Crypto Investment

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

How can traders learn from common investment mistakes and reduce their market risks accordingly?

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.

1/ Please don’t blindly follow the trend to buy $ETH after the price rises for a period of time, and don’t panic sell after the price drops.

A stupid money who loses more than 2M $USDC in half a year will tell you how dangerous this behavior is.

— Lookonchain (@lookonchain) February 22, 2023

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 options contracts opposite their current open positions. Therefore, investors could mitigate risk by opening a put option contract against their bullish spot.

A put option gives a holder the right, but not the obligation, to sell ETH at a predetermined price on or before a particular date. So, if the spot Ether price drops, the investor could sell the asset at a pre-agreed price, thus protecting himself from losses in ETH’s value.

Don’t go all-in; check momentum

Do not put all your eggs in one basket regardless of how much capital you can throw around.

Instead, entering position in increments could be a safer strategy while keeping some funds on the sidelines. Thus, traders can buy ETH during a short or long term bull run but can spare some capital to buy during potential dips, while relying on multiple technical indicators for cues.

For instance, momentum oscillators like the relative strength index (RSI) reveals whether Ether is oversold or overbought on specific timeframes. So a strategy of going long when the RSI reading is close or above the 70 and forming a lower high has a high chance of failure.

The Ethereum daily chart below shows the two instances when the abovementioned investor bought ETH alongside the RSI forming a lower high.

*ETH/USD daily price chart. Source: TradingView*

Ultimately, traders’ mistakes can serve as opportunities to learn what works for an investor and what doesn’t. The main takeaway is that investors should enter a market with a definite plan based on their own analysis and risk appetite.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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

How can traders learn from common investment mistakes and reduce their market risks accordingly?

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

Buying Ether high, selling low

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.

1/ Please don't blindly follow the trend to buy $ETH after the price rises for a period of time, and don't panic sell after the price drops.

A stupid money who loses more than 2M $USDC in half a year will tell you how dangerous this behavior is.

— Lookonchain (@lookonchain) February 22, 2023

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 for it to be sold eight hours later as ETH price dropped, resulting in a loss of another $324,000.

3 Ether investment lessons to learn

Don’t rely on just one fundamental

The investor first traded stablecoins for ETH on Sept. 12, just three days before the long-awaited transition from proof-of-work to proof-of-stake 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.

Hedge with put options

Don’t go all in; check momentum

Do not put all your eggs in one basket regardless of how much capital you can throw around.

Instead, entering a position in increments could be a safer strategy while keeping some funds on the sidelines. Thus, traders can buy ETH during a short- or long-term bull run but can spare some capital to buy during potential dips, while relying on multiple technical indicators for cues.

For instance, momentum oscillators like the relative strength index (RSI) reveal whether Ether is oversold or overbought on specific timeframes. So a strategy of going long when the RSI reading is close to or above the 70 and forming a lower high has a high chance of failure.

The Ethereum daily chart below shows the two instances when the above-mentioned investor bought ETH alongside the RSI forming a lower high.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

GameStop to drop crypto efforts as Q3 losses near $95M

The gaming company has minimized its exposure to cryptocurrency focuses but is seemingly still pushing ahead with plans related to NFT and blockchain technology.

Gaming retailer GameStop says it will no longer focus any efforts on cryptocurrencies, after amounting $94.7 million in net losses in the third quarter and laying off staff from its digital assets department.

During a Dec. 7 earnings call, GameStop CEO Matt Furlong said the video game retailer “proactively minimized exposure to cryptocurrency” during the year and “does not currently hold a material balance of any token,” adding:

“Although we continue to believe there is long-term potential for digital assets in the gaming world, we have not and will not risk meaningful stockholder capital in this space.”

The company said earlier this year that it was looking at crypto, nonfungible tokens (NFTs) and Web3 applications as avenues for growth, calling these spaces “increasingly relevant for gamers of the future.”

Going forward GameStop will shift its focus to collectibles, gaming and pre-owned items.

Its moves in the NFT space are still seemingly going ahead, as it says its “also pursuing, and plan[s] to continue to pursue, other business and strategic initiatives associated with digital assets and blockchain technology,” according to a Dec. 7 filing with the Securities and Exchange Commission.

Cointelegraph contacted GameStop to confirm that it would continue efforts on its NFT marketplace but did not receive a response.

