiveness of your strategy would gradually decline over time.
Third, as your portfolio grows, achieving the same high multiples becomes increasingly difficult with larger capital. The bigger the size, the more constrained your flexibility and ability to act quickly become.
Fourth, rapidly increasing position sizes over a short period can disrupt your psychological state, negatively affecting trade execution. If your total assets were $50,000 just weeks ago, and now that amount represents only the floating loss of a single losing trade, your mindset could collapse. This psychological adaptation takes time and cannot happen overnight.
These factors indicate: Do not assume your trading PnL and current market conditions will persist indefinitely.
This mistaken assumption typically leads to two major problems:
First, traders believe that early successful strategies will always work. However, both market environments and strategy suitability change over time, and many strategies don’t scale well to larger positions.
Traders often increase position sizes aggressively during periods of rising volatility without realistically testing their strategies, which frequently leads to severe consequences.
Just slightly excessive leverage, a bit more market shock, plus a touch of panic, can cause massive losses when the market reverses—potentially delivering a fatal blow to the portfolio.
Worse still, this situation is often accompanied by arrogance and stubbornness—such as thinking, “This strategy made me $N before, why should I change?”
Although I’ve discussed this issue multiple times, you might be surprised by how easily one can self-hypnotize into believing they’re a “trading genius” after earning substantial wealth in a short time.
In such cases, people often overlook the importance of market conditions and refuse to admit they were simply lucky, instead wrongly attributing all gains to some so-called “newly discovered trading ability.”
By the time you finally realize that market forces—not your own skill—were primarily responsible for your profits, it’s usually too late.
The second common mistake is “lifestyle inflation,” which is rarely discussed.
Many traders rashly project how much they’ll earn in the coming month, quarter, or year based on short-term portfolio growth and profits.
Social media platforms like Twitter amplify this psychology—people constantly flaunt expensive watches, luxury sports cars, lavish Dubai lifestyles, and envy-inducing PnL screenshots. These make you feel your achievements are never good enough.
As a result, many traders drastically upgrade their lifestyles, spending money they haven’t actually secured. This behavior is usually based on blind optimism about short-term gains, irrationally extrapolated into the future.
However, when the market cools down, you may already be deeply entrenched. Cutting back your lifestyle significantly not only damages self-esteem but is often impractical.
Summary: Current market conditions can dangerously distort your thinking:
-
Do not assume these conditions will last forever.
-
Do not assume your strategy will bring linear growth, whether over time or across larger capital sizes.
-
Do not assume you can manage trades the same way (in terms of execution or psychology) after dramatically increasing position sizes.
-
Do not assume you’ve fully mastered the market and can remain profitable indefinitely.
-
Do not use current market conditions as a benchmark for your future income.
Assume you are error-prone, susceptible to arrogance, and that your past success was largely due to luck. Approach yourself, your trading strategies, and especially your ego, with this kind of humility.
A common mistake among many traders is treating the dollar value of their portfolio as actual, realized wealth.
But that’s not true.
Typically, until your profits are converted into fiat currency and deposited into your bank account—with taxes set aside—all gains remain “paper wealth” and do not count as real income.
This may sound old-fashioned or dull, but I’ve seen too many traders (this happens in nearly every market cycle) fall from tens or even hundreds of millions in assets back to breakeven—or even legal bankruptcy.
This is not fear-mongering; it’s a very real risk.
I like to visualize the relationship between “portfolio balance” and “actual usable funds” using Russian nesting dolls.
Unrealized PnL is like the largest doll—the most visible number you see.
The actual amount you ultimately retain and can use in real life is the smallest doll inside.
Between them are several progressively smaller dolls, representing various factors that can erode your wealth.
From the largest to the smallest, wealth gradually shrinks until only a fraction remains truly yours.
(Of course, you could also use onion layers as an analogy, but Russian dolls might be more intuitive.)
When looking at your portfolio balance or unrealized PnL—especially when those assets are still fluctuating in the market and tied to directional bets (with varying degrees of liquidity)—you need to apply some form of “discount rate” to these numbers.
In other words, recognize that the probability of the full amount in your portfolio eventually being transferred to your bank account and being 100% freely spendable is virtually zero.
This isn’t just because of market volatility, but also because tax obligations in most jurisdictions take a significant portion of your gains. Even if you sell at the peak, part of your profit must go to the government.
Beyond taxes, there are additional practical “discount mechanisms” to consider within your portfolio.
