‘Silly cash’ Ethereum investor loses over $2M in six months — 3 classes to study

by Jeremy

An nameless Ethereum investor has misplaced greater than $2 million buying and selling Ether (ETH) since Sep. 9, 2022, on-chain knowledge reveals.

Shopping for Ethereum excessive, promoting low

Noticed by on-chain monitoring useful resource Lookonchain, the “silly cash” dealer spent $12.5 million in stablecoins to purchase 7,135 ETH after it rallied 10% to $1,790 in September 2022. However a subsequent correction compelled the dealer to promote all the stash for $10.51 million. 

Ethereum investor’s transaction historical past from September 2022. Supply: Lookonchain

Consequently, the dealer misplaced almost $1.75 million. Apparently, ready and promoting at in the present day’s value would have resulted in a smaller lack of $1.14 million.

The investor’s trades reemerged in February as ETH value had risen by roughly 10%. Knowledge reveals that $7.65 million in ETH was acquired on Feb. 16, solely to promote it eight hours later as ETH value dropped, leading to a lack of one other $324,000.

Ethereum investor’s transaction historical past from February 2023. Supply: Lookonchain

3 Ethereum funding classes to study

Merchants can use such examples to study from others’ errors and cut back their funding dangers with confirmed methods. Let’s check out among the most simple instruments that may assist cut back losses. 

Do not depend on only one elementary

The investor first traded stablecoins for ETH on Sep. 12, simply three days earlier than long-awaited transition from proof-of-work (PoW) to proof-of-stake (PoS) by way of the Merge improve.

The Merge, nonetheless, turned out to be a “sell-the-news” occasion. Thus, going extraordinarily bullish on Ether primarily based on one robust elementary was a poor choice.

Furthermore, going all in whereas counting on one indicator, significantly a widely-anticipated information occasion, is usually a shedding technique, which is why merchants ought to contemplate a number of elements earlier than making a choice. 

Ethereum fund outflows picked momentum forward of the Merge. Supply: CoinShares

As an illustration, one such metric was institutional flows. Ether funding funds suffered outflows price $61.6 million every week earlier than the Merge, in response to CoinShares’ weekly report, suggesting that “good cash” was leaning bearish. 

Hedge with put choices

Hedging with choices in Ether buying and selling permits traders to buy choices contracts reverse their present open positions. Subsequently, traders may mitigate danger by opening a put possibility contract in opposition to their bullish spot.

A put possibility offers a holder the best, however not the duty, to promote ETH at a  predetermined value on or earlier than a specific date. So, if the spot Ether value drops, the investor may promote the asset at a pre-agreed value, thus defending himself from losses in ETH’s worth.

Do not go all-in; verify momentum

Don’t put all of your eggs in a single basket no matter how a lot capital you possibly can throw round.

As a substitute, coming into place in increments could possibly be a safer technique whereas retaining some funds on the sidelines. Thus, merchants should purchase ETH throughout a brief or long run bull run however can spare some capital to purchase throughout potential dips, whereas counting on a number of technical indicators for cues.

As an illustration, momentum oscillators just like the relative power index (RSI) reveals whether or not Ether is oversold or overbought on particular timeframes. So a technique of going lengthy when the RSI studying is shut or above the 70 and forming a decrease excessive has a excessive likelihood of failure.

Associated: A newbie’s information to cryptocurrency buying and selling methods

The Ethereum each day chart beneath reveals the 2 situations when the abovementioned investor purchased ETH alongside the RSI forming a decrease excessive.

ETH/USD each day value chart. Supply: TradingView

Finally, merchants’ errors can function alternatives to study what works for an investor and what would not. The principle takeaway is that traders ought to enter a market with a particular plan primarily based on their very own evaluation and danger urge for food. 

This text doesn’t comprise funding recommendation or suggestions. Each funding and buying and selling transfer entails danger, and readers ought to conduct their very own analysis when making a choice.