Wealth is just the first step.
Author: Loopify
Translated by: Deep Tide TechFlow
In the pursuit of wealth, the final outcome is what matters most.
A person can make millions of dollars in a short period, but the speed at which they lose that wealth is often faster than the speed at which they earned it.
If you compare the events before and after, you will find that in most cases, the only difference is that the money earned has been lost again—often these losses are tens or even hundreds of times the original net worth. Many people become so engrossed in "casino" games that they forget to withdraw in time, resulting in them continuing to gamble away their money.
In another scenario, when most people gain substantial profits, the problem may become even more severe. Many will withdraw large sums of money, start overspending, and fall into the so-called "lifestyle inflation." This phenomenon is often reflected in material consumption, especially when their main source of income comes from the "casino" (such as speculative markets). They tend to overestimate their future earnings and assume they can maintain a luxurious lifestyle based on those earnings for the long term.
If you are not familiar with the concept of "lifestyle inflation," it refers to the increase in spending on living standards as net worth or income rises, ultimately leading to past luxuries becoming everyday necessities. For example, a person with a net worth of $50,000 in 2023 may spend $100,000 a year renting a penthouse in Miami in 2024.
I entered the cryptocurrency space through the NFT industry a few months after the Covid crash. If you are not familiar with NFTs, they were as popular in the 2021 cryptocurrency cycle as "meme coins."
In the following two years, I witnessed two extremes: some people successfully cashed out, earning eight-figure pure profits; while others lost seven to eight figures in assets due to holding NFTs, and even now these NFTs are still in their possession.**
In a bull market, the market generally rises, and people feel frustrated for only making 2x when others made 5x. In a bear market, everyone faces losses of -50%, -75%, or even -99%, leading to low morale.
These two vastly different market environments shape your trading habits, holding patterns, and views on money. This is also why people often say you need to go through three market cycles to truly "succeed":
The first cycle: You may make a lot of money but lose it back.
The second cycle: You become very cautious but miss out on many opportunities as a result.
The third cycle: You find a balance between caution and boldness, adapting flexibly to market changes.
If lucky, two cycles may be enough. But very few people succeed in their first bull market cycle.
This situation applies to any portfolio size, especially when you have made millions of dollars.
"Keeping an investment from $1,000 to $1,000,000 is referred to as 'poor risk management.'"
In fact, almost 99% of people can hold $1,000 to $1,000,000, but ultimately will let it fall back from $1,000,000 to $1,000.
When you succeed in "casino games," especially with high-risk speculative assets like meme coins, you may feel there is no need to learn anything else. No matter what stage you think the market is in now, I have seen many meme players trying to apply their skills to leverage trading, only to lose all their previous gains. This also indicates that we are closer to the end of the market cycle than the beginning.**
Similar to the situation in 2021, when many NFT players began to try trading cryptocurrencies.
This is not to say you shouldn't try, as adapting to market changes is very important. Meme coins cannot remain popular forever. In fact, in some recent project launches, and the brief 24-hour attention people paid to these projects, we have already seen signs of the meme coin craze gradually fading.
However, you need to enter this field slowly, learning and understanding the market as much as possible. Treat yourself as a beginner rather than trading with an arrogant attitude.
I delve deeper into the concept of "levels" in this article, which I believe is a useful framework for anyone who unexpectedly becomes wealthy for the first time.
(The original image is from Loopify, translated by Deep Tide TechFlow)
In the process of accumulating wealth, we can divide life into different "levels." If you feel the gap between levels is too large, you can add a ".5" state within them. For example, "2.5" might indicate that you have a stable job and some savings but have not yet bought a house. This layering approach can help you better understand your situation and set goals for improving your quality of life.
When you are still in the "casino"—whether in the cryptocurrency market or other speculative markets—remember to withdraw your chips at any time to improve your life. Each withdrawal is an "upgrade" for your life.
@Loopifyyy: "Once you have become wealthy, be sure to plan how to protect your wealth.
The NFT market will create many millionaires in the coming decades, and it will develop into a huge market. But remember, like any market, there will always be losers. Keep this in mind."
This experience comes from a tweet in November 2021, during the peak of the cryptocurrency market, while the NFT craze lasted nearly a year.
These experiences are not only applicable to cryptocurrency but to all areas of wealth accumulation. Becoming wealthy is just the first step; what is more important is how to keep that wealth.
How to Keep Wealth: Practical Advice
Consistently take profits: Regardless of whether the market is rising or falling, you should regularly cash out your profits.
Profits must turn into "real money": Only when the funds are deposited into your bank account are they truly profits. Otherwise, you may reinvest the funds into the market, trying to buy the dip or purchase new "hot investments," but the result is often that you cannot deposit back after withdrawing.
Do not be misled by "peaks": The highest point of your portfolio is just an "illusory number," and you can hardly realize it completely, so do not make decisions based on that number.
Avoid lifestyle inflation: As income increases, try to remain frugal and do not let past luxuries become everyday necessities.
Prioritize debt repayment: Whether it is credit card debt or a mortgage, paying them off as soon as possible can significantly elevate your financial level.
Distinguish luck from skill: Clarify how much of your earnings come from luck and how much comes from real investment ability. If you are not humble enough, the market will eventually teach you a lesson.
Avoid "revenge trading": Trying to recover losses through aggressive trading after a loss often leads to greater failures, even bringing your entire portfolio to zero.
Survival is the prerequisite for success; staying alive gives you the opportunity to succeed.
"Not trading" is also a trading strategy.
You do not need to participate in every seemingly "shiny" opportunity, nor should you feel anxious because of others' huge gains or losses.
There is a situation in the market: even if Bitcoin (BTC) rises to $1 million, many people may have gone bankrupt before the cycle ends because they made foolish decisions. Do you want to be that person? Of course not; no one wants that.
So, make sure to take your chips when leaving the "casino" and truly add value to your life.
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