In the cryptocurrency market, short-term price fluctuations often leave novice investors dazzled, making it difficult to grasp the correct operational direction. In fact, success in the cryptocurrency space does not lie in chasing short-term gains but in adhering to a steady investment strategy.
I. Understanding Market Cycles and Investment Rhythm
Cryptocurrency prices are highly volatile, but their market cycles have certain regularities. Generally, bull markets last from 6 months to 1 year, while bear markets last from 1 to 2 years. This means that each bull-bear cycle lasts approximately 3 to 4 years.
To remain undefeated in the market, the simplest and most effective method is to build positions in bear markets and exit in bull markets. According to historical data, Bitcoin has averaged several times increases in each bull market, while experiencing significant pullbacks in bear markets, providing data support for the strategy of 'buying in bear markets and selling in bull markets.' For example, Bitcoin's price fluctuated around $5,000 during the bear market in early 2020, while during the peak of the 2021 bull market, it once broke through $60,000. This kind of drastic rise and fall offers stable profit opportunities for long-term investors.
II. The Core Position of Mainstream Cryptocurrencies
Many people love to chase altcoins during bull markets, hoping to achieve overnight wealth through explosive gains. However, the reality is that the probability of becoming rich is extremely low, and most altcoins will experience significant pullbacks or even drop to zero in the later stages of a bull market. Therefore, I have always insisted on mainstream cryptocurrencies as core position allocations, especially $BTC $ETH .
For example, in the third quarter of 2024, Bitcoin and Ethereum continued to hold the leading position in the market, especially after the Federal Reserve's interest rate cuts and China's economic stimulus policies. Bitcoin rose by about 7.5% during that quarter, while Ethereum increased by 2.8%. In contrast, altcoins exhibited more extreme fluctuations, with some coins experiencing a 30%-50% pullback in a short period. This fully demonstrates that the robustness of mainstream cryptocurrencies can provide a high margin of safety during bear markets and yield good returns during bull markets.
III. Bear Market Strategy: How to Identify Market Bottoms?
For most investors, bear markets are the best time to build positions. However, the problem is that many people often lack patience or fall into panic due to the prolonged market downturn. My advice is to gradually build your positions in stages during a bear market, rather than making a full investment all at once. A significant feature of market bottoms is that the overall atmosphere in the cryptocurrency space is extremely quiet, with no media coverage and no discussions among investors about Bitcoin. This 'lethargic' state often lasts for months or even longer.
Taking the 2020 bear market as an example, Bitcoin's price once dropped to the $4,000-$5,000 range, while overall market sentiment was negative, and few were optimistic about the prospects of cryptocurrencies. However, it was the investors who gradually built positions during this extremely depressed period who ultimately reaped significant rewards in the 2021 bull market. This also validates a classic investment theory: when most people no longer pay attention, it is often the time for you to enter the market.
IV. The Temptation of Altcoins and Risk Management
In a bull market, the explosive rise of altcoins often attracts a large number of investors, especially in the later stages of a bull market, where these low-market-cap coins can achieve several times or even dozens of times increases in a short period. For example, in the cryptocurrency market in mid-2024, several altcoins like REEF,$PEPE experienced astonishing short-term gains. However, behind the explosive rise of altcoins lies extremely high risk.
Historical data tells us that most altcoins typically experience a cliff-like drop after a bull market ends. After the 2018 bull market, once-prominent altcoins like Bitconnect and Verge quickly lost market attention and saw their prices plummet to nearly zero, ultimately disappearing completely. For ordinary investors, the high volatility and unpredictability of altcoins make them more like a gamble rather than a long-term investment choice.
Therefore, chasing altcoins in a bull market is a 'double-edged sword.' If you really cannot resist trying it out, you should only participate with a very small proportion of your funds, avoiding heavy bets, and do not expect to become wealthy through altcoins. As the stock guru Warren Buffett said: 'Do not take unnecessary risks for a little extra return.'
V. How to Sell at the Bull Market Peak?
Deciding when to exit the market is the most crucial timing for every investor. The mid-point of a bull market is usually the safest exit point. At this stage, the prices of Bitcoin and Ethereum have steadily risen, market sentiment is high, and mainstream cryptocurrencies are entering an upward trend. Selling at this time can ensure a good profit margin without falling into the madness of the market's final bubble.
Taking the 2017 bull market as an example, Bitcoin reached nearly $20,000 at the end of that year, but many investors chose to hold on due to greed, ultimately experiencing a drop of over 80% in early 2018. The same situation occurred in 2021 when Bitcoin's price exceeded $60,000, and extreme optimism in the market led many investors to hesitate to exit, resulting in heavy losses during the subsequent pullback.
Rational investors should gradually reduce their positions at the peak of a bull market rather than trying to predict the absolute top of the market. After all, no one can accurately grasp when a bull market will end, but gradually exiting can effectively reduce the risk of being trapped.
VI. Preserving Principal is of the Utmost Importance
In any investment market, the safety of principal is always the top priority. Especially in the cryptocurrency space, which is highly volatile, preserving your principal means you can continue to participate in the next bull market, rather than being dragged into the abyss by the collapse of the previous market. Many people end up turning what could have been manageable small losses into irreversible large losses simply because they were reluctant to cut losses during a bear market.
Taking LUNA as an example, at the beginning of 2022, this coin was once very popular and attracted a large number of investors to heavily bet on it. However, with the collapse of its ecosystem, LUNA's price plummeted from $80 to nearly $0 in just a few weeks, leaving almost all holders deeply trapped. This painful lesson reminds us again that in the cryptocurrency market, preserving principal is the only way to ensure a chance for resurgence.
The cryptocurrency space is a market full of opportunities, but it is also a battlefield fraught with risks. To survive and profit in this market in the long term, it is crucial to adhere to the strategy of buying in bear markets and selling in bull markets, focusing on mainstream cryptocurrencies, and maintaining a rational investment mindset. Don't be swayed by short-term market sentiment; what truly allows you to profit in the long run is your patience and discipline.
Regardless of how the market fluctuates, always remember the essence of investing: steady profits are the ultimate goal, and preserving principal is the foundation for achieving this goal. I hope my experiences can help you make more rational investment decisions in the future cryptocurrency market.
