Your "scarcity mindset" is the biggest enemy of encryption trading.

Author: VKTR

Compiled by: Deep Tide TechFlow

This is not financial advice.

I have held an ETH position for almost two years, basically at a break-even point. It’s like dead money, with no movement at all. It’s like a zombie just sitting in my portfolio, while other stocks in the market are racing around me.

Cursed Chart

Now it is finally showing good profits, but that does not change the fact that it might be one of the worst trades of my life. The reason is not the entry point or the investment idea, but because I couldn’t bring myself to give up on this trade and redeploy the funds to more valuable places.

This is a manifestation of a scarcity mindset. I am so afraid of “giving up” that I would rather watch my money go to waste for two years than admit I was wrong and seek better opportunities.

This phenomenon is everywhere. Traders self-destruct not because they can’t read charts or time entries, but because they are unable to make clear decisions regarding their funds.

I know a trader who made 2 million dollars during the bull market in 2021. By 2022, he was left with nothing. Another trader panic-sold all his assets when the market first dropped by 30%, only to watch the price rise 50 times, while he kept holding stablecoins. The same mindset, different disasters.

When you observe any trader over a long period, you will notice the same pattern. They make a fortune, only to ultimately suffer because they do not trust their own decisions. A 40% surge turns into a 20% loss because they hold their positions for too long. A 10x runner is sold at break-even because they do not believe it will continue to rise. A trader who sells a worthless coin to zero will eventually panic-sell the next runner due to the philosophy of “a bird in the hand is worth two in the bush.”

I have experienced both situations. It’s not the nonsense of diamond hands, nor the panic of paper hands, but I have seen enough good opportunities eventually turn into regret, enough to help me recognize the real patterns. Sometimes I hold positions too long, and sometimes I sell too early. The commonality does not lie in my strategy or analysis.

That is fear.

This is not belief, this is not discipline, this is not faith in technology.

Although it sounds a bit daunting, it could be childhood trauma.

Invisible Cage

I believe that most trading mistakes are actually due to a scarcity of funds. Every tweet about “holding on despite the pain” and every group chat message saying “I sold too early” indicates that someone has believed since a young age that such opportunities may not come again. Every trader who cannot make clear decisions usually understands early on that money is scarce and valuable, and it’s best not to waste the limited opportunities.

Most of the traders I know grew up in the anxiety of the middle class, checking their accounts before buying anything. Parents would argue over bills. Every penny is precious because it might never be available again.

This kind of bullshit follows you into the trade like a curse.

Imagine this: you make a 40% profit on a trade. Your scarcity mindset starts calculating. “If I hold on a little longer, this money could change my life.” So you hold on. You hold on for too long. Watching your gains evaporate because you can’t accept that a 40% profit is enough.

Or the opposite situation: you made a 40% profit, and your scarcity mindset whispers, “Get out while you can. You might never see green again.” So you sell it, only to watch it rise to 400%, while you hold cash, blaming yourself for not believing in the setup.

Scarcity mindset chooses financial trauma over financial freedom

Both reactions stem from the same viewpoint: the belief that opportunities are limited and precious.

Behavioral economists have studied this for decades. When you grow up under financial pressure, your brain instinctively thinks that every decision could lead to disaster. The experiences from your childhood are manipulating your trading account, and it is likely causing you to lose money.

Abundance asymmetry

At the same time, there is another type of trader in these markets. They usually have money from a young age, or at least a stable financial situation. They make decisions without a care. Profitable positions, stop-loss for losses, and appropriately adjust their positions. There is no emotional attachment, no vicious cycle of “what if…”.

They sincerely believe that there will be more opportunities in the future, while many of us do not think so.

Abundant traders believe: “I will let this winner continue to run and manage my risks appropriately. There will always be another trade.” Scarce traders believe: “This may be my only chance to achieve financial freedom, so I will either lock it in immediately or let it go to zero.”

One method can create wealth, while the other can bring anxiety.

Why does everyone make wrong decisions?

The most expensive lie in the cryptocurrency field is not “diamond hands” or “always profitable,” but the idea that there is a correct answer for every transaction.

Really, I think we are just afraid. Afraid of missing out. Afraid of making mistakes. Afraid that once we take a wrong step, there will never be another opportunity like this.

