If you want to achieve excess returns in a bull market, the earlier you should place your bets before others enter the market!
Written by: Edgy
Translated by: Deep Tide TechFlow
There are four stages in a bull market.
We are currently at the tail end of the first stage of the bull market (Note: This article was written a few months ago, and the author now believes that we have entered the second stage of the bull market). Below are some guidelines and recommendations on how to deal with market cycles and avoid missing out on high profits.
Here are some operational suggestions for you:
Grasp every stage of the bull market
Maximize profits
Avoid the most common pitfalls
Stage One: Accumulation Stage
The accumulation stage is where the market currently stands, and it's also where we've been for the past year. After the panic of Terra's collapse, FTX's collapse, and USDC's unpegging, the cryptocurrency market hit rock bottom.
The most difficult phase of the market has passed (unless Binance or USDT experiences a major crisis that affects the entire industry).
Currently, the overall market is maintaining its current price fluctuations. Major industry news has almost no impact on the overall market (such as PayPal launching a stablecoin). Currently, off-market funds are not injecting new liquidity into the cryptocurrency market, while on-market funds are playing against each other, and various altcoin sectors are being driven by capital rotation.
Now is the accumulation stage. We can start positioning funds in the market to profit in the bull market.
Operational suggestions:
Find high-quality projects. Look for projects that you believe will take off in the upcoming bull market. High-quality projects mainly have the following characteristics: high product/market fit, competitive advantages in similar products, active project teams, clear development roadmap, and financial health.
Save funds. Many investors want to buy the tokens of projects from the last bull market because their token prices are 90% lower than their all-time highs. But the next cycle will likely see most of the best-performing projects not yet listed. Compared to projects from past bull markets, investors will be more inclined to position themselves early in new projects.
Control trading frequency. Even though the current market is boring, don't let the desire to trade take over just because it's boring. First, survive in the cryptocurrency market, then discuss making a profit. Wait for better trading opportunities instead of trading randomly because the market is boring.
Learn during a bear market. A bull market is not a good time to learn, but a good time to make money. Now, during the bear market, is a good time to learn.
Monitor liquidity. Keep an eye on the inflow of funds into centralized exchanges (CEX), stablecoin minting, TVL of DeFi protocols, overall cryptocurrency market capitalization, and other related factors. Changes in these factors can represent changes in cryptocurrency market liquidity. More liquidity means the market sentiment is improving.
Stage Two: Early Bull Market
The market starts to warm up, and prices begin to rise, but people will not believe that the bull market is here.
The most difficult thing is to not believe that the bull market is coming. After all, investors' psychology of losses in the bear market will hinder them from making profits in the bull market. Many people will be hesitant, thinking that the market will continue to decline. If you want to achieve excess returns in a bull market, the earlier you should place your bets before others enter the market!
What reasons will bring about the bull market?
Major industry events, such as the approval of BTC or ETH ETFs, or a new country adopting BTC as legal tender.
The BTC halving will occur in 2024. Of course, the rise after past Bitcoin halvings does not necessarily mean that the next halving will also lead to a rise. But if enough people believe that the halving will lead to a rise, the resulting market consensus will also drive up prices.
New narratives. In the last bull market, the cryptocurrency market had two major narratives: DeFi and NFTs. What about this round of the bull market? GambleFi? TelegramBots? RWA? GameFi? Or will NFTs reignite the market? Of course, the most likely scenario is some areas with low market heat, such as games like Axies Infinity or Stepn, but with better token models and game mechanisms.
Improvement in macroeconomic conditions. For example, if the Federal Reserve stops raising interest rates, it will allow more liquidity to enter the cryptocurrency market.
Regulatory changes. The U.S. and other countries providing more transparent and effective regulation for the cryptocurrency market.
Increased convenience. There are still many difficulties for ordinary people to enter the cryptocurrency market. More convenient wallets and dapps that are more user-friendly for beginners will also promote the bull market.
Eastern markets. Cryptocurrency investors and builders on Twitter have regional pride and prefer Western markets. This is also why most people cannot understand why Tron is so popular (Tron has a large customer base in the Asian market). The impact of cryptocurrency in countries like South Korea, China, and Hong Kong is also significant.
In fact, a chain reaction can be triggered by just one major factor.
Some people in the cryptocurrency market start making money as the market improves. They improve their quality of life and then tell people around them, who are likely to enter the market out of FOMO, bringing in more off-market funds and further driving up market prices, creating a positive cycle.
Operational suggestions:
1. Reduce positions in coins that are causing you losses, and increase positions in coins that are making you profits. Always cut losses in time and don't be hesitant. Just because a coin or protocol has given you a 5x return doesn't mean it can't achieve a 10x return. Whether prices can continue to rise depends on indicators and market sentiment. As for investments causing you losses, reduce positions in a timely manner.
2. Profit from the rise and take profits in time. No one can sell at the highest point, so establish your profit-taking system and stick to it.
