Many retail investors are trapped in a deadly misconception—thinking that the worst that can happen is the coin price dropping to zero, and that holding on will eventually turn things around. Little do they know, this is precisely the beginning of catastrophic losses.

The collapse of LUNA in 2022 best illustrates this point. In 48 hours, it plummeted from $119 to $10, a 91.6% decline. At this point, a large number of bottom-fishers rushed in, thinking they had found a bargain. But what happened next? 36 hours later, LUNA dropped to $0.1. Those who went all-in at $10 saw their principal evaporate by 99%—from 100,000 yuan to just 1,000 yuan.

Mathematically, it’s brutal: dropping from 100 yuan to 1 yuan is a 99% loss; dropping from 1 yuan to 0.01 yuan is also a 99% loss. The ultimate test of a decline often comes after you believe you’ve "hit bottom" and then the price crashes even further.

The trend of FTT is even a textbook example of multiple traps. When it fell from $24 to $2.4, the bottom-fishing army rushed in; then it dropped to $0.88, rebounded to $1.2, and some added positions to recover losses; finally, it fell to $0.01, a total decline of 99.96%. How many people got cut during each "false bottom"?

Even leading cryptocurrencies like BTC in 2022 fell from $69,000 to $15,000. Among those who bought at $60,000, the price dropped to $30,000, a 50% loss; then, those who added positions at $30,000 saw it fall to $15,000 again, losing another 50%. The so-called "limited decline" is just self-deception.

The truth is: the absolute value of the price can only fall so far, but percentage losses, time consumption, and opportunity costs are limitless. Many people ultimately don’t die from going to zero, but from pointless holding and mental fatigue.

A reliable approach to trading should be like this:

When a decline seems to have bottomed out, your psychological endurance is limited, so you must cut losses; when a rise seems to have no top, your time is limited, so you must take profits. In practice, set your stop-loss according to your risk tolerance—if you can endure floating losses for 3 months, exit at 20%; if you can endure a year, you can set it at 40%. Don’t be too greedy with profits—take 20% profit when your floating gain reaches 50%, and after doubling, take another 30% profit. Once your target return is reached, cash out immediately.

The core of investing is risk management and calculating the risk-reward ratio. The illusion of "limited decline" will destroy all risk awareness.

Remember: after losing 99%, you can still lose another 99%. Every "bottom" could be the entrance to a new round of hell. Protect your principal, stick to stop-loss and take-profit rules, and only then can you have a chance to wait for the next cycle’s explosion.