This phenomenon is everywhere. Those traders you might call “maximizers” are unable to make clear decisions because every trade could change everything. They hold onto profitable stocks for too long, eventually turning them into losing stocks. They sell profitable stocks too early, only to watch them head toward destruction. They keep increasing their positions without managing risk. They view every decision as irreplaceable.

They are trading childhood traumas, not the market.

The True Cost of Narrow-Mindedness

The scarcity mindset not only affects your trading but also your entire relationship with money and opportunities.

I once made 5 times profit on a position, but I couldn’t bring myself to take the profit. I watched it slide down for three months, eventually leaving me with just break-even, because I was haunted by the fear of “selling too early.” But I have also panic-sold profitable stocks, where I had a 30% profit, which later rose to 10 times, because my brain couldn’t believe I deserved to have that wealth.

Scarcity thinking can lead to a specific type of self-sabotage:

Decision paralysis – you can’t decide when to buy, sell, or hold, because every choice feels like it could ruin everything. You feel helpless and unable to manage risk dynamically.

Binary thinking - you believe that every trade is either “diamond hands forever” or “instant profit”. You cannot increase or decrease your position because you do not trust yourself to make multiple correct decisions.

Risk distortion - you either go all in on a single trade or take no meaningful risks at all. You can’t find a middle ground for truly accumulating wealth.

Secret to Abundance

The solution may not necessarily be psychotherapy or meditation, although I find the latter to be helpful. The key is to make your brain believe that money is a renewable resource, not a limited resource.

You might ask yourself: “What would someone with 10 million dollars do in this situation?” I can guarantee that they wouldn’t hold onto stocks until they drop by 80% just because they “believe in the technology.” However, they also wouldn’t sell during the first 20% of a bull market out of fear of volatility.

Experienced large-cap traders do not become emotional about individual trades. They consider risk management and position size rather than absolute returns. They prefer to make consistent decisions rather than pursue perfect ones.

The truly effective method

I wish someone had told me these things five years ago, and the truly successful traders I have seen all do the same:

Consider various scenarios rather than absolute conditions. Set multiple profit targets and risk levels before trading. Don’t let scarcity mindset persuade you that there is only one correct approach.

Measure your trading size as if you were already very wealthy. If you had $1 million, would you bet 100% of the risk on a single altcoin? Then why would you do that with your $10,000 account?

Practice dynamic risk management. Take profits when gains are substantial. Increase positions when judgments are correct. Cut losses when judgments are incorrect. Do not treat every decision as permanent.

Calculate opportunity cost. Every dollar tied up in unproductive transactions means you miss out on potential profits elsewhere. Every dollar you panic sell represents compounding growth you could have achieved.

Compound Effect

A mindset of abundance can help you make more money than a mindset of scarcity. The relentless pursuit of perfection in every trade often leads to a reduction in overall good trades.

When you start to think deeply, you will make better decisions. You will take profits at the right time. You will let some winners run. You will cut losses. You will wait for good opportunities. You will stop revenge trading. You will stop getting caught up in high-level narratives out of fear of missing out.

All these small decisions will accumulate. You will no longer be caught in the boom and bust cycle of scarce trading, but will begin to accumulate stable and lasting wealth.

The market rewards patience, discipline, and strategic thinking, while punishing despair, greed, and emotional decisions. Your mindset determines which category you belong to.

Break the cycle

I still struggle with this. Even now, with a larger account size and more experience, I sometimes find myself making decisions out of fear rather than rationality. Scarcity mindset is deeply ingrained.

But I have already learned to recognize it. Moreover, I have seen the same pattern in every trader who has transitioned from continuous losses to continuous gains.

The first step is to recognize that your scarcity trap exists. It’s not your fault—it’s shaped by your childhood experiences with money. But you have the responsibility to change it.

Cure and win

Your relationship with money is formed before you learn to walk, and every transaction you make could potentially cost you money. The scarcity trap is a poverty mindset dressed in the guise of strategy.

I have gone through a lot of hardships to understand this point. The money I lost when making those terrible decisions was more than the money I lost when making those logical decisions. I have turned winners into losers more times due to overthinking than when I acted according to my plan.

I believe this model can destroy traders more than any poor technical analysis or market crash.

Your childhood experiences do not determine your trading fate. But you must realize that your scarcity mindset is your true enemy. Not the market, not the whales, and not manipulation.

Your brain has collapsed, causing you to continue to collapse.

First, solve this problem. Everything else is just strategy.