As mentioned in the first part of this article, you must reserve room for inevitable mistakes. Here's one key factor:
1. Timing Issues
The odds of completely exiting the market at its absolute peak are nearly infinitesimal.
In other words, it’s extremely difficult to fully realize your portfolio’s peak value.
In practice, outcomes usually fall somewhere along a spectrum—from “exiting too early out of panic, locking in most gains” to “riding the full boom-and-bust cycle back to zero”—and everything in between.
Ideally, you aim to stay closer to the former end, but this itself is extremely challenging. You must remain humble and accept that you will likely make mistakes.
Remember, the primary goal is to preserve as much capital as possible—not to prove your judgment correct. Arrogance has no place here.
Even experienced top-tier traders in 2021 mostly began reducing risk when BTC fell below $60,000 from its all-time high and started showing signs of instability—already about a 15% drop from the peak.
At the time, this might have seemed like “missing the top,” but given the subsequent sharp market decline, it turned out to be a highly successful move.
For reference, BTC alone corrected about 15% from its peak—and that was considered “early exit.” Some major altcoins dropped two to three times more during that period.
Even with decent timing, such drawdowns are significant.
If your timing is off (and chances are, it will be), the losses will be even greater.
In summary, accept this fact: You are unlikely to sell at the market peak (hopefully this is a shared understanding). Therefore, you must accept that, due to timing issues, your portfolio will inevitably give back a portion of its peak gains to the market.
2. The Dip-Buying Trap
Market environments shape fixed trading habits.
Especially when those habits have recently been profitable, it becomes very difficult to break away from them quickly.
In a previous article, we discussed BitMEX and bear market PTSD. During bear markets, traders are often conditioned to trade mean reversion on short timeframes and reverse nearly every setup.
The influence of bull markets on trading habits is at least equally profound—if not stronger—because traders actually make more money in bull markets. Under such conditions, you can fall into similar traps.
Specifically, if the market rewards you repeatedly for buying the dip across nearly every timeframe, reinforcing the belief that “every drop is a discount and will eventually rebound,” then during the first major decline after the market peaks, you’re likely to keep buying.
Or at the very least, following the “humble self-reflection” mindset we advocate, you should acknowledge that you probably can’t identify the market top and may misinterpret post-peak declines as discount opportunities.
If you’re perceptive enough, you might notice that this downturn feels different—it doesn’t recover as quickly as before.
Certain data points can help assess this (e.g., the magnitude of open interest liquidations—if very large, it often signals a potential trend reversal, though we’ll discuss this in detail later).
However, recognizing these signals in real time is difficult.
The challenge is that even after the market has topped, there can still be drops that look like “golden buying opportunities,” often accompanied by strong initial rebounds.
Take BTC’s “fake” all-time high in November 2021 as an example:
Price showed a large wick and strong bounce from the mid-to-low $40,000 range, but then failed to resume the uptrend or make new highs.
Later, another strong rebound occurred from the $35,000 support zone, but again, no follow-through or new highs emerged.
These rebounds, while tempting, were actually “traps” after the market had peaked. If not recognized in time, they can lure traders into buying more, leading to even greater losses.
Two things happening simultaneously often trap traders: 1) A strong initial rebound from a clear technical support level; 2) No continuation of the trend afterward.
If you’re sharp, you might treat these rebounds as medium-term trades while actively reducing risk (e.g., cutting exposure to long-tail or high-risk speculative assets in your portfolio). This approach is close to the “best practice” for trading bounces after market tops.
But if you’re unlucky or inexperienced, you might keep averaging down during the decline, hoping the rebounds will behave as they did before (but they won’t). Eventually, when the market fully collapses, you may give back nearly all your prior profits.
These rebounds are often “bait” thrown out by the market, making traders complacent and encouraging further buying. But this behavior poses a serious threat to your portfolio, as it increases your risk exposure after the peak.
Particularly in the period between the market top and the actual crash, many traders reinvest their cash reserves, profits, and even realized gains back into the market—further increasing their net exposure.
This scenario may sound absurd, but it’s extremely common.
More importantly, these “discounts” compound:
-
Step one: You fail to sell at the top (discount #1);
-
Then, you buy the dip during the decline, depleting cash reserves or increasing exposure, while the market keeps falling (discount #2);
-
Finally, you either hold the losing positions long-term or are forced to cut them at a loss (discount #2.5).
This isn’t a fictional narrative—it’s the real experience of many traders. To me, this pattern is all too familiar. I believe investors who’ve lived through full market cycles will recognize it—and may have even repeated it themselves.
