"Long-term diamond hands" VS "short-term FOMO paper hands": Who will win?
At that time, we were still too young to know that all the gifts fate bestows have long been secretly priced. — Stefan Zweig.1. The Casino Theory of Cryptocurrency: Luck or Skill, the Path to Success is Not About Difficulty
Any game, whether it is gambling or not, ultimately has to prove a fundamental question: Is it a "game of luck" or a "game of skill"? Undoubtedly, in the early days of the cryptocurrency world, luck played a major role; as long as you dared to take the plunge, you could win. The crypto space rewarded early brave explorers handsomely. As the industry has developed, we still see wealth myths in the crypto world occasionally bursting forth, but the opportunities for victory solely based on luck are becoming increasingly rare. We have witnessed countless stories of overnight riches, as well as many tragedies of instant losses.
The importance of luck lies in the opportunities it provides, while the importance of skill lies in its ability to turn those opportunities into wealth. From the current standpoint, we must acknowledge that luck still exists in the crypto space for retail investors, but we must also recognize that the importance of skill is increasingly significant.
What is the ultimate skill for winning in the crypto world? Different people have different opinions; some believe it is the short-term invincible king of candlesticks, while others think it is the value investor king who dares to hold large positions for the long term. However, in terms of final win rates, both strategies have their champions but also have ordinary players who face disastrous losses.
From the perspective of an ordinary retail investor like myself, it is essential to remember that embracing low-difficulty investments is the only secret to winning. Note the limiting qualifiers: ordinary people and ordinary retail investors.
For diamond hands and short-term FOMO paper hands, achieving ultimate victory undoubtedly comes with considerable difficulty.
2. Survivor Bias of Diamond Hands: If You Can, Go Ahead; If You Can't, Don't Force It
Before discussing diamond hands, we must assume a truly ordinary Web3 surfer, who, apart from being bold, has no significant talent, has only a mediocre understanding of candlesticks, cannot hold long positions, feels anxious watching others get rich, and is a typical retail investor who loses when they jump in. Next, we will further discuss the probability of ordinary people becoming diamond hands, so you can completely give up hope.
The term "diamond hands" originated from forums like Reddit, referring to investors who resolutely refuse to sell their assets regardless of how much volatility they experience.
It is important to note that this implies two conditions: highly volatile financial assets and a firm refusal to sell. Long-term holders of gold probably cannot earn this honorary title. Only those who hold onto highly volatile speculative assets for the long term and refuse to sell, ultimately achieving significant results, qualify to be called diamond hands.
In the crypto world, where immense wealth can happen at any moment, no one is unwilling to become a diamond hand, but not everyone can achieve this; otherwise, the number of diamond hands in the crypto space would not be so scarce, with only a few having already become legends.
To become a diamond hand, you must possess the following qualities:
1) Exceptional insight + luck: You can foresee the growth potential of this asset for a certain period, and before it takes off, you can already see its enormous growth potential and certainty.
2) You have ample free capital that allows you to invest a certain amount without affecting your current lifestyle and mindset.
3) You must be sufficiently resolute, possessing a level of understanding that surpasses the general public and maintaining it over time.
These three points are not complicated, but very few can truly practice them. Knowing is easy, doing is hard. Especially for most retail investors, the practical difficulty of the first and third points indicates that diamond hands are indeed rare.
Therefore, a basic characteristic of a diamond hand is: first, you need some spare cash, which most people will have; second, you need a level of understanding that far exceeds that of the average person, which eliminates most; finally, you need to maintain emotional stability and determination over time, which further eliminates a large portion of people. Thus, the probability of an ordinary person becoming a diamond hand becomes very low.
It should be clarified that the above discussion pertains to the probability of an ordinary person. This market is not lacking those who dare to bet their entire fortune and remain unshaken through long-term significant drawdowns; some of them have achieved great results, but these individuals are not ordinary people.
The harsh reality is that we can only see someone easily achieving victory. We may shout "Noble lords and ministers, do they not have any talent?" but may not realize the pain they can endure, which we cannot bear at all. This is both talent and luck, as well as the result of hard work.
If you can, go ahead; if you can't, don't force it. Sometimes waiting rewards you with value because you understand what true value is. Most of the time, waiting does not create value and ultimately turns into obsession. Recognizing players with long-term value is inherently rare; they are either exceptionally intelligent, extraordinarily talented, or work harder than others, possessing at least one outstanding quality.