GameStop has pushed numerous Web3-related products, the most recent being its NFT marketplace went live on Oct. 31 on ImmutableX, an Ethereum layer-2 blockchain, following a public beta launch in July.

Earlier, the company launched a beta self-custody crypto wallet in May and a beta NFT marketplace on Loopring in March. Loopring is another Ethereum-based layer-2 protocol.

It also partnered with the now-bankrupt crypto exchange FTX US in September, aiming to bring more customers to crypto and to work together on e-commerce and online marketing initiatives. It ended ties with the exchange on Nov. 11, soon after it filed for bankruptcy.

GameStop’s Q3 losses slightly narrowed compared to the second quarter, which saw losses of $108.7 million. It’s also a year-on-year improvement for GameStop, which posted a $105.4 million loss in the third quarter of 2021.

Staff cuts reportedly hit crypto department

On Dec. 5, GameStop cut multiple staff in its third round of layoffs for 2022, as Furlong confirmed in the earnings call.

While earlier reports suggested that the team working on the company’s blockchain and NFT projects was the most impacted, Furlong did not specify where the staff cuts were concentrated.

Still, posts from employees and people claiming to be former employees have shed some light on the layoffs. Daniel Williams, lead software engineer at GameStop, wrote in a Dec. 5 LinkedIn post:

“Another big round of layoffs from GameStop currently in progress… E-commerce Product and Engineers… Lots of them.”

Other posts from those claiming to be affected by the cuts also appeared on LinkedIn at the time. Brandon Jenniges, a former iOS and blockchain engineer posted he “had a great time getting a deep dive into Ethereum and learning about many new things in the crypto space.”

“I and the rest of the mobile team were let go,” wrote former developer Christopher Fields.

In July, the company terminated its chief financial officer, Michael Recupero, and a number of staff at its video game-focused magazine Game Informer.

11% of US insurers invest — or are interested in investing — in crypto

Of the 328 CFOs and CIOs representing around half of the global insurance industry, 6% responded their firm was either already invested or considering an investment into cryptocurrencies.

United States-based insurers are the most interested in cryptocurrency investment according to a Goldman Sachs global survey of 328 chief financial and chief investment officers regarding their firm’s asset allocations and portfolios.

The investment banking giant recently released its annual global insurance investment survey, which included responses regarding cryptocurrencies for the first time, finding that 11% of U.S. insurance firms indicated either an interest in investing or a current investment in crypto.

Speaking on the company’s Exchanges at Goldman Sachs podcast on Tuesday, Goldman Sachs global head of insurance asset management Mike Siegel said he was surprised to get any result:

“We surveyed for the first time on crypto, which I thought would get no respondents, but I was surprised. A good 6% of the industry respondents indicated that they’re either invested in crypto or considering investing in crypto.”

Asia-based insurers were next in line, with 6% interested or currently invested, and European insurers came in at only 1%.

The report found cryptocurrencies were in fifth place for the asset class insurers expect to deliver the highest returns over the next 12 months, with 6% ranking it as their first choice, beating United States and European equities.

Around 2% of firms indicated a current crypto investment, and while it’s a small number of firms indicating investment or interest, Goldman Sachs analysts wrote that this level of interest “is still notable.”

On the podcast, Siegel discussed a follow-up survey conducted of crypto-interested firms to understand their motivation behind purchasing:

“We did some follow-up questions on that, and generally, the companies that are either invested or considering crypto are doing so to understand the market and to understand the infrastructure. But if this becomes a transactable currency, they want to have the ability down the road to denominate policies in crypto and also accept premium in crypto, just like they do in, say, dollars or yen or sterling or euro.”

Only 1% of the total surveyed firms said they would increase their crypto position over the next 12 months; 7% said they would maintain their current position; and 92% said they would not invest in crypto over the next year.

Despite the growing interest, there are still those pessimistic about crypto as 16% said it was an asset class they expected to deliver the lowest returns over the next 12 months. Overall, crypto was the third-lowest ranked asset class on this measure.

Mathew McDermott, the bank’s global head of digital assets, wrote in the report:

“As the crypto market continues to mature, coupled with growing regulatory certainty, a cross-section of institutions are becoming more confident to explore investment opportunities as well as recognizing the disruptive impact of the underlying blockchain technology. I have been positively surprised by the rising adoption by global Asset Managers, who clearly recognize the potential of this market.”