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?
The Series of Events That Led to the Downfall
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.
The Lesson: Profit Isn’t Profit Until You Take It
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! 😬
This whale had it all—a massive $40.8M unrealized profit on $ai16z and $ZEREBRO as of Jan 2. But instead of cashing out, they held on too long, and now they’re booking losses instead of gains. pic.twitter.com/SQkuy2oie6— EyeOnChain 🔶 (@EyeOnChain) February 4, 2025
Risk Management in Crypto Trading
Although tales like these are the exceptions, they underscore something very important about crypto trading: Risk management is essential. The markets move fast, and if traders don’t have a clear exit strategy—preferably one that allows for both profit and minimal loss—they can easily end up on the wrong side of a trend.
Among the finest practices in risk management are:
-Establishing Achievable Profit Goals – Knowing when to take profits keeps traders from clinging to positions for too long and, instead, encourages them to cash in when targets are met.
– Employing Stop-Loss Orders—This allows for an automatic sell of your position when the asset’s price falls below a specific point and could therefore aid in preventing catastrophic losses.
– Investing in Different Assets – Spreading funds across various assets mitigates the risk of being overexposed to any one particular cryptocurrency.
– Emotional trading is bad for business. When traders make decisions based on the two most powerful human emotions—fear and greed—they are almost guaranteed to make costly mistakes.
This whale’s ill fate tells traders everywhere that the time to secure unrealized profits is the now. In the high-risk, high-reward world of cryptocurrency, untamed by the natural restraints of market forces that a centralized currency can rely on, a profit isn’t a profit until it’s taken.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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Image Source: peshkov/123RF // Image Effects by Colorcinch
