In 47 days, from earning 44 million dollars to losing all capital, the fate of Brother Ma Ji was determined by the "Gambler's Ruin Theorem."

Majie, a former artist and tech entrepreneur, is now a Whale in the crypto world. He staged a jaw-dropping wealth roller coaster on the Hyperliquid exchange.

With an aggressive leverage strategy, he once pushed his account up to nearly $60 million (with unrealized profits exceeding $44 million).

However, driven by the “gambler's fallacy” and the “disposition effect”, he ignored the market reversal and frantically added to his position, attempting to defy mathematical laws.

Ultimately, within 47 days, it fell from its peak to just 1718 dollars, with no principal left, vividly and brutally illustrating the end of the “gambler's ruin theorem.”

To understand this defeat, one must grasp three concepts: random walk, absorption barrier, and negative drift.

① Random Walk

Imagine a drunk man walking in a straight line. He tosses a coin, if it's heads he moves forward (making money), if it's tails he takes a step back (losing money).

The experience of Brother Maji is essentially that of a drunken man's footsteps. In the short term, he may continuously throw out positive signs, rushing forward, with assets soaring to 60 million. But this does not mean he is impressive; it's just luck.

② Absorption Wall

The road that the drunken man walks is asymmetrical on both sides.

On the left is a high wall (the dealer/market): composed of the total funds of the market. For individuals, it is almost infinitely distant. You cannot win all the money from the market and make the market “bankrupt.”

On the right is a cliff (you): this is your principal zero point. For Majid, this point is finite.

As long as the game continues, the drunk has a chance to retreat continuously. Once he touches the cliff (assets go to zero), he falls off. Falling off means “being absorbed” - the game is over, and you no longer have the opportunity to recover your losses.

Because the opponent (market) is infinite, while you are finite, as long as there is enough time, you will 100% fall off the cliff.

This is the “Gambler's Ruin Theorem.”

③ Negative Drift

If it's just flipping a coin (with a 50% win rate), it may take a long time for the drunkard to fall. But in casinos and crypto world contracts, there are fees and slippage, like a strong wind blowing the drunkard towards the cliff edge. This is negative drift.

Under negative drift, the mathematical expectation is negative. Brother Maji has paid hundreds of thousands of dollars just in funding fees this round.

So, his account had an unrealized profit of 44.84 million dollars on September 18, why didn't he cash out? Why did he lose all his principal? The reasons are as follows:

a. Leverage. Leverage can bring the distant “cliff” right in front of you–a mere 4% reversal (25x leverage) can cause a fall.

b. Margin strategy. Using limited “bullets” to continuously average down (doubling method) in order to counteract the infinite market decline will inevitably lead to a break in the funding chain, crashing against the absorption wall.

c. Mental accounting. Why does he not take profits when he makes a big gain? Because in the gambler's mindset, that 44 million is “casino money,” and losing it is not regrettable.

Big Brother Ma Ji said “Just be happy”, this is the carefree attitude of wealthy gamblers, ordinary people should not learn from it.

Here are three life algorithms:

1. Participate in “Positive Expectation”

Contracts and gambling are negative expectation games, do not touch them unless you are spending money for excitement.

Invest in a “serious” index, hold quality assets with EV > 0, and be a friend of time.

Duan Yongping said that ordinary people can make money by regularly investing in the S&P 500, as the market experiences “positive drift.”

2. Stay away from “absorption wall”

Survival is the top priority. Stay away from leverage and don't let volatility push you off a cliff.

Three, set the “stop line”

Speculators must cash out to make money and cut losses to avoid bankruptcy according to the gambler's ruin theorem; otherwise, the outcome is 0.

Value investors should use spare money that they can afford to lose to wait for the right drift.