In 2022, Ethereum lose over half of its value between January 1 and September 15, but it also jumped by 64% from mid-July to mid-September, sending investors on a roller-coaster ride.
Regrettably, many inexperienced investors have engaged in dangerous activity as a result of these enormous price swings.
Leading web3 analyst Lookonchain highlighted one such incident where an ETH investor lost more than $2 million USDC in less than a year by blindly following price trends.
Between September 9 and September 12, 2022, a trader bought 7,135 ETH for 12.25 million USDC, at a 10% increase in the price of Ethereum.
As the value of Ethereum started to decline shortly after, the trader panicked and sold all of its Eth on September 16 making only a little over 10 million USDC. As a result, 1.74 million USDC were lost in just one week.
Later, the same trader bought 4,489 ETH with 7.65 million USDC on Feb. 16, when the price of Ethereum had risen by 10%. However, when the price of Ethereum dropped again, the trader sold all of their Ethereum in a panic, receiving only 7.33 million USDC back.
This resulted in a loss of 324,000 USDC in just one week.
Lookonchain said the above actions of blind buying and panic selling cost the trader over 2 million USDC in just half a year.
This serves as a cautionary tale for other investors, who may be tempted to follow similar behavior, it added.
In the second quarter of 2022, a string of unfavorable headlines hit the cryptocurrency industry last year.
A Word Of Caution For Ethereum Traders
The failure of the algorithmic stablecoin led to the collapse of the Terra blockchain in May, as well as the freezing of withdrawals and eventual bankruptcy filing of crypto lender Celsius in June and July and FTX in Nov.
As a result, several investors panicked and sold their holdings. Especially, newbie traders are often tempted to blindly follow the trend, buying when the price rise and selling as the value falls, fearing further losses.
However, such actions can be dangerous and result in significant losses. Lookonchain further noted,
It doesn’t matter if you miss the buying opportunity, you can wait patiently for the next opportunity. Not making money is much better than losing money.