Analysis of the Risks and Limitations of Shorting

In the investment market, shorting may seem to profit from declines, but in reality, there are many risks and uncertainties involved. From a theoretical perspective, the upper limit of profit from shorting is 100%, while potential losses can expand infinitely. In contrast, the maximum loss from going long is 100%, but the upside potential is unlimited.

Although some believe that shorting in the cryptocurrency market is relatively easy due to the inherent flaws in many projects, this viewpoint is debatable. In fact, maintaining a shorting strategy for an extended period may have negative consequences:

1. Distorted mindset: Overly focusing on negative market factors can easily lead to a pessimistic mood.
2. Losing confidence: After losing confidence in the industry, one may make irrational decisions.
3. Increased risks: Attempting shorting mainstream cryptocurrencies may lead to disastrous consequences.

Investors should be aware of some basic facts:

• The long-term inflation trend of fiat currency is difficult to change.
• Bitcoin has shown a long-term upward trend.

Taking the collapse of the Luna project as an example, while shorting did indeed yield substantial profits, this was merely a transfer of wealth from the bulls to the shorts and exchanges. We cannot overlook the fact that during Luna's rise from $0.3 to $120, the shorts had already suffered heavy losses.

Even profiting from shorting during the Luna crash was an extremely rare opportunity. In contrast, it is not uncommon for coins like TRB to surge from $10 to $550 in a short period, which is enough to destroy the funds of short sellers.

Therefore, for most investors:

• Habitual shorting should be avoided (except for hedging)
• Some profits are not worth chasing.
• It may be wiser to stay on the sidelines during a bear market.

In summary, although shorting can sometimes yield short-term gains, in the long run, the risks of this strategy often outweigh the rewards. Investors should approach shorting operations with caution and focus more on long-term value investing.