Some asset prices still have room to rise 2-5 times or more before they reach their peak.
Written by: Chris Burniske, Partner, Placeholder
Compiled: 1912212.eth, Foresight News
If your friends contact you with questions about Bitcoin, Ethereum, and other cryptocurrencies, it’s not easy to guide them given the current market conditions (BTC is almost $100,000). This is especially true when they are inexperienced novice investors. Here are some lessons I’ve learned through observation over a decade.
Make sure that the actions they take are their own responsibility. You may have more experience and knowledge, but that doesn't mean you're absolutely right. No one understands everything that is happening in this market. If someone claims to know something, he or she is lying.
You can try to explain to them what phase of the market cycle we are currently in. To me, we are 2 years into this bull market cycle. (Bottom of the image below is November 2022)
Counting from the bottom 2 years ago, BTC has increased by more than 6 times, ETH has increased by more than 4 times, and SOL has increased by more than 30 times.
The sad truth is that as the price of tokens rises, people will pay more and more attention, and this attention will subsequently be converted into purchasing power. Therefore, the more the price rises, the more attention will be paid to the potential for subsequent returns, but generally speaking, the later we enter the "attention cycle", the worse the position will be.
So the best time to enter is often when almost no one is interested, but that was 2 years ago. What should they do when they can’t wait to buy tokens, even if it’s not the best time to enter?
Keep it simple: Personally, if they were a novice, I would tend to recommend holding a certain percentage of BTC, ETH, and SOL (50/25/25%), with the rest at their own risk. At least if they mess up the entry/exit, they can still maintain a certain bankroll. If they choose a small coin, then encourage them to study and keep it below 10% of the total allocation to reduce risk.
Judging from the current entry price, if they double, they are encouraged to take out their principal at that time, which also ensures profits at the same time. Later, if their capital has tripled, they can cash out all of their capital, or if they are willing to be more adventurous, they can cash out 2x the capital they have earned and maintain the remaining 1x capital (cost), But try to get them to understand the crazy plunge that can occur in a bear market. (If they are a staunch Bitcoin supporter, they may never want to sell, that’s okay, but must be prepared to face difficulties at some point)
Selling in a bear market is caused by panic and fear of selling, but it becomes relatively difficult to exit in a bull market. Sometimes they will hate you if they think they sold too early, but they will still thank you later.
They also need to be careful if they choose to take profits and then be tempted to enter the trade again, reinvest those profits, and become FOMO if the market continues to rise - often this idea can lead to adverse consequences.
Because if the market suddenly crashes, they may end up finding that they have to pay more taxes on their realized gains than they end up with in the assets they have as assets plummet (which happens often).
Every sale of a crypto-asset is a taxable event, even an exchange of crypto-assets for crypto-assets. Once I start actually cashing out my money, I plan to keep it in a principal-protected account with Traditional Finance (TradFi) for 12 to 18 months - a high-yielding crypto stablecoin account doesn't count as cash custody because There is still crypto market risk in these accounts, and the leverage accumulated by longs could cost you all your money. First, I would pay off my tax liabilities before I start looking for new investment opportunities again, which usually happens when people lose their minds in panic, or, better yet, when the market heat subsides and people fall into apathy ( This tends to occur more than 12 months after the market peaks).
While exchange-traded funds (ETFs) and potential sovereign buying may mean that Bitcoin (BTC) won’t see a too brutal bear market in the future, every time a bull market comes, people will find various reasons to justify the rise. to ridiculous highs, or claiming there won’t be a bear market.
"Super cycles" are, without exception, collective delusions.
I can see reasons for the cycle to repeat (peaking in Q4 2025), and I can see reasons for the cycle to lengthen and break the four-year pattern. While we may see consolidation after a new U.S. president takes office, I don't buy this talk of cycle shortening. This is just bearish post-traumatic stress disorder (PTSD) at work.
That being said, structurally speaking, anything growing at 100x is prone to at least an 80-90% retracement at some point - mostly from taking too many profits.
If SOL rises to $800 this cycle, then in the future (e.g. 2027) it could fall to $80-160. So, if someone buys at $240 and holds on, they will lose money come the ensuing bear market. It’s hard for people to realize this from the bull market mania, but now that you’ve been there, you understand, and now you can teach them
At current prices (SOL has risen over 30x from its lows), no one is going to get rich or get crazy multiples, but they will see someone making a lot of money, so it will be hard to resist - If you tell them not to buy, but to wait because an "eventual crash" will take the price below where it is now, they will feel pain because there is still room for the price to rise 2-5x or more depending on the asset. It will reach the top, so everything is very unstable.
As a final note, I would like to further note that many inexperienced investors think more in terms of dollars ($) than in terms of X (multiples) or percentages (%). For example, if you say SOL might go to $1,000, they're going to think, wow! That adds $760 to the value of each SOL! However, going from $8 to $240 only adds $232 in value per SOL.
But what they don’t realize is that going from $8 to $240 is a 30x increase, while going from here to $1,000 is just a 4x increase. It's important for investors to truly understand this.
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