Summary

A trader's massive profit from a memecoin investment sparks debate within the crypto community, with veterans cautioning against hubris and the dangers of not taking profits.

Abstract

The crypto community is abuzz with a recurring narrative: a trader turned $16,000 into$ 10 million by investing in the memecoin $BONK on the Solana network. This event has reignited discussions about the cyclical nature of crypto market trends, reminiscent of the Doge coin craze of 2020-2021. The trader's braggadocious response to advice from seasoned Crypto Twitter (CT) members, dismissing them as the 'tired old guard,' has drawn criticism and comparisons to past instances of hubris leading to downfalls in the crypto space. The article underscores the importance of taking profits due to the psychological biases that can lead to significant losses, such as anchor and recency biases. It also highlights the potential tax implications of holding onto such volatile assets without realizing gains. The consensus among experienced traders is that while the trader has the freedom to choose his actions, the pattern of overconfidence and subsequent market corrections is a well-trodden path with often predictable outcomes.

Opinions

The crypto community, particularly the 'old timers,' view the trader's arrogance and refusal to take profits as a classic example of hubris that often precedes a fall.
Experienced traders emphasize the importance of selling when euphoric and not falling prey to psychological biases that can lead to significant financial losses.
There is a sentiment that the trader's decision not to sell is reckless, especially if the initial investment represented a significant portion of his capital.
Some community members are concerned about the tax implications of not selling at the peak, potentially leading to tax liabilities on unrealized gains.
The article suggests that the trader's attitude reflects a common pattern in the crypto space where newcomers believe they can outsmart the market, ignoring the wisdom of those with more experience.
The discussion points to a broader reflection on the cyclical nature of the crypto market, with similar events playing out repeatedly, often with similar outcomes.

This Dude Gains $10 Million on A Memecoin and The Crypto Community Is Mad

A recurring episode of the crypto craze

Man, this is why, watching the crypto space right now I am constantly hit with a feeling of déjà vu. It’s like the same movie being played again and again. Same narrative, with only slight differences in details.

Recently I wrote about the current Cosmos hype, about the potential free tokens you might be getting when you are a staker in the chain’s ecosystem. As it turns out, the Cosmos ecosystem is not the only recycled phenomenon nowadays. We also have been experiencing the good old dog coins frenzy as we speak.

Just to refresh your memory, back in 2020–2021, the bull market started to heat up by meme coins like Doge. This time we deal with a different dog-sounding token. It is called $BONK on Solana, whose value has insanely multiplied in the past weeks. BONK also just got listed on Binance.

One particular boastful BONK winner is this guy, who turned $16,000 to $10 million trading on 6x leverage.

It was a spectacular win, and his post garnered comments, especially from experienced CT folks advising him to take profit.

It’s how he responded that folk took offense to. Not only that he’s not gonna listen, but he also throws shade and calls CT basically ‘tired old guard.’

Winners’ Hubris

Quickly that X post and the interactions that come with it became a widespread discussion across the space with people filling in here and there.

It’s something relatable for many of the ‘old timers’.

In the crypto space, arrogant people come and go. Their fate, in most cases, didn’t end well, no matter the manifestation of that arrogance.

Avi, who bragged about hacking a DeFi protocol and whitewashing it as ‘a profitable trading strategy’, was arrested.

Su Zhu, once a billionaire who got his head too big, is now not only bankrupt but also in jail.

Oh, maybe I should tell you about Alameda.

There’s no single person in crypto who is arrogant that’s surviving. One way or another, the gravity will pull back down to earth. Heck even the humble CZ of Binance also got cooked somehow.

Old timers know this reality. There’s a saying there’s no old and bold trader and it comes for a reason.

But it’s always the new blood that thinks they know better.

CT veterans, who survived the harsh bear market by being sensible, are seeing hubris being replayed like an old record. Here we go again, the exact same case.

The danger of not selling

Let’s go into the rationale behind selling.

People are concerned because a position like this is prone to something called anchor bias and recency bias. Any experienced trader can relate to these two biases.

Suppose that position goes to $15 million and you’re not selling. The coin then dumped, your position is now back to $10 million, and now you’ll even more refuse to sell because you will believe it’s just a dip and it’ll go back to $15 million.

This time though, you’ll promise that you’ll sell at $15 million.

When the position dumps to $9 million and lower, you would still refuse to sell because you believe it’ll bounce. This time, at least you’d sell at $10 million.

The spiraling continues and in the end, you find yourself round-tripping. Or, if the coin rugs, you’ll even lose everything, the capital, and the profit included.

It’s worth noting that BONK is a meme coin, so the trip downward can be really quick and catch traders off guard.

The number one mistake people made in the past bull market was simply refusing to take a profit. The greed gets the better of them. They forget that the best time to sell is when you feel the most euphoric.

There are countless examples in the past bull market. Remember DeFi Kingdom’s JEWEL? In fact, when it comes to dog coins, they have their own example as well. Remember that Doge millionaire who back then swore to never sell? As it turned out, DOGE didn’t run up indefinitely and he saw his investment never going back to an all-time high.

It’s worth noting that after the round-trip, you could expose yourself to revenge trade to chase something you think you should have had. This creates a bad psychological framework that prevents you from being profitable in the future. People end up losing all their money chasing the dream that once slipped from their fingers.

For real, should he sell or nah?

The real answer to this depends on his situation before the trade.

If $16,000 initial capital was only a minuscule to his overall 6–7 figure liquid portfolio, then he can afford to not sell. He can ride it to zero if he wants. It’s a low-risk high-gain situation for him.

However, if that $16k was all he had, then it’s utterly stupid to not take profit. Dude, if you round-tripping you’ll lose all that initial capital either from the dump or the desire to revenge trade. It’s better to sell at least half to secure some profit.

I think this is why some people are bothered. He refuses to even take initial capital or a small percentage of profit. It’s reckless and beyond naive.

Basically, where his head is now determines the urgency of selling — or not selling. The golden rule is, if you become too emotionally invested, like in the past Doge case, it becomes the trades’ identity, you know it’s time to hit that sell button. On the other hand, if you are pro traders with 100 more memecoins positions and that BONK is just one of many, you can afford to ride this to Valhalla just for the lulz.

Some US-based folks also mentioned the tax implication of not selling at the right time.

Suppose your position is worth $10 million by the end of December, but by the time you report your taxes, it is worth $1 million. According to US tax law apparently, you’ll have to pay taxes for the 10 million of last year's gain.

You are prone to pay taxes for assets you no longer have, and you won’t have money to pay it.

(Of course, this tax calculation doesn’t work in a jurisdiction where the capital gain taxes are only for realized profit.)

At the end of the day, I couldn’t care less about what he does. He’s free to make choices and whatever consequences that come with it.

It’s just amusing how this phenomenon continues to exist and how people simply won’t learn. What can you say, crypto is full of entertainment.