A Common Financial Myth
In the cryptocurrency community, the term "All in" has been overly romanticized. Many believe that by investing all their funds into the crypto market, especially mainstream coins like Bitcoin or Ethereum, they can achieve financial freedom during a bull cycle. This mindset contains a fundamental fallacy: extrapolating past market performance linearly while ignoring the essential structural differences between the cryptocurrency market and traditional financial markets. The crypto market lacks circuit breakers, no earnings reports to analyze, and no predictable dividend flows to serve as price bottom support. When the environment of "all asset classes rising" disappears, assets lacking fundamental support tend to fall the hardest.
A deeper issue lies in the fact that most people's definition of "All in" is inherently vague. In a hypothetical scenario, an office worker with an annual income of 500,000 invests their entire savings of 500,000 into cryptocurrency. This money accounts for all possible major expenses within their next five years—including down payments for home purchases, children's education funds, or unexpected medical expenses. When the market drops 60% in the short term, this investor faces not only paper losses but also a dual attack of liquidity crisis and psychological collapse. Research shows that when investors' paper losses reach a certain level, their decision-making quality significantly declines—a cognitive bias that psychologists call "loss aversion."
The Logical Loopholes Behind
Arguments supporting “All in” cryptocurrency typically revolve around three core premises: blockchain technology will change the world, Bitcoin will become digital gold, and past returns will recur in the future. However, each of these three premises contains a significant logical leap. The development of blockchain technology may indeed change certain industries, but this does not mean that all blockchain‑based tokens will appreciate—in fact, over the past few years thousands of tokens have gone to zero, and these projects also rely on blockchain technology. There is a huge gap between the potential of the technology and the investment value of a single asset.
The argument that “Bitcoin will become digital gold” is also questionable. As a store of value, gold has undergone thousands of years of market testing, and its price stability stems from global consensus and physical demand. Bitcoin's market value volatility over the past decade has seen annual maximum declines exceed 70% multiple times—a magnitude of fluctuation that clearly conflicts with the definition of a “stable store of value.” Gold investors can hold physical metal during market panics and await price recovery; however, cryptocurrency investors using leverage or contracts may be forced to liquidate before prices rebound.
The third logical flaw lies in over-reliance on historical returns. The Bitcoin returns over the past decade are striking, but investment research repeatedly shows that the correlation between an asset class's past performance and future returns is extremely low. Especially in an emerging market where the regulatory framework is still evolving, past success may mask accumulated systemic risk. When the advantage of early adopters disappears, and when institutions enter and change the market microstructure, the competitive environment faced by individual investors is completely different from a decade ago.
What I Actually Think
Regarding the role of cryptocurrency in an investment portfolio, my view is not entirely negative. The decentralized nature of blockchain technology and the innovative applications of smart contracts do provide solutions in some areas that traditional architectures struggle to achieve. As an asset class, cryptocurrency offers high liquidity, round‑the‑clock trading, and cross‑border characteristics, which have practical value for certain investor groups. However, the existence of value and the proposition of “should invest all your funds” are two completely different statements.
When evaluating any asset, we need to distinguish between “the value of the asset itself” and “the suitable capital allocation for us.” A company may have great growth prospects, but if its stock price volatility exceeds our psychological tolerance, then no matter how bright the fundamentals, this investment is inappropriate for us. The volatility of cryptocurrency means that even if you are confident in the long‑term development of blockchain technology, that does not mean you should ignore the discipline of asset allocation. One of the core principles of financial planning is not to put all your eggs in one basket; this saying applies equally to the cryptocurrency space, and it is even more important.
I have observed a common phenomenon where many voices promoting the "All in" strategy during bull markets often come from individuals who have already established other income sources or assets. For them, a 60% loss in cryptocurrency may simply be an adjustment in asset allocation; but for those who have invested all their living expenses, the same decline could mean the evaporation of years of savings. This difference in circumstances is often deliberately ignored in communities, leading novice investors to develop erroneous risk perceptions.
Directions for Establishing the Correct Framework
To establish a correct cryptocurrency investment framework, one must start from the basic principles of asset allocation. Traditional investment theory suggests that investors should determine the proportions of asset classes such as stocks, bonds, and cash based on their age, risk tolerance, and investment horizon. Due to their high volatility, cryptocurrencies are typically recommended to occupy a very small proportion of an investment portfolio—whether from professional institution advice or academic research, most views tend to treat them as satellite allocations rather than core holdings. The specific percentage should be determined based on individual circumstances, but the key point is that this number must be predetermined and strictly adhered to, rather than adjusted back and forth based on market sentiment.
Secondly, establishing stop-loss mechanisms and liquidity buffers is a necessary discipline. Unlike the stock market, the cryptocurrency market lacks circuit breakers to prevent sharp price declines. Historical data shows that Bitcoin experiencing single-day declines exceeding 30% is not uncommon. Without preset stop-loss points, investors often make irrational decisions in panic—whether selling in panic at the lowest point or blindly adding positions hoping for a rebound. Planning in advance under what circumstances to exit is much more reliable than making临时 judgments when emotions are running high.
Third, there is a need to establish objective tests of psychological tolerance. Many people claim they can endure a 50% paper loss, but only discover during actual experience that anxiety has severely affected their quality of life and work performance. One actionable test method is: assuming your cryptocurrency holdings drop by 70%, can you go three months without changing your daily living expenses? If the answer is no, then the amount you have invested has exceeded your actual tolerance. The goal of financial planning is not to let us "survive" in the market, but to ensure we can still live normally despite market fluctuations.
"Risk does not lie in what assets you hold, but in how you react to fluctuations in those assets. True financial discipline is not chasing returns in bull markets, but maintaining sleep quality and life rhythm unchanged in bear markets."