Zhao Dong Recounts How He Lost 9,000 BTC

[churrosndips]

MARKETS AND PRICES
2 mins ago | Samuel Haig | 11
Zhao Dong Recounts How He Lost 9,000 BTC
Famed Chinese OTC bitcoin trader, Zhao Dong, recently shared the story of how he first entered the bitcoin markets, the losses he incurred, and his views on speculation in the cryptocurrency markets.

Also Read: Snowden on Bitcoin: Blasts Public Ledger and Core Developers

Zhao Dong’s Rocky Start in the Cryptocurrency Markets
Zhao Dong Recounts Story of 9,000 BTC LiquidationZhao Dong, the founder of DFUND, has, in recent years, risen to prominence as one of China’s largest OTC traders. However, early in his trading career, Mr. Dong would incur losses that drove him to contemplate suicide.

An interview published by Weixin states that Zhao Dong first entered the cryptocurrency markets with approximately 10 million yuan (roughly $1.58 million USD). He “followed the bull market quickly,” shortly leading Zhao Dong to open heavily leveraged positions. As a consequence, Zhao Dong found himself 60 million yuan (nearly $9.5 million USD) in debt to friends for whom he was informally managing the money of – after losing 9,000 bitcoin in a single day during February 2014. Despite questioning his will to live, Zhao Dong decided to persevere.

Zhao Dong Loses Over $23.5 Million in 2014
Zhao Dong Recounts Story of 9,000 BTC LiquidationDuring 2014, Zhao Dong states that he lost “nearly 150 million yuan” (almost $23.7 million USD) due to his decision to open “one of the largest [bitcoin] mines in [China]” immediately preceding the onset of 2014’s cryptocurrency bear season.

Zhao Dong states that his mining operations were based in Shanxi, Inner Mongolia, Sichuan, and Shenzen. As consequence of tumbling BTC prices, significant establishment costs, and mounting repayments to creditors, Zhao Dong states that the “bitcoins dug in every day [could]n’t afford even the electricity bills.”

In 2015, Zhao Dong states that he was forced to liquidate his mining operations – which saw him receive only 3 million yuan (474,000 USD) for hardware that initially cost him 50 million yuan ($8 million USD)

Zhao Dong Discourages Retail Bitcoin Speculation
Zhao Dong Recounts Story of 9,000 BTC LiquidationDespite his reputation as an OTC trader, Zhao Dong rejects the notion that he is a professional speculator. Zhao Dong states that he “doesn’t do technical analysis. I’m not a speculator. In fact, I’ve always been a small profit maker and I’m not a speculator.” Looking back on his experiences, Mr. Dong emphasizes risk management as the most important thing for traders to observe, before citing attributing a quote to Mark Zuckerberg – “not risking is the biggest risk. But adventure plus risk control is perfect.”

Zhao Dong seeks to discourage retail traders from entering the cryptocurrency markets, stating “Honestly, if you are not a professional speculator, then I suggest that you do not want to invest in speculation. For most of the speculation, losing money is almost inevitable. It’s like going to a casino.”

In spite of up-and-down experiences with bitcoin, Zhao Dong describes BTC as comprising “far more than just a technology,” adding that bitcoin “will have a profound impact on human history […] Bitcoin is the first time in human history to use technical means to ensure that private property is sacred and inviolable.”

https://news.bitcoin.com/zhao-dong-recounts-how-he-lost-9000-btc/?utm_source=OneSignal%20Push&utm_medium=notification&utm_campaign=Push%20Notifications

[parobber]

Just seems like another person who probably is only so much in profit because he went big and got lucky. Anyone who has been in bitcoin since before 2014 should be in a huge profit, it's almost impossible not to be.

[BillyBobZorton]

I guess it's not as bad shorting bitcoin, but starting a big mining operation right before the biggest bear market of all times (MtGox 2013 crash) was obviously a big mistake.

Starting it during 2015 to rack up a lot of cheap coins would have been great tho. You keep mining while on a stable low price and keep expanding as much as possible and then you are set once the big new all time highs hit.

If I could i would start mining now that the price is going bullish again.

[sorrysteve1]

I guess it's not as bad shorting bitcoin, but starting a big mining operation right before the biggest bear market of all times (MtGox 2013 crash) was obviously a big mistake.

Starting it during 2015 to rack up a lot of cheap coins would have been great tho. You keep mining while on a stable low price and keep expanding as much as possible and then you are set once the big new all time highs hit.

If I could i would start mining now that the price is going bullish again.

What's stopping you? If you can correctly call the bottom or a bull trend approaching then mining and holding the coins can be really profitable. I'm sure a lot of miners adopt a strategy of selling just enough coins to cover their costs and then hold the rest waiting for a higher price in the future.

