Monday, 27 March 2023

Crypto News

‘Stupid money’ Ethereum investor loses over $2M in six months — 3 lessons to learn

'Stupid money' Ethereum investor loses over $2M in six months — 3 lessons to learn

An anonymous Ethereum investor has lost more than $2 million trading Ether (ETH) since Sep. 9, 2022, on-chain data shows.

Buying Ethereum high, selling low

Spotted by on-chain monitoring resource Lookonchain, the “stupid money” trader spent $12.5 million in stablecoins to buy 7,135 ETH after it rallied 10% to $1,790 in September 2022. But a subsequent correction forced the trader to sell the entire stash for $10.51 million. 

Ethereum investor’s transaction history from September 2022. Source: Lookonchain

As a result, the trader lost nearly $1.75 million. Interestingly, waiting and selling at today’s price would have resulted in a smaller loss of $1.14 million.

The investor’s trades reemerged in February as ETH price had risen by approximately 10%. Data shows that $7.65 million in ETH was acquired on Feb. 16, only to sell it eight hours later as ETH price dropped, resulting in a loss of another $324,000.

Ethereum investor’s transaction history from February 2023. Source: Lookonchain

3 Ethereum investment lessons to learn

Traders can use such examples to learn from others’ mistakes and reduce their investment risks with proven strategies. Let’s take a look at some of the most basic tools that can help reduce losses. 

Don’t rely on just one fundamental

The investor first traded stablecoins for ETH on Sep. 12, just three days before long-awaited transition from proof-of-work (PoW) to proof-of-stake (PoS) via the Merge upgrade.

The Merge, however, turned out to be a “sell-the-news” event. Thus, going extremely bullish on Ether based on one strong fundamental was a poor decision.

Moreover, going all in while relying on one indicator, particularly a widely-anticipated news event, is often a losing strategy, which is why traders should consider multiple factors before making a decision. 

Ethereum fund outflows picked momentum ahead of the Merge. Source: CoinShares

For instance, one such metric was institutional flows. Ether investment funds suffered outflows worth $61.6 million a week before the Merge, according to CoinShares’ weekly report, suggesting that “smart money” was leaning bearish. 

Hedge with put options

Hedging with options in Ether trading enables investors to purchase

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