Capital flow determines everything; narratives always run ahead of fundamentals.

Written by: Miles Deutscher

Translated by: AididiaoJP, Foresight News

I have been navigating the cryptocurrency market for over 6 years. I have made millions and lost millions, founded crypto projects, and frankly, I have experienced every imaginable emotional rollercoaster in this field.

The goal of this article is simple: to break down 12 hard-earned lessons that cost me millions of dollars to learn. By reading this article and applying these lessons to your own crypto journey, I hope you can become a better trader, protect yourself from significant capital drawdowns, and increase your chances of life-changing opportunities through cryptocurrency.

Part One: Fundamentals

Lesson One: The Power of Focusing on a Niche

There are many ways to make money in the cryptocurrency market; your task is to find the one that suits you best and become an expert in that niche.

In 2020 and 2021, I delved deep into DeFi. I mined across multiple chains, explored various DeFi ecosystems, and executed looping/governance strategies.

This gave me a lot of insights into the field: from risk management and position sizing to game theory and the flywheel effect.

If I had been simultaneously engaged in contract trading, on-chain sniping, airdrop farming, etc., I doubt I would have accumulated the existing knowledge.

In the crypto space, being an expert in one area is better than being a jack of all trades.

Lesson Two: Advantage is Everything

The best cryptocurrency traders I know clearly define their advantages and focus 99% of their energy on extracting the best results from them.

Your advantage might be speed, precision, patience, risk management, networking, or a combination of the above, but you need a differentiating factor.

Your market advantage largely depends on your personality, existing skill set, time spent in the field, and other variables.

Define your advantage, master it, and then execute.

Lesson Three: Only Participate in What You Understand

If you don’t understand something, don’t buy it until you do.

Many people buy tokens due to hype or FOMO without truly understanding the project or its business model.

Never invest in something you don’t genuinely understand.

In the cryptocurrency market, if you haven’t built a solid logic/strong underlying belief, you will find it hard to withstand its volatility.

Lesson Four: Narrative > Fundamentals

Capital flow determines everything.

Narratives always run ahead of fundamentals.

You may have researched a project with the best team, best business model, etc., but if there’s no community, no narrative, and no capital flowing into the space, none of that matters.

Conversely, there are many fundamentally "bad" tokens and sectors that skyrocket in price due to attention.

Study the hype, study the community, study the narrative; this is an attention economy.

Part Two: Execution

Lesson Five: The Market Punishes Unplanned Traders

Always trade with a plan; don’t enter blindly.

Define whether this is a long-term hold or a short-term trade.

Before entering a trade, define your profit-taking area and invalidation points (both technical and fundamental).

Trading without a plan is a plan to get liquidated.

In cryptocurrency, managing capital drawdowns is key to long-term survival.

Lesson Six: Position Sizing Control

This is often the primary issue that retail traders mess up.

You might pick the right coin at the right time, but if you don’t control your entry position size correctly, it’s meaningless.

Conversely, you might pick the wrong coin at the wrong time, and if your position is too heavy, it could devastate your overall portfolio.

Based on your risk tolerance and portfolio size, you should set a percentage of risk capital for each trade (and that percentage should be determined by preset criteria: e.g., conviction level, market conditions, market cap, liquidity, etc.).

Lesson Seven: Let Winners Run, Cut Losers

I keep seeing this mistake.

People sell strong coins and switch to less mature coins, trying to catch up on gains.

You should let winners run for as long as possible and cut losers as quickly as possible.

Cryptocurrency trading is all about momentum; ride the wave for as long as you can and avoid getting knocked off by it.

Part Three: Mastering Portfolio Management

Lesson Eight: Tool Selection

Depending on which stage you are in your journey, you will use different tools to achieve your goals.

The tools I used to earn my first $10,000 in cryptocurrency are completely different from the tools I use now to manage millions of dollars.

A smaller amount of capital can actually be an advantage because it allows you to trade low liquidity tokens. There are too many mispriced opportunities to exploit. For large whales, playing these games isn’t worth it, but you can.

Some examples include: airdrop farming, arbitrage, low market cap tokens on-chain, etc.

Lesson Nine: Concentrate, Don’t Diversify

Diversification makes sense for wealth protection.

But to succeed, over-diversification can be more harmful than beneficial.

I strongly recommend that most people hold only 5-10 positions as their core portfolio.

This will ensure you have enough time to manage these positions, stay updated, and adjust regularly. A bloated portfolio will slow down your responsiveness.

During market bubble periods, you can exceed this range to seize opportunities, but what you really need is a core portfolio made up of 5-10 high-conviction assets.

I broke this rule with my "degen" portfolio, but it only accounted for 10-20% of my total portfolio. If you want to cast a wide net and take chances, do so in an isolated environment, concentrating most of your capital on high-conviction plays.

Lesson Ten: From Altcoins to Bitcoin

Remember: your goal is to accumulate Bitcoin.

Use altcoins as a source of profit, then accumulate Bitcoin.

Then you will start treating your trades differently (e.g., charting against Bitcoin, analyzing risk factors relative to Bitcoin, analyzing macro trends that affect Bitcoin, which in turn affect altcoins).

This is a very powerful mindset that can significantly improve your risk management on its own.

Lesson Eleven: Sell on the Way Up, Then Lock in Profits.

In the last cycle, I recklessly reinvested a lot of profits just because I had stablecoins sitting on exchanges, and I kept gambling with them.

My framework should have been:

• Step 1: Always take profits during a bull market when altcoins are surging.

• Step 2: Convert stablecoins back to fiat to "lock in" gains. Alternatively, another method is to withdraw to an inaccessible cold wallet, which will prevent over-trading.

Part Four: Modern Secrets

Lesson Twelve: Let AI Do the Heavy Lifting

You should document your entire crypto journey to collect data about yourself and improve.

You can do this by posting on X, using MCP integrated with Notion databases, private Google Docs, or any method that works for you.

After documenting and collecting data, share it with AI to help uncover blind spots in your advantages.

Not using a recording + AI system will put you at a significant disadvantage, and since cryptocurrency is a zero-sum game, you really need to fight for every inch of advantage.

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