With the rapid increase in the number of people joining the cryptocurrency space, there is anticipation of a potential bull run in the near future. Experts suggest that this surge could occur as early as 2024. However, it is important to note that a bull market is an entirely different experience compared to the current bear market. Ben Simpson, the founder of education platform Collective Shift, describes it as “complete and utter chaos” and compares it to a tornado.
According to Simpson, one of the common mistakes made by new crypto traders is holding onto their investments for too long. This behavior is often fueled by the desire to maximize profits. Reflecting on his own experience, Simpson admits that he didn’t have a clear plan during his first cycle in 2017, which eventually led to significant losses. To avoid such pitfalls, it is advisable for investors to establish clear investment goals and have a well-defined portfolio strategy. Setting specific sell prices for each asset can help mitigate potential losses when the bull market eventually comes to an end.
Mitigating Volatility with Dollar-Cost Averaging
James Butterfill, the head of research at CoinShares, suggests that dollar-cost averaging can be an effective strategy to mitigate the volatility of cryptocurrencies, regardless of whether it’s a bull or bear market. This approach involves making periodic small purchases or sales of assets. By spreading out investments over time, the average purchase cost can be lowered, and the impact of volatility on the portfolio can be minimized.
CK Zheng, the co-founder and CIO of hedge fund manager ZX Squared Capital, recommends that investors focus on well-established and recognized cryptocurrencies such as Bitcoin (BTC) and Ether (ETH). Butterfill also highlights the diversification benefits of Bitcoin, which surpasses other alternative assets like gold, commodities, or real estate. While it can be tempting to invest in new and emerging cryptocurrencies, it is important to strike a balance between speculative and mature assets.
Deryck Graham, the founder of crypto hedge fund Portal AM, suggests breaking down investments into different sectors and selecting tokens that are related to these sectors. It is important to consider factors such as tokenomics, the track record of the development team, the presence of influential investors, community size, market momentum, and liquidity. Graham also advises against investing in memecoins or tokens with little to no practical use. This strategic approach can help identify valuable investment opportunities within specific sectors.
Markus Thielen, the head of research at Matrixport and author of Crypto Titans, emphasizes the importance of investing in new cryptocurrencies that align with emerging themes. While Bitcoin has consistently reached new highs in previous bull markets, Thielen suggests that new themes drive new bull markets. Therefore, investors should consider diversifying their portfolios by exploring innovative cryptocurrencies instead of solely relying on those from previous bull runs.
Beware of Overexposure and Risky Practices
Simpson, Zheng, and Graham all caution against overexposure to the cryptocurrency market. They advise against taking loans to invest in crypto, risking more than what one can afford to lose, and relying on leverage for trading. Zheng specifically warns about the potential total loss of capital in leveraged positions. Investors should adopt an investment mindset rather than engaging in speculation.
Maintaining Mental Health and Balance
While crypto investments can be exciting and potentially lucrative, it is crucial to prioritize mental well-being. Simpson advises both experienced traders and newcomers to take breaks from constantly watching the markets. Engaging in physical activities, such as going for regular walks, runs, or gym sessions, can help individuals maintain a healthy balance and preserve their mental health.
Preparing for a crypto bull run requires careful consideration and planning. Investors should learn from the mistakes of the past, implement strategies to mitigate volatility, focus on established cryptocurrencies, identify value within different sectors, explore emerging themes, and avoid overexposure and risky practices. Moreover, maintaining mental wellness is essential for long-term success and stability in the ever-evolving cryptocurrency market.