From $40 Million in Profits to a $2 Million Loss – The High Cost of Greed in Crypto

The market for cryptocurrencies is known for its volatility, but sometimes the most significant risk isn’t just the market swinging up or down—it’s the trader’s own refusal to take profits at the right time.

Take this recent case, for instance: a trader was living large with what was supposed to be a $40.8 million profit. Only problem? The trader never cashed out. And guess what? That “profit” vanished into thin air and reappeared as a series of losses the moment the market turned against the trader and, let’s face it, against us all.

This trader, typically called a whale because of the size of their holdings, was invested strongly in two tokens—$ai16z and $ZEREBRO. By January 2, their unrealized gains had gotten out of control, swelling to an unbelievable $40.8 million. However, instead of taking those profits and running (which we all should do when faced with such enormous trading victories), this whale decided to do the opposite. They doubled down (again, something we aren’t usually advised to do) and went for broke. After all, if a trade is this good, why not risk it becoming a worse loss?

This story took a major turn in early January when the market appeared to be working perfectly for this whale. With large positions in $ai16z and $ZEREBRO, they had a chance to book some epic profits. But, in a scene we’ve seen play out too many times with crypto traders, they decided to hold on and reach for even bigger gains, totally misjudging the speed at which the market can turn.

As of January 9, the trader’s luck had begun to change. Their initial significant decision was to liquidate their position in $ZEREBRO. Painfully, this was not a decision made in the light of profits. The trader was compelled to sell at a loss, to the tune of around $1 million.

The losses continued to mount. A mere 11 hours after the previous fire sale, the whale made another move that was anything but graceful. They liquidated 21.34 million $ai16z tokens, worth $9.18 million, and took another $1 million hit to their profit-and-loss statement. That’s right: a whale that was once up $40.8 million had, as of this writing, been reduced to a P&L that’s only $38.8 million up. Still, that’s a lot of money.

The fast transition from a winning position to a losing one is a harsh reminder of the necessity of knowing when to end a trade. Although hindsight is always 20/20, this situation shows the peril of allowing greed to drive trading choices.

One of the most frequent traps in trading, whether it’s in traditional markets or crypto, is not having the courage to take profits when they should be taken. Many traders, especially those who have recently experienced the kind of rapid gains that make a profit seem too easy to book, become emotionally attached to their positions—rationalizing that the price will keep going up and up and up. This kind of mindset can lead to serious missed profit-taking moments and renders many traders open to being blindsided when a sentiment shift occurs and the market reverses on them.

Unpredictable markets can appear quite clear-cut one day and then turn up a whole new set of losses the next. For that reason, it’s essential not to get too comfortable with any single interpreted market trend, even a rally. That’s true for experienced traders, who understand that almost any upward move can be followed by a downward slide, as well as for novices, who need to develop the basic survival skill of not placing too many bets on any one horse.

This specific whale suffered a painful lesson in the need to secure profits at the right time. The ruthless crypto market wiped out tens of millions in potential gains in just a few weeks.

From $40M #profit to a $2M #loss – The Cost of Greed!