You probably already know that there are two market cycles (also called Market Trends). The so called Bull market and the Bear market. These cycles show the sentiment of the people participating in the stock market. During a Bear market stocks usually go down many months in a row and people usually try to sell their stocks in order to escape extreme volatility and price downtrend. In a Bear market the go-to idea is to sell stocks and buy stores of value like gold or just FIAT currencies. You do need to do it at the beginning of the Bear market or at the end of the Bull market to extract as much value, put it somewhere that holds value and ride it out until the next cycle.
During the Bull market the opposite happens, all the stocks rise and are propped up by hype, speculation and bubbles that will eventually pop in order to be corrected to its actual value prices during the Bear market cycle. If you want to extract the most value and make the most money, you have to somewhat “gamble” and try to predict these cycles. It is easier to do than day trading but it still involves you analyzing the market and everything around it and try to time it, which is not the best strategy.
Just buying, holding for many years and ignoring the cycles will probably be the safest way to make money. But how can you ignore a situation when your portfolio jumps and makes you thousands of $ in a day or on the contrary looses you thousands of $ in a day ? And this continually happens every day during a given cycle where you either make a lot or loose a lot.
It all comes down to psychology and emotional control.
Before that, something to note is that the cryptocurrency market also has these “Trends”. It is somewhat similar to the stock market where during a Bull market it is advised to buy “altcoins” and diversify into riskier coins or sell the “altcoins” and buy Bitcoin or stablecoins during a Bear market.
I have been in both market cycles and I made many mistakes which in turn made for great lessons. Since I now experienced all of them I will never make the same mistakes going into the next cycles.
To become truly successful and make a lot of money with cryptocurrencies you need to live through each cycle at least twice. If you are lucky or bring experience from the stock market cycles you need each cycle just once. All you need to do is survive the cold winter of a Bear market and suppress your greed during the Bull market, that’s it.
The Journey so far
My journey began during the great ICO Bubble burst in the beginning of 2018.
ICOs and token sales became popular in 2017. There were at least 18 websites tracking ICOs before mid-year. In May, the ICO for a new web browser called Brave generated about $35 million in under 30 seconds. Messaging app developer Kik’s September 2017 ICO raised nearly $100 million. At the start of October 2017, ICO coin sales worth $2.3 billion had been conducted during the year, more than ten times as much as in all of 2016. As of November 2017, there were around 50 offerings a month, with the highest-grossing ICO as of January 2018, being Filecoin raising $257 million (and $200 million of that within the first hour of their token sale).
The ICO Bubble burst and the market started its plunge during the first months of the year. This particular Bear market lasted for almost 3 years until the end of 2020. The next cycle (Bull market) began maybe at around September of 2020 and lasted until around end of 2021 and beginning of 2022. Since then it has been a Bear market for around a year (at the date of writing this article).
So I basically experienced 4 years of Bear market and a year of Bull, sounds pretty rough doesn’t it. Yet me not having my own Mansion is a clear indication of a lack of experience in the Bull market. Why is that ? Its very simple, I never sold during the Bear market which means I never “lost” anything during the times when prices were going down(You only loose if you sell at a loss.), yet I also never sold during the Bull market due to being greedy.
But its gotta be hard not to sell while you see the value of your portfolio go down day by day for the duration of 4 entire years right ? What if it all was a sham and there is no Financial Revolution ? What if the cryptocurrency market will never recover and will be banned by governments around the world and disappear into obscurity ? What if the cryptocurrency I invested in will collapse and go to 0 ? It seems rather hard to remain convinced and resilient during the cold of the winter when such questions start to appear in your mind.
I will try to share some things I learned that maybe will help you cut down the time in half. After all, learning from the mistakes of others is free.
The Bear market is the time when many “bad” Projects die. Those with unsustainable strategies and those who are simply scams. This theory was proven many times by the death of many projects back then after the ICO collapse and now by the death of Terra(Luna), FTX and other exchanges and companies that were either caught unprepared or were outright flawed systems that would eventually collapse due to the fraudulent actions of those in charge. If a cryptocurrency project survived many Bear market cycles before, they already know what to expect and will likely survive many more to come. The key is to find those who you are sure will not only survive a Bear market but will thrive in it.
This is the cycle during which the most building happens. There is no hype, there is no FOMO, it is just developers building and projects slowly being adopted. Layer 0, 1 and 2 Chains are focusing more on solving scalability and enhance their security while dApps that run on them, focus on building new features and enhancing existing ones while also using the time to deal with the many hacks that happen during this cycle. Hacks mostly happen to dApps and not so much to the Chains. It is important to note that during a Bear market if a dApp is hacked it can be the end for it.
