If you want to successfully trade cryptocurrencies in a bull market, there are a few things you must do. But most importantly, remember to take profits.
In the cryptocurrency market, strategic navigation as it surges is not only a skill, but an art. Volatility is the norm, and volatility measures the changes in asset prices and requires a sophisticated approach from market participants. Similar to the ebb and flow of the tide, it can be navigated strategically.
Decoding the dynamics of the market surge
Bitcoin BTC
During the 2021 bull run, Ethereum ETH peaked at $69,000.
Then it reached $4,800. Although the total market capitalization reached an all-time high of $3 trillion, as of December 15, this figure was slightly less than $1.7 trillion, a gap of more than 30%. While this change is significant, it clearly does not fully reflect the roller-coaster ride the market has experienced.
Understanding the drivers behind this volatility is key to navigating it. Market sentiment, technological breakthroughs, and regulatory developments all play a vital role. It is essential to understand current sentiment and adapt to market dynamics, leveraging insights by analyzing social sentiment, news sentiment, and technical analysis indicators.
Related: As Bitcoin Halving Approaches, It May Be Time to Take the Risk
Beyond the surface hype, factors that complicate the cryptocurrency surge include global economic conditions, investor speculation, partnerships, market liquidity and the halving events of certain cryptocurrencies.
Fundamental analysis
The foundation of any successful trading strategy is the quality of the fundamental analysis behind it. Cryptocurrencies with solid fundamentals will always outperform those that lack strong fundamentals, a principle that is supported by the Efficient Market Hypothesis (EMH).
This hypothesis has been validated in various markets, highlighting the importance of fundamental analysis when dealing with cryptocurrency surges, providing investors with a guide to identifying projects with great potential. Staying abreast of cryptocurrency developments and narratives requires utilizing research and analysis tools like DefiLlama. Real-time data and in-depth analysis help monitor trends and make informed decisions.
Master the Art of Technical Analysis
While fundamentals set the stage, technical analysis is the script. Indicators such as moving averages, relative strength index (RSI) and Bollinger Bands interpret market trends. Technical analysis has become an art form among traders, significantly influencing trading decisions and increasing annual returns for traders who master its intricacies. In addition to chart patterns, it is also important to understand market psychology, which allows traders to make informed decisions to strategically influence the cryptocurrency market. All exchanges offer these tools. TradingView is the top choice for more in-depth analysis.
The RSI indicator is my North Star when it comes to short-term swing trading on the 15-minute timeframe. Its simplicity, versatility, and functionality as a momentum oscillator helps identify overbought and oversold conditions, indicating potential reversals or buying opportunities. My trading decisions are a combination of technical and fundamental analysis, evaluating trend patterns, support and resistance levels, market sentiment, broader market conditions, token/project specific developments, and relevant news events.
Know When to Sell
“The year after the Bitcoin halving is usually a bull year,” former Binance CEO Changpeng Zhao noted in a Twitter Spaces post in July.
Bitcoin’s halving is expected to take place in April, when the number of new Bitcoins issued to miners will be halved from the current 6.25 Bitcoins to 3.125 Bitcoins. Analysts at JPMorgan also expect the 2024 halving to double the cost of mining Bitcoin, potentially establishing a new price floor. As a savvy trader, you can take advantage of these predictions by strategically acquiring assets that are likely to follow Bitcoin’s trend and knowing when to exit.
The process of determining when to sell cryptocurrencies is a strategic one that requires market analysis, risk assessment, and a deep understanding of one's own financial goals. I usually enter projects that solve important problems at a very early stage. I do this to make a positive difference in the world for the better. That's my sense of accomplishment. In my experience, when you solve a real problem, you will eventually make a profit. I take profits when a project gets some financial returns.
This strategy isn’t for everyone. One thing you may want to consider is setting predetermined profit targets. If an investment has met or exceeded its expected returns, it’s usually wise to take profits. Avoid greed and you’ll be much better off.