[YuginKadoya]

Great story in getting up to the top and sprung back down again by losing so much just like that, Well this is all because of bitcoin i really think there is a time in our life that we can certain lose even though we think that we had everything but this lost didn't mean it is the end I really think it is a new beginning and try to persevere even more, A lot can happen because this is bitcoin we are talking off we can have a life changing experience sometimes but  for zhao dong getting back up is not impossible because you have reach it once definitely you can reach it up again.

[slyfox]

I guess it's not as bad shorting bitcoin, but starting a big mining operation right before the biggest bear market of all times (MtGox 2013 crash) was obviously a big mistake.

Starting it during 2015 to rack up a lot of cheap coins would have been great tho. You keep mining while on a stable low price and keep expanding as much as possible and then you are set once the big new all time highs hit.

If I could i would start mining now that the price is going bullish again.

Certainly it was a bad decision but at the same time sometimes everything will come to luck, he had the money, he had the knowhow and if he invested in another period of time he could have got huge profits but instead since he invested at the worst possible time he lost a fortune, this show to us that no matter how good is your plan you still need a little bit of luck in order to succeed.

[vit05]

This text is almost impossible to read. Why have they repeated his name so many times? Was he afraid to forget who they were talking about?

The bottom line is that he opened a Bitcoin mining company, but due to price volatility and the cost of borrowing with investors he could not keep it runing. And in the end he sold for a fraction of what he had invested.

[Panda Trump]

Just seems like another person who probably is only so much in profit because he went big and got lucky. Anyone who has been in bitcoin since before 2014 should be in a huge profit, it's almost impossible not to be.

Actually, that's not necessarily true. Given the fact that Bitcoin's price peaked at around $1000 in 2013 & Bitcoin is at $8000 now, you'd have made +700%. However, that's only a huge profit if you invested a huge amount of money. Want to be a millionaire? Well, then you should've invested $125k back then. I doubt a lot of people dared to take that risk.
Then of course the fact that the crash held Bitcoin's price far beneath $1000 for months to come (years actually)...

Besides, only the guys who held Bitcoin since then are in a huge profit. I like to use Bitcoin for what it's made for: Buying stuff with it & selling stuff for it.
The moronic speculative mentality most of the Bitcoin holders currently got is destroying Bitcoin's purpose & has turned it into a bubble. Sadly, that's not dumb FUD, but plain reality.

However, I agree that Zhao Dong is probably just another person who had some insane luck gaining so much money. Just like a couple tens of others who are now millionaires, just because they were lucky enough to hear about Bitcoin early on.

[buwaytress]

Just seems like another person who probably is only so much in profit because he went big and got lucky. Anyone who has been in bitcoin since before 2014 should be in a huge profit, it's almost impossible not to be.

Actually, that's not necessarily true. Given the fact that Bitcoin's price peaked at around $1000 in 2013 & Bitcoin is at $8000 now, you'd have made +700%. However, that's only a huge profit if you invested a huge amount of money. Want to be a millionaire? Well, then you should've invested $125k back then. I doubt a lot of people dared to take that risk.
Then of course the fact that the crash held Bitcoin's price far beneath $1000 for months to come (years actually)...

Besides, only the guys who held Bitcoin since then are in a huge profit. I like to use Bitcoin for what it's made for: Buying stuff with it & selling stuff for it.
The moronic speculative mentality most of the Bitcoin holders currently got is destroying Bitcoin's purpose & has turned it into a bubble. Sadly, that's not dumb FUD, but plain reality.

However, I agree that Zhao Dong is probably just another person who had some insane luck gaining so much money. Just like a couple tens of others who are now millionaires, just because they were lucky enough to hear about Bitcoin early on.

This is what I feel, and somewhat refreshing to see such an old hand crediting a fair share of success to pure luck. It's a sign of maturity to acknowledge that luck is sometimes what makes or breaks.

I wouldn't say all holders are bad for the market though, just the same way all sellers can't be bad. I definitely think we owe a lot to people who use and spend, the Lazslos who bought pizza, and the bct users who spend in the goods section. No makers, no takers, right? But holders are also those who advocate long term outlooks. Which seems forgotten by the goldfish memories of mainstream traders...

[Sir Cross]

I guess it's not as bad shorting bitcoin, but starting a big mining operation right before the biggest bear market of all times (MtGox 2013 crash) was obviously a big mistake.

Starting it during 2015 to rack up a lot of cheap coins would have been great tho. You keep mining while on a stable low price and keep expanding as much as possible and then you are set once the big new all time highs hit.

If I could i would start mining now that the price is going bullish again.

What's stopping you? If you can correctly call the bottom or a bull trend approaching then mining and holding the coins can be really profitable. I'm sure a lot of miners adopt a strategy of selling just enough coins to cover their costs and then hold the rest waiting for a higher price in the future.