With prices constantly going down many projects start to run out of funds to develop if they were not prepared and stocked up on stablecoins. Those who continue building and even recruiting developers during a Bear market are the ones that show resilience that you should definitely value.
Projects that are born in the Bear market can also be seen as quite the gems. Just like companies that started during a recession and later became successful shows that companies conceived in the worst market conditions are already prepared for the worst and are there to build and prepare for the next cycle.
But now for the seemingly hard part on how not to sell. I personally have not found any study that would prove that what I do is somehow beneficial or is the right way to do. I simply done it this way for all these years and it has worked for me.
All there is to it for me can be summed up in a couple of points:
- Do not look at the prices
Do not follow individual price movements and only watch the general market sentiment. Once the Bear market begins just do not look at the prices. This only applies if you are here for the long run. You should be prepared and plan on selling after at least 5 years. If you set a nice long-term goal of 10 years then the prices in between wont matter. This helps you not be affected by the negative sentiment of a Bear market. This does not mean you should ignore the projects you invest in completely. If you see your project plunge a large amount in value in a very short amount of time but the whole market is not doing the same, then you should worry. But if the whole market is doing bad but the fundamentals of the project never changed then there is nothing to worry about.
- Do not look at the value of your portfolio
Since I started investing I personally never looked at my portfolio valuation. It never really interested me since I set a long-term goal and would not sell until then anyway. There must be psychology involved which I can not explain, but this helped me to never involve emotions into investing. Since I do not know how much I gain or loose in a given time period I simply look at the bigger picture where the value is constantly growing and the waves in between don’t matter all that much. This has helped me focus on other things that are more important like studying the tech behind the projects to the best of my ability, the teams behind those projects and their respective visions and fundamentals. Of course curiosity is hard to contain and I might have tried to speculate on the valuation in a general sense with some approximate numbers. This helped quench my curiosity and remove any anxiety yet I still never looked at the actual numbers.
- Do not become attached to the money you invested
This is quite important. The saying “do not Invest more than you can loose” exists for a reason. Only invest money if you are prepared to loose it the next day. Sounds rough but it is what it is. This is still an undeveloped and maturing industry with many projects dying left and right. But if you catch the right one you will not regret it for the rest of you life. I personally could not care less if the value of my portfolio would go to 0 tomorrow, I have a job and I have a fixed income, I risk little by investing. If you have a family or debts or bigger expenses, you need to personally evaluate your own risks and think about it. For a long-term Investment of say 5 years just think of the money as gone until the end of the term. If you are fine with that and are prepared for any emergency that could happen during those 5 years then you can invest. Set low expectations so when you reach your goal you will be surprised. If you expect nothing you won’t fear loosing it so much and if you loose it then it won’t be a shock.
- Control your emotions
Bad news can be very rough and will make you think that it is the end. But you have to remember that behind the projects are real people who are just as invested as you are and are just as interested in its success. Those developers will loose their jobs if the project fails so they will do everything to solve problems. The key is to find those who acknowledge and address key issues in a transparent and trustworthy way. If a project ignores criticism and the development team does not address presented issues, it is quite worrisome. Find those who genuinely want to make the world a better place and create something new. Do not chase projects who are Venture Capital controlled and those who seek to make money. Seek those who have a vision, fundamentals and a plan. But keep in mind that if a project is not delivering it does not mean that they never will. Some projects went through big changes and restructures and became very successful. Just seek those who are honest about their intentions. And of course ignore the media and those who simply call all the cryptocurrencies as scams. They do not understand the technology and it is in their best interest for it to fail since it threatens their existence. Simply control your emotions and never act on them, only buy and sell based on rational decisions. You can even make a list of pro’s and con’s of a project if you need help to decide whether you should sell it or not. This will give you time to get your emotions in control and make a rational decision.
- Continue investing in what you believe
Since prices never mattered to me all that much I spent time studying the many problems cryptocurrencies tries to solve and the people behind the projects. It is important to find projects with a vision you believe will revolutionize certain industries as a whole and a team dedicated to that vision no matter the circumstances. This does require you to understand at least the basics of many global industries, but if you want to invest in something truly innovative you have to spend the time to learn about it. Projects that try to be regulatory compliant from the get go should be given priority since they will not run into problems later and will flourish having the trust of current companies and government institutions.
If you are having doubts about something that you invest in try to look at it objectively and rationally. Make a list of all the things the cryptocurrency project has :
- Promised to achieve and failed
- Promised to achieve and succeeded
- Promises to achieve
- How has the team behind it dealt with difficult situations
- Has the fundamentals and goals changed since you invested
Then simply see for yourself and decide if it is worth it to keep holding it or sell at a loss. I for example wrote the article “Why I am Bullish on Vechain” mostly to convince myself that the project that I believe in still holds true to the vision presented when I first invested in it, I did however get inspired by “Why We’re Bullish on ATOM” by Patrick Bush and Matthew Sigel from VanEck, which I strongly recommend as a read. After I wrote the article I had a summary of the achievements of the team behind that project which gave me confidence that even in these harsh times of a Bear market the team delivers true to their vision.
