The dramatic tales of instant wealth, sensational media reports, and widespread FOMO (Fear of Missing Out) propelled Bitcoin into the mainstream spotlight around 2017. Each peak was followed by a trough, and from 2018 to 2020, the cryptocurrency market entered a bear phase. It wasn't until the U.S. launched unlimited quantitative easing to rescue the economy that a new wave of crypto enthusiasm emerged. This express train to prosperity made many investors wealthy overnight, while others suffered significant losses. Let’s explore this evolving narrative.
The Digital Gold Rush
Bitcoin, along with other cryptocurrencies, surged to the forefront during the era of unlimited quantitative easing. By December 2020, the crypto market entered a bull phase due to these economic policies. Speculators began recognizing opportunities, exploring various avenues for profit. One of the lower-barrier entry points was Ethereum mining using graphics cards.
At the time, social media was abuzz with stories of miners recouping costs within two months, RTX2080 cards earning USD$5 daily, and achieving financial freedom through mining. Initially, I was just an observer. However, by the Lunar New Year, early miners had already covered their initial investments. Unable to resist the temptation, I invested heavily in computer hardware to build my first mining rig.
Setting Up the Operation
After assembling the hardware, I promptly downloaded NiceHash—a user-friendly mining software that requires only a few steps to begin. My setup included one RTX3080 and one RTX2080, generating up to USD$20 daily and roughly USD$600 monthly. This meant the initial investment could be recovered in just two months. The excitement was real; earning money had never felt so effortless.
But challenges soon emerged. Daily earnings proved highly volatile. Miner income depends on factors like network difficulty, token prices, and the reward distribution methods of mining pools. As more participants joined, mining difficulty increased, diluting individual rewards. Another issue was heat management. I replaced all case fans with industrial-grade models, running them at 100% capacity. The noise was unforgettable.
Power consumption was another concern. Running two rigs escalated my electricity bill to nearly HKD$1,500 monthly. After deducting costs, profits were less impressive than anticipated. The constant noise and heat became daily inconveniences.
I decided to sell all my hardware in April, exiting at the peak of the gold rush. This allowed me to profit from both the mining and the subsequent sale of equipment.
Centralized Decentralized Finance
With leftover funds from selling the rigs, I ventured into cryptocurrency investments. Eager to understand the ecosystem better, I stepped into the world of decentralized finance (DeFi)—a path with its own risks and rewards.
Earlier in April, I had noticed PancakeBunny on Binance Smart Chain (BSC). This yield optimization platform maximized returns from liquidity mining. Note that this differs from GPU mining; liquidity mining involves providing liquidity to decentralized exchanges (DEXs). As a liquidity provider (LP), you earn a share of transaction fees from trades using your pool. This revenue model is termed liquidity mining.
PancakeBunny’s pools offered astonishing yields, sometimes exceeding 200% annual percentage rate (APR). Even in today’s high-interest environment, traditional banks offer only 5–6% on fixed deposits, making 200% seem astronomical. Enticed by these returns, I started with a USD$1,000 test investment. Within a week, I increased it to $5,000, and eventually to $10,000. In just a month, I earned nearly USD$1,000 in interest—a passive income dream.
The Iron Finance Collapse
By early summer, a Titanic-like project entered the crypto space. Iron Finance, with its seemingly stable coin mechanism, record-breaking Total Value Locked (TVL), and a daily APR of 1.5%, became the DeFi star of June. The market was frenzied. I went all-in, investing USD$10,000 to purchase 433 Titan tokens. In two days, the value soared to $13,000.
But the ship hit an iceberg—not just a scratch, but a catastrophic split, sinking rapidly. The collapse happened in moments. While I was at work, unaware of the disaster, my $13,000 vanished. By the time I saw the news, all that remained were 433 worthless tokens. The regret was profound. I wished I had recognized the warning signs earlier to cut losses. A service like instant SMS alerts for market anomalies could have minimized the damage.
Learning from Mistakes
The outcome was harsh, and human behavior often reflects greed. However, there are ways to avoid such pitfalls. Always DYOR (Do Your Own Research) before investing in any project. Investigate the team’s background, previous projects, whitepapers, and roadmap. Base decisions on your understanding of the market and the project’s fundamentals.
Even if a project appears solid with a promising team and business model, external factors can impact its survival. Limit exposure to no more than 10% of your total portfolio. Diversification is key—don’t put all your eggs in one basket.
FOMO is a common manipulation tactic. Projects may use marketing and social media to artificially pump token prices, luring unprepared investors. When prices suddenly spike by 50–100%, it often signals a FOMO scenario. If exposure seems excessive across media platforms, consider exiting to prevent losses.
Frequently Asked Questions
What is Bitcoin mining?
Bitcoin mining involves using computational power to validate transactions and secure the network. Miners compete to solve complex puzzles, earning rewards in Bitcoin. This process requires specialized hardware and significant electricity.
How does liquidity mining work?
Liquidity mining lets users provide funds to decentralized exchanges, earning a share of transaction fees. It’s distinct from traditional mining, relying on market activity rather than computational work.
What caused the Iron Finance collapse?
Iron Finance failed due to a loss of peg in its stablecoin, triggering massive sell-offs and hyperinflation of its Titan token. This underscores the risks in algorithmic stablecoins.
How can investors avoid DeFi scams?
Thorough research is essential. Check project credentials, audit reports, and community feedback. Avoid investing based solely on hype or social media trends.
What role does FOMO play in crypto?
FOMO drives impulsive investments during price surges, often leading to buying at peaks. Staying rational and adhering to a strategy helps mitigate this.
Are there tools for risk management?
Yes, some platforms offer real-time alerts and portfolio tracking. 👉 Explore advanced risk management tools to stay informed.
Conclusion
The cryptocurrency landscape is dynamic, offering opportunities and risks. From mining to DeFi, each phase teaches valuable lessons. As we pause here, stay tuned for deeper insights in the next segment of this series.