In summary, you need to further discount your portfolio’s peak gains—not only because you’re unlikely to sell at the top, but also because there’s a significant risk of being lured into buying during the first correction, leading to greater losses.
3. Overtrading During Distribution Phase
Markets often enter a “distribution phase” near the top, where prices stop moving in one direction and begin consolidating sideways.
Depending on the market cycle, instruments, and timeframe, this consolidation might appear as brief ranging, but for traders accustomed to rushing into trades whenever they see green candles on lower timeframes, this period can feel long and painful.
During this phase, two common risks exist: buying dips that continue to fall (or at least fail to make new highs), and trend-following traders repeatedly getting whipsawed by choppy price action in a range-bound market.
Especially toward the end of a market cycle, asset prices rise sharply every day, and the only entry point may be through extremely aggressive low-timeframe trend-following strategies. If you continue using these strategies once the market enters distribution or consolidation, losses are almost inevitable.
In fact, the failure of such strategies themselves is a key signal of changing market conditions. If your low-timeframe trend-following system worked well but suddenly starts failing beyond normal volatility, it likely means the market environment has shifted.
Whether you buy dips that don’t rebound sufficiently, or blindly chase a trend that no longer exists, the outcome is often the same: When your bull market strategy fails, you’re likely to suffer losses.
4. Market Impact
Remember what it feels like when your nose is completely blocked?
At that moment, you might regret not appreciating normal breathing when you had it.
Liquidity plays a similar role in markets—when abundant, we take it for granted; when gone, problems arise instantly.
If you trade large positions, or your portfolio contains many low-market-cap, low-liquidity assets, you must pay special attention to two issues:
-
The market impact you may cause when urgently selling;
-
If you choose to sell at an inopportune moment (e.g., dumping market orders into a market with almost no buyers during a broad sell-off), this impact can be magnified.
Slippage directly eats into your profits, so in illiquid conditions, your portfolio suffers an “invisible discount” relative to its peak value.
If you mainly trade high-liquidity assets like BTC, ETH, or SOL, this issue may be less severe. But if you focus on new tokens, Memes, or other high-risk assets, it becomes critically important.
In crypto markets, there are almost no true “safe-haven” assets. When a market crash occurs, nearly all assets move in sync (correlation approaches 1), and few escape steep declines. Newer, less liquid assets typically suffer the worst damage—not only worsening execution but also amplifying losses.
Additionally, a psychological trap emerges in such scenarios:
“It’s already dropped so much, why should I sell now?”
Or, “It’s already dropped so much, I might as well wait for a rebound before selling.”
Yet in most cases, no meaningful rebound ever comes. And even if one does occur, many traders overestimate their ability to withstand drawdowns and accurately time mean-reversion entries.
The core issue here is pride—selling later makes you feel foolish for not having exited earlier. So you delay selling altogether, ending up with even larger losses.
In summary, if your portfolio includes illiquid or highly speculative assets, your expectations around peak portfolio value must be more conservative—apply a higher “discount rate” mentally.
5. Revenge Trading
This is a classic trading psychology trap.
After going through the stages described earlier (success varies by individual), you may notice a gap between your current account balance and its previous peak—one that’s hard to ignore.
This gap is large enough to trigger regret and self-blame, yet small enough to make you believe a few good trades could recover it.
This is precisely when revenge trading begins—laying the groundwork for a catastrophic failure built on compounding errors.
Revenge trading has clear characteristics:
It’s driven by ego, irrational, and desperate.
In this state, your thinking becomes chaotic, focused entirely on short-term outcomes while ignoring long-term process.
Almost everyone has experienced revenge trading, and the outcome is usually disastrous—in most cases, it only drives you deeper into losses.
What’s terrifying is that revenge trading carries extreme risk: a single emotional trade can easily erase months or even years of hard-earned progress.
6. Conclusion
The purpose of this article is to help you let go of obsession with your portfolio’s peak value, so it doesn’t dominate your trading decisions.
If you cling too tightly to that peak number, treating it as the sole objective, the end result could be devastating.
The suggestion here is: Adopt a more rational view of your portfolio peak—treat it as a dynamic reference point that requires discounting, not an absolute target.
This perspective is more realistic:
-
You’ll experience less unnecessary panic;
-
You’ll preserve more capital;
-
You won’t destroy months or years of effort chasing a number that never truly existed.
Remember, the essence of trading is maintaining rationality—not being controlled by emotions.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@CryptoCred