3. Control positions in altcoins and meme coins. Don't use family assets, retirement funds, or sell BTC and ETH to buy large positions in altcoins. You can buy altcoins and meme coins, but don't go all-in or use high leverage, as the risk is too high.
4. Invest with caution. Historical evidence has shown that the fundamentals and token economic models of some wildly hyped coins are generally average. Remember: a coin's price will only rise when there is market heat and when investors are buying into it. Most investors will not bother to understand the operational logic and economic model behind a project, but where there is market consensus, there will be a rise in the token price.
5. Beware of Ponzi schemes. In a bull market, there will be projects with Ponzi characteristics, where the project team knows how to manipulate market sentiment and drive up prices. However, inevitably, Ponzi schemes will eventually collapse. You can embrace Ponzi schemes, but be sure to profit and leave before the market collapses, or you can choose not to touch Ponzi projects at all.
6. Don't ignore the voices of retail investors. In some cryptocurrency podcasts and conferences, everyone discusses various emerging technologies, which can easily draw people in. Ordinary investors simply do not understand these professional terms. However, you need to engage with ordinary investors to understand their trends, such as checking what they are currently paying attention to on Reddit and YouTube.
7. Focus on certain areas. Find a few professional areas that belong to you. In the cryptocurrency market, it's impossible to keep up with all the hotspots, and it's impossible to catch all the rises. It's acceptable to miss a few good projects and a few coins that double in value. Start now and focus on a few areas that you understand the most, and when opportunities arise, be sure to seize them!
Stage Three: Peak of the Bull Market
This is the stage where retail investors start pouring in. They enter at the peak of the bull market, but in their minds, they believe they are entering at the beginning of the bull market.
The arrival of the bull market has a positive feedback loop. As prices rise, this will drive investors in the market to have FOMO. This is a positive feedback loop: they FOMO, they buy, and this continuously drives up prices.
All coins will rise. A $10,000 meme coin can bring you huge profits, and you may hear people discussing cryptocurrency-related matters while out for a walk.
The market will become more and more FOMO. Some people may even quit their jobs to become full-time cryptocurrency traders. There will also be people selling their houses to invest in the cryptocurrency market.
So, how can you tell if the market has peaked?
Mainstream media starts reporting on cryptocurrencies. You will repeatedly hear news about someone trying to find a cold wallet containing 8000 bitcoins, or someone buying two pizzas with 10,000 bitcoins.
Financial YouTubers like MeetKevin, Max Maher, and Graham Stephen upload multiple cryptocurrency videos every day.
Mainstream brands like Pepsi and McDonald's will start mentioning cryptocurrencies to expand their brand influence. Celebrities will try to make money through sponsorships or by launching their own NFT series.
Everyone is showing off their profits. When KOLs on Twitter or other investors start flaunting their profits, you should be alert – the market may have peaked.
Everyone will try to make you believe that this time is different. You must resist your own intuition.
At this stage, most people in the market will believe that the bull market will continue, and prices will continue to rise. But the most important thing at this time is when to exit. At this stage, it is crucial to keep a cool head and realize that there is no market that rises forever.
It is most important to convert floating profits into actual profits and secure them!
Stage Four: Decline Stage
What goes up fast, comes down fast, and the peak of the bull market has passed. At this stage, everyone will speculate whether this is the peak of the bull market and whether there will be another wave of uptrends.
There will be a narrative in the market: This time is different – cryptocurrencies have become mainstream investment products! The bull market will continue for several more years!
Everyone's FOMO has a reason behind it. From the perspective of the project team, more retail investors must participate to attract investment. From the perspective of retail investors, more funds must be used to speculate on meme coins for prices to rise. So, they will continue to FOMO you and continue to CX.
Of course, even though the bear market has arrived and prices are falling, there will occasionally be hotspots in the market. Bitcoin peaked in November 2021. However, in the following months, FTM and Luna continued to rise.
Once prices plummet, there will be hindsighters who will say, "I told you earlier that prices would fall!"
After missing out on the bull market of the past two years, what makes me so confident that there will still be a cryptocurrency bull market?
Because I have staked my career and the next ten years of my life on DeFi. I am confident in this field.
Let me briefly explain the reasons:
Under the current economic conditions, life is becoming increasingly difficult for ordinary people, with the main manifestations being:
Credit card debt reaching historic highs
Per capita debt reaching historic highs
Increased student loan repayments
Credit card interest rates reaching historic highs
Debt interest payments about to reach historic highs
Average monthly payments for new cars reaching historic highs
Not to mention housing prices
The current economic situation makes life increasingly difficult for everyone. The cost of living is rising year by year, and the income from going to college and finding a job is not enough to buy a house.
At the same time, the threshold for success in society is constantly increasing.
Among young people of this generation, no one wants to grow up slowly, and no one wants to achieve financial freedom only in middle age. Young people want to get rich now and hope to have a huge amount of wealth at a young age.
For young people, cryptocurrency is not just a new financial asset, but also a dream. For them, there is no faster way to make money than in cryptocurrency.
Cryptocurrency is an excellent opportunity for young people to realize their dreams and strive for change.
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