Being in a Bear market for so long gave me an immunity to it. I see it as a major opportunity to invest at cheaper prices because I am very convinced that cryptocurrency is here to stay. Chances for the cryptocurrency industry to die are very slim, it is simply the next step in the digital evolution that cannot be stopped. Whether it takes 5 or 50 years to mature remains to be seen, but I without doubt believe that it will be here to stay.
This cycle is absolutely nuts. If you invest in a Bear market and then experience the Bull market you will not believe the numbers you are seeing. It just feels unreal for everything to grow so fast day by day seemingly without end. This however also brings its challenges.
Some things I learned throughout this cycle that you should remember to avoid are mostly summed up in two words, FOMO and greed. These two things are the hardest to suppress during this cycle.
Here you will simply have this idea in your head that the train has forever left the station and will never be back again. You will miss out if you don’t get into the train while it is in motion to “rich town”. When you see everything in green everyday and the prices keep growing and growing, you start to feel that you missed out. Hype is very prevalent during this cycle where it seems like the whole world is cheering on that one project that is about to launch or is about to do something and every action seems like its going to be the “tipping point” of adoption. (The tipping point is that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire, from The Tipping Point: How Little Things Can Make a Big Difference by Malcolm Gladwell)
Advising against investing in a Bull market could also turn into a mistake, because nobody really knows how long it will last and how high it could go. But as a general rule it would probably be better if you had patience and invested during Bear markets. It not only will give you a lower price as an entry point, it would also give you a bit more assurance that you invested in a good project. Since most “bad” projects (that are either scam or simply bad in terms of preparation for a winter cycle) die early on once the Bull market subsides, you can assume that if the Bear market is already at least a year on, then you know that the majority of really bad ones have died. (the ones that are just bad still hang on but will be easier to spot) A project that is recruiting during a Bear Market is a sign of a healthy project that could be a good entry point to ride it off during the Bull cycle.
I have less experience in this cycle so there is less for me to say. Security-wise you should definitely be more on the lookout for scams because during this cycle too much attention is drawn to this industry which attracts a lot of scammers and people with fraudulent schemes on their mind.
But investment wise the only thing to say is, sell at least a little bit, otherwise you will regret it. Even if you are investing for the long-term of say 10 years, it would be unwise to simply ignore the cycles in between. Selling at least a little bit during the Bull market to reinvest it during a Bear market is a safe strategy which also will help you achieve emotional stability. Say you invested in a Bear market and have sold 5 or 10% during the Bull market. Since Bull markets can be so crazy in cryptocurrency those 10% could even be higher then your initial investment in the previous cycle. That is of course the best scenario because you took all you invested back and now have free money invested that continues to grow. This gives you a big boost in confidence and reassurance that this whole thing is real and not just some fake digital coins. You could even set those 10% that you sold aside specifically targeting the arrival of a Bear market in order to reinvest them again. This will then be a double booster for your morale which is a very important thing during a Bear market.
Other than that, set a price goal for your exit strategy alongside the long-term time commitment. Say you want to invest in a certain cryptocurrency for a time period of 10 years OR until it reaches a certain price. An exit strategy is very important to have, otherwise you never sell, which defeats the purpose of investing. So if a Bull market arrives just see if your desired price point has been reached, if not, just sell 10% and continue on.
Also if you happen to receive free money in a form of an airdrop please for the love of god sell some or swap it for one that you believe in the most. No matter how good it looks and no matter how much higher it seems to go day by day, just sell some, you will regret it very much when it eventually dumps. You can even swap it for a stablecoin and re-buy it for cheap during the Bear market. Sell most of it if a project launches without a working product or a vision. Sell some of it if there is at least a product or a vision already present.
It is easy to go through these two market cycles if you have already experienced them. So try to learn from the mistakes of others and adapt your own strategy on how you will approach it. I tried to summarize a couple of things I learned and some general information that I personally found helpful but this does not paint the whole picture. Even with this information you will do mistakes. You should not avoid doing mistakes, you should avoid making them expensive I paid money for my many mistakes (in the sense that I lost money) but it was worth it. I learned many lessons from them which made me more resilient and ready. In the end what matters is that the majority of those mistakes I did happened relatively early on and so my losses are very small compared to what they could have been if they occurred later. I hope the information in this article will help you stay focused on what really matters, a financial revolution.
This content is for Information and educational purposes only and should not be considered investment advice or an investment recommendation.