An anonymous Ethereum investor has lost more than $2 million trading Ether (ETH<\/a>) since Sept. 9, 2022, on-chain data shows.<\/p>\n Spotted<\/a> 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.\u00a0<\/p>\n 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.<\/p>\n 1\/ Please don’t blindly follow the trend to buy $ETH<\/a> after the price rises for a period of time, and don’t panic sell after the price drops.<\/p>\n A stupid money who loses more than 2M $USDC<\/a> in half a year will tell you how dangerous this behavior is.<\/p>\n \u2014 Lookonchain (@lookonchain) February 22, 2023<\/a><\/p><\/blockquote>\n 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.<\/p>\n 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.\u00a0<\/p>\n 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<\/a>.<\/p>\n The Merge, however, turned out to be a “sell-the-news” event<\/a>. Thus, going extremely bullish on Ether based on one strong fundamental was a poor decision. <\/p>\n 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.\u00a0<\/p>\n For instance, one such metric was institutional flows. Ether investment funds suffered<\/a> outflows worth $61.6 million a week before the Merge, according to CoinShares’ weekly report, suggesting that “smart money” was leaning bearish.\u00a0<\/p>\n Hedging with options in Ether trading enables investors to purchase options contracts<\/a>\u00a0opposite their current open positions. Therefore, investors could mitigate risk by opening a put option contract against their bullish spot.<\/p>\n 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\u00a0protecting themself from losses in ETH’s value.<\/p>\n Do not put all your eggs in one basket regardless of how much capital you can throw around.<\/p>\n 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.<\/p>\n For instance, momentum oscillators like the relative strength index (RSI)<\/a>\u00a0reveal 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.<\/p>\nBuying Ether high, selling low<\/h2>\n
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3 Ether investment lessons to learn<\/h2>\n
Don’t rely on just one fundamental<\/h3>\n
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Hedge with put options<\/h3>\n
Don’t go all in; check momentum<\/h3>\n
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