The story
When Alex bought an altcoin, he had a clear plan: take profits at $4 and cut the position if the project’s outlook deteriorated.
The token climbed to $3.80. Alex imagined the gains he could lock in—but decided to wait for $4.
Then the market turned. The price slid to $2.50, then $1.80.
Alex could still sell, but the thought of making the loss real felt unbearable. He kept holding, telling himself it would bounce back.
Weeks later, the project announced another delay. Alex finally sold at a much lower price.
He hadn’t followed new evidence. He’d been trying to avoid the pain of admitting a loss.
The visual metaphor
Imagine a crypto investor at a fork in a mountain trail.
One path glows in warm sunlight, marked “TAKE PROFIT.” The other descends into a red, storm-lit ravine, lined with signs saying “IT WILL BOUNCE BACK” and “I DON’T WANT TO SELL AT A LOSS.”
He can see the safer route, but the fear of regret keeps pulling him toward the dangerous one.
The psychology behind it
Loss aversion is our tendency to feel the pain of a loss more intensely than the pleasure of an equivalent gain.
In crypto, it can make investors hold failing positions for too long, refuse to take reasonable profits, or take bigger risks just to get back to break-even. The entry price becomes an emotional reference point, even though the market doesn’t care what we paid.
Avoiding a loss on paper is not the same as making a sound decision. Holding is still a choice—and it carries risk.
The practical takeaway
Before entering a position, define the conditions that would make you sell, including what would invalidate your investment thesis.
When those conditions occur, reassess the asset using current evidence—not the desire to avoid realizing a loss.
Your goal isn’t to never lose. It’s to make decisions that protect your capital over time.
— The Behavioral Investor — Understand yourself.