Mining now takes up too much electricity and investing on the equipment would need a huge capital. I've read a quote before that "mining is profitable when it wasn't". For those who mined way back now reap huge profits because of how the price of bitcoin shooted up. The same may happen in the future if bitcoin's price will continue to rise. The costs are high but it would be worth it once you realize your return of investment and start reaping some gains.

[Za1n]

Mining now takes up too much electricity and investing on the equipment would need a huge capital. I've read a quote before that "mining is profitable when it wasn't". For those who mined way back now reap huge profits because of how the price of bitcoin shooted up. The same may happen in the future if bitcoin's price will continue to rise. The costs are high but it would be worth it once you realize your return of investment and start reaping some gains.

I agree with you somewhat on this, but the thing is times have changed a lot since then. Mining has always entailed risk, the biggest of which is that the coin(s) your mine may become worthless some day and you are out your expenses.

In the earliest of Bitcoin's days, mining was simply running your CPU when you weren't using you computer, so you might be out a few extra dollars per month if nothing became of it, no big loss. Then came the GPUs, again during the earliest days people used mainly what they already had, probably on their gaming PC, most people had one or two and simply mined with them adding maybe $20/mo to their electric bill. Again no big deal as it was simply a hobby and hobbies sometimes do cost money.

Another fact is that even back then some people had multiple rigs with multiple GPUs already as they like to turn their old computers in rigs for projects such as Seti@home, or other similar shared computing projects. So these people may have switched some of these rigs over to mining full time when the profitability started to increase.

This period was the beginnings of the arms race as more and more people started building fresh rigs for the express purpose of mining. This is also where the real risk started as you were no longer using equipment you already had and limiting your power usage to just a few dollars extra, but were instead investing significant money in hardware and power bills in the hopes your strategy paid off in the future. Then eventually came the ASIC's which raised the bar even higher as once they became obsolete, you couldn't even resell them, so the risk was even larger.

Even with all this the risks were fairly low as Bitcoin had not yet reached the magical $1,000 point that changed everything. Once this point has been breached, even though short-lived, it brought a lot of awareness and significant investment into the space. Since that time, and especially over the past 12 months, equipment prices have gone up 150-200% above their previous suggested retail prices. Coin difficulties have skyrocketed to the point that unless you are running a farm with 100's of GPUs you probably are just wasting your time trying to mine.

We are now on the downturn coming off a 12 month bull-run and there currently is no solid bottom yet in sight, however both mining difficulties and hardware prices are still at their all time highs. So this is the major disagreement I have with your statement, is that now more than ever before is investing in mining as huge risk. This is not to say that mining won't ever be profitable again, just that investing now when upfront costs are so high tips the risk reward ratio too far over into the risk side where it doesn't make sense at this point in time.

[parobber]

Just seems like another person who probably is only so much in profit because he went big and got lucky. Anyone who has been in bitcoin since before 2014 should be in a huge profit, it's almost impossible not to be.

Actually, that's not necessarily true. Given the fact that Bitcoin's price peaked at around $1000 in 2013 & Bitcoin is at $8000 now, you'd have made +700%. However, that's only a huge profit if you invested a huge amount of money. Want to be a millionaire? Well, then you should've invested $125k back then. I doubt a lot of people dared to take that risk.
Then of course the fact that the crash held Bitcoin's price far beneath $1000 for months to come (years actually)...

Besides, only the guys who held Bitcoin since then are in a huge profit. I like to use Bitcoin for what it's made for: Buying stuff with it & selling stuff for it.
The moronic speculative mentality most of the Bitcoin holders currently got is destroying Bitcoin's purpose & has turned it into a bubble. Sadly, that's not dumb FUD, but plain reality.

However, I agree that Zhao Dong is probably just another person who had some insane luck gaining so much money. Just like a couple tens of others who are now millionaires, just because they were lucky enough to hear about Bitcoin early on.

This is what I feel, and somewhat refreshing to see such an old hand crediting a fair share of success to pure luck. It's a sign of maturity to acknowledge that luck is sometimes what makes or breaks.

I wouldn't say all holders are bad for the market though, just the same way all sellers can't be bad. I definitely think we owe a lot to people who use and spend, the Lazslos who bought pizza, and the bct users who spend in the goods section. No makers, no takers, right? But holders are also those who advocate long term outlooks. Which seems forgotten by the goldfish memories of mainstream traders...

I take your point, but it seems as though he did have many funds available and rich as a term is also very subjective. For someone investing 5k back in 2014, having 40k now is still a very great return. The price was also as low as near $200 in 2014 and that would then be a 40x increase and that would make a lot of more moderate investors 'rich'.

I feel like in everything, not just cryptocurrencies or investing, you always need a big slice of luck if you are going to have great success.

Holding in itself isn't bad, but there has to be a utility behind bitcoin or it is not much more than a ponzi scheme, a combination of people holding and spending will work but if no one ever spends then bitcoin can not and will not progress.