By Chris Burniske, Partner at Placeholder
Compiled by: Yuliya, PANews
If you are in the cryptocurrency world, you may have received frequent inquiries from friends about investment advice recently. In the current market environment where the price of Bitcoin is close to $100,000, it is indeed challenging to provide guidance to novice investors. The following is some experience shared by the author after more than ten years of observing the market.
Basic principles
Personal responsibility awareness
It is the investor's responsibility to make every investment decision. Even if you are experienced, it does not mean that your judgment is always correct. There is no absolute certainty in the market, and those who claim "absolute certainty" are often lying.
Market cycle awareness
Try to tell your friends what stage the cryptocurrency market is in. For the author, it is currently in the second year of the bull market (starting from the bottom in November/December 2022). Bitcoin has risen more than 6 times, Ethereum more than 4 times, and SOL more than 30 times. There is a cruel reality at this stage: rising prices of crypto assets will attract more attention, which will in turn turn into buying demand. However, the later in the "attention cycle", the less ideal the entry time is.
Investment strategy advice
Asset Allocation
For novice investors, it is wise to keep the investment portfolio simple. The recommended allocation ratio for beginners is as follows:
Bitcoin (BTC) 50%
Ethereum (ETH) 25%
Solana(SOL) 25%
Even if there may be a deviation in the timing of entry, at least you are holding high-quality assets. If you are interested in other tokens, it is recommended to control them within 10% of the total position to limit the risk.
Profit Strategy
Profit management is equally important. When the investment doubles (2 times), it is recommended to withdraw half of the profit and keep the original investment cost to continue holding. When it reaches 3 times, you can withdraw all, or keep the cost part after achieving 2 times the profit and continue holding.
It is worth noting that if you encounter firm Bitcoin holders, they may never want to sell, which is understandable, but they need to be mentally prepared to withstand a deep correction.
Risk Management and Tax Considerations
In cryptocurrency investment, every transaction is a taxable event, including coin-to-coin transactions. It is recommended to transfer funds to a high-yield account at a traditional financial institution for 12-18 months after a substantial gain. Tax issues should be dealt with first, and then consider re-entering the market, preferably when the market is in a panic or generally loses interest.
In terms of market cycles, although the launch of ETFs and possible sovereign purchases may slow the depth of future bear markets, the term "super cycle" is often a collective illusion of the market. The fourth quarter of 2025 may usher in the top of the cycle. Any asset that quickly achieves a 100-fold growth is structurally prone to experiencing an 80-90% correction, which is due to too many investors holding huge profits.
Investment mentality and cognition
Novice investors tend to pay more attention to the absolute price rather than the increase multiple. For example, Solana increased from $8 to $240, an increase of $232, which is actually a 30-fold increase; while from $240 to $1,000, although it increased by $760, it was actually only a 4-fold increase. Understanding this is crucial to forming a correct investment perception.
Staying sane in a bull market is more challenging than staying courageous in a bear market. Chasing profits is often very risky because if the market suddenly collapses, investors may face the dilemma of tax expenses on realized gains exceeding the value of remaining assets.
The current market may continue until the fourth quarter of 2025, or it may break the four-year cycle. Although it may not be possible to get crazy multiples of returns from the current price, it is still possible to participate in the market through reasonable strategic planning and risk control. The key is to stay sober, control risks, and manage expectations reasonably.