Now, if the probability of becoming a diamond hand is very low, can I get rich through short-term FOMO? The answer is still negative.
3. The Trap of Short-Term FOMO: I Can, I Want to Jump In; I Can't Anymore, But I Can't Get Out
First of all, the bubble in financial markets is absolutely a positive term, but you must understand and embrace the bubble, while never becoming the bubble. Short-term FOMO tests not only your psychology but also your operational skills. Its main tests are:
Everyone is making ten times in a day; will you play?
Everyone has boarded; will you get on?
Others see a hundred times; you get off at twenty points.
Another golden dog comes out, but you are not on board.
You got on, but found yourself trapped.
The end of the show.
Taking the recent MEME frenzy as an example, this psychological state and cycle are played out daily, from observing, boarding, increasing positions, to being trapped, stopping losses, and exiting.
You will discover a shocking phenomenon: during this period, it seems like there is endless money to be made, but the person who achieves great results is not you. It starts with big profits, then small profits, followed by small losses, and finally leads to zero, being trapped, or huge losses.
Where does the problem lie?
The characteristic of short-term FOMO is: high odds, but the win rate is not necessarily high. Apart from the generally rampant bull market, the FOMO market often focuses heavily on a few assets for speculation, or hot money quickly rotates between different sectors, significantly increasing emotional and random elements. After all, no one knows what emoji or image Musk will post tomorrow.
The scenarios where short-term FOMO can make money are: entering early, exiting quickly, and controlling your hands.
Entering early: You can discover the value of this asset earlier than most of the market, possessing high sensitivity and judgment.
Probability of exiting quickly: You can identify top risks faster and withdraw in time; controlling greed.
Probability of controlling your hands: You can avoid random operations; once you are up, you want to buy everything; extreme position management and risk management abilities.
Those who possess all three abilities are absolutely in the minority in the market.
We need to note that this does not mean short-term FOMO is guaranteed to lose money, but the probability of making big money in short-term FOMO is very low, and for most people, it remains a high-difficulty and undesirable path.
Buffett's teacher, Graham, once said: Bull markets are the main reason ordinary investors lose money. The profound reason behind this is not that bull market FOMO leads to losses, but because of the neglect of short-term risks that result in significant losses.
The paradox of financial markets is that a bear market does not mean high risk, and a bull market does not mean low risk.
For short-term FOMO, while you are observing, a small group of people has already built their positions in advance. When you board, the rapid increase in a day makes you forget yourself, while some people have already exited early. By the time you realize something is wrong, you are already deeply trapped.
4. Will This Time Be Different? The Current Cost, the Future Price
When we explore winning through diamond hands and short-term FOMO, we find that the probability of winning in both cases is relatively low. You might say that Trump is in power, policies are favorable, and the bull market has no upper limit, so both diamond hands and short-term FOMO will win. However, the actual situation is likely not so. Historically, there has never been an eternal bull market, nor an eternal bear market; everything is a cycle.
For ordinary people, we need to embrace low-difficulty investments rather than seek high-difficulty investments. This does not mean that since neither diamond hands nor short-term FOMO can win, we should simply give up. Every choice you make now is a cost, which may lead to huge returns in the future or may come with unbearable costs.
For most ordinary people, the probability of getting rich through any replicable method is very low; your resources, endowments, personality, and even the environment you are in can lead to failure at any time.
The methods for getting rich are hard to replicate, but the reasons for failure are mostly similar.
The so-called low difficulty means that based on a thorough understanding of your own personality, combined with your resources and endowments, you should do what you are best at and have the highest win rate; everything else is about long-term persistence.
Suppose you cannot even solve basic living security; you should find a job at this time, rather than trying to cultivate diamond hand abilities.
Suppose you are someone with significant emotional fluctuations who cannot tolerate drawdowns; you should not chase highs in a highly volatile market. Instead, you should focus on a target, using small amounts of capital for long-term accumulation, or you should concentrate on being a yield farmer, earning the most certain money.
Overcoming human weaknesses has never been easy. For most ordinary people, it is likely that they will not be able to challenge and overcome them for most of their lives. Therefore, the only low-difficulty thing you can do is to continuously learn from top experts, integrate their practices into your own system, and invest in what you are best at and have the highest win rate.
This is my insight and also advice for ordinary retail investors. It may not make you rich overnight, but on the long journey of life, losing less is also a form of victory.
Standing at the starting point of a new bull market, regardless of the choice, this time, I hope you can win!
