Welcome to the fourth quarter of 2024, the price of Bitcoin has exceeded $80,000, and the much-anticipated altcoin season has finally arrived.
But when should I sell my crypto? You might rely on your intuition to determine when the bull run peaks, but is there a better way?
Remember: "Failing to prepare is preparing to fail."
The pitfalls of price prediction
It is a common mistake to rely solely on price targets to manage investments. Such targets are often subjective and easily driven by emotions or influenced by social media. It is extremely difficult to accurately predict prices and predict the timing of price changes.
As a portfolio grows, so too does an investor's fear and greed. Every dip and rise escalates the struggle to think rationally.
Price targets keep changing, cognitive biases keep growing, and investment discipline keeps weakening. It’s you versus yourself, and as the stakes increase, so does the difficulty.
The power of investment ideas
Are there any reliable strategies besides price predictions? We have many options: sentiment, technical indicators or on-chain analysis. However, strategies centered around investment ideas often prove to be the most reliable.
Forming an investment philosophy
An investment thesis is a rational argument for a project's potential over a defined timeframe. The factors that go into forming this thesis are varied and not always price-related. Good concepts should be testable to allow for precise and flexible management.
Why concept investment is more reliable
Idea investing is reliable for several reasons:
Scales with your growing portfolio
Eliminate the influence of emotions and feelings
Provides a clear verification method
Eliminate short-term noise
Example 1
Let’s say you are very optimistic about the prospects of a certain L1. Instead of looking at its past ATH (historical high), you can look at:
TVL, transaction volume, or number of active wallets. Going a step further, you can focus on related indicators such as its market share or mind share.
Next, set up validation based on a key performance indicator (KPI) of your choice. This helps check if L1 is following the path you predicted or deviating from it. For example, you could use 30-day growth of a KPI as a validation baseline.
Example 2
Imagine a new project for an AI agent. Instead of price, you focus on a KPI 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 like lesser-known and more volatile coins?
Many companies have only a minimum viable product (MVP) or no active product at all. In this case, focus on the roadmap nodes or milestones.
Also, if your investment philosophy focuses on event execution rather than metric growth. As they say, "buy the rumor, sell the news." Sometimes it is wiser to exit immediately after confirming the date rather than waiting for the event to happen. Later, you can set new metrics and form a new philosophy.
Other strategies
You may consider the following alternatives:
Time-based strategies
Fear and Greed Strategy
Relative performance
Time-based strategies
Time-based strategies offer a simpler, more reliable approach. You can sell a small portion of your portfolio on a weekly or monthly basis. Adjust the timing and amount of sales based on macro factors, liquidity, and your goals.
Fear and Greed Strategy
Market sentiment swings like ocean tides, which exacerbate greed. The Fear and Greed strategy is about riding the rising tide and securing gains before it recedes. You can consider a weighted DCA-out strategy based on the Fear and Greed Index.
Relative performance
Imagine the market is a race and each token is like a speeding car. Now, the key point is to determine which car accelerates faster relative to the others. One way to realize profit is to sell it when it reaches a certain circulating market capitalization ranking.
Final Thoughts
Cryptocurrencies are highly speculative and emotions often take over. A risk system that operates independently of price can provide peace of mind.
