When should you profit from the frenzy of the bull market? The author suggests not falling into the trap of price predictions and instead prioritizing the formation of your own investment ideas. This article is sourced from “Crypto, Distilled” by Foresight News.
Tweet, compiled, translated, and written by Foresight News.
(Background:
Is the investment theory of “buying new, not old” in a bull market really effective?
)
Table of Contents:
The Trap of Price Predictions
The Power of Investment Ideas
Forming Investment Ideas
Why Idea Investing is More Reliable
Example 1
Example 2
Other Strategies
Fear and Greed Strategies
Relative Performance
Final Thoughts
Welcome to the fourth quarter of 2024, where the price of Bitcoin has surpassed $80,000 and the long-awaited altcoin season has finally arrived. But when should I sell my cryptocurrency? You may rely on intuition to determine the peak of the bull market, but is there a better way?
Remember: “Failure to prepare is preparing to fail.”
Relying solely on price targets to manage investments is a common mistake. Such targets are often subjective, easily influenced by emotions or social media. Accurately predicting prices and the timing of price changes is extremely difficult.
As your investment portfolio grows, so does the fear and greed of investors. Each downturn and upswing escalates the struggle of rational thinking. Price targets constantly change, cognitive biases grow, and investment discipline weakens. This is a battle with yourself, and as the stakes increase, so does the difficulty.
Further reading:
Want to get rich in a bull market? Consider these six principles and two strategies.
Besides price predictions, are there any reliable strategies? We have many options: emotions, technical indicators, or on-chain analysis. However, strategies centered around investment ideas have proven to be the most reliable.
Forming Investment Ideas
An investment idea is a rational argument for the potential of a project within a defined timeframe. The factors that form this argument are diverse and not always related to price. A good idea should be testable, enabling precise and flexible management.
Why Idea Investing is More Reliable
Idea investing is reliable for the following reasons:
Expands with the growth of your investment portfolio
Eliminates the influence of emotions and sentiments
Provides clear validation methods
Eliminates short-term noise
Let’s say you’re very optimistic about the future of a certain L1. Instead of focusing on its past all-time high (ATH), you can look at metrics like TVL, trading volume, or the number of active wallets. Furthermore, you can observe related indicators such as market share or mind share.
Next, set validations based on the key performance indicators (KPIs) you choose. This helps to check whether the L1 is following the path you predicted or deviating from it. For example, you can use the 30-day growth of a KPI as a benchmark.
Now, imagine a new project involving artificial intelligence agents. Instead of looking at the price, you can focus on KPIs like the number of agent transactions. Based on your beliefs, you set a benchmark, such as reaching 1 million on-chain transactions.
What if you’re interested in tokens that are relatively unknown and highly volatile? Many companies only have a minimum viable product (MVP) or no active product at all. In such cases, focus on roadmap milestones or milestones.
Additionally, if your investment idea emphasizes event execution rather than indicator growth, you may consider the saying “buy the rumor, sell the news.” Sometimes, it’s wiser to exit immediately after confirmation dates rather than waiting for the event to occur. Afterwards, you can set new indicators and form new ideas.
If you find complex idea strategies unsuitable for you, you can consider the following alternatives:
Time-based strategies
Fear and greed strategies
Relative performance
Time-based strategies offer a simpler and more reliable approach. You can sell a small portion of your investment portfolio weekly or monthly. Adjust the timing and quantity of sales based on macro factors, liquidity, and your goals.
Fear and greed strategies
Market sentiment fluctuations are like the tides of the sea, intensifying greed. Fear and greed strategies ensure profits during the rising tide before it recedes. You can consider a weighted DCA-out strategy based on the fear and greed index.
Relative Performance
Imagine the market as a race, with each token being a speeding car. The key is to determine which car is accelerating faster relative to others. One way to achieve profits is to sell when it reaches a specific ranking in terms of market capitalization.
Cryptocurrencies are highly speculative, and emotions often take the upper hand. Having a risk system that operates independently of price can provide peace of mind. Therefore, prioritize forming your own investment ideas rather than speculating. This is an essential quality of successful investors.
Related Reports:
CryptoQuant: Bitcoin likely to hit new highs in June, bull market expected to continue until then.
CryptoQuant: Bitcoin currently in “mid-cycle” of bull market, halving rally not over yet! It will end in April next year.
Truth: Over 80% of new tokens on Binance have fallen below their listing prices in the past six months, with only five exceptions… Has the logic of the bull market changed?