One Of Two
If you are in the Crypto space then you are most likely practicing one of two strategies, or even both. Firstly, there is the approach more common to maxis… the accumulation of Bitcoin or other top-tier coins. Then we have the real altcoin investors. Those looking to secure enormous gains turn to smaller cap coins. Essentially it’s one of two paths. Accept modest gains over time, or up your risk profile.
Moving into lower-cap altcoins during the final stages of a bear market is actually not that risky. There can however be an initial period of volatility. However, appreciation begins to accelerate once the shift has been confirmed. The risk issue is very much aligned with the seasonal behavior of the market. In many ways, entering a good micro-cap altcoin at the right time is actually not that risky, at all.
However, begin accumulating during a market peak, and you are inviting a beating. Doing your best to remain in sync with the market is a very important aspect of altcoin investing. Many choose to focus on their entry and tend to ignore the remainder of the strategy. They feel good because they “got in” at just the right time, and subsequently, are experiencing a surge in portfolio value.
It’s Not Forever
Seeing green across your portfolio is merely a floating profit. Realistically speaking, it could be gone in no time. This is where the majority of altcoin investors make the fatal mistake of celebrating too soon and throwing caution to the wind. However, the closure of a strategy is even more important than the entry. Why? Because it can become fruitless if it is not “harvested”.
This is where an investor with a relatively poor entry can outperform an investor with a perfect entry. Choosing to close the position at the right time is even more important than the perfect entry. It’s a rather simple form of logic, and yet so many seem to be unfamiliar with it. Essentially, altcoins need to be exited, at some point, otherwise the gains are lost. Holding onto altcoins indefinitely is like drilling a hole in your bucket.
Sometimes, the option of holding onto an altcoin is perhaps not that bad of an idea. This however is only applicable if the coin or token in question has some level of influence or income-generating properties. Even still, exiting to some extent is still advisable. Why? Well, you can expect any altcoin to depreciate by 90% during a bear market. This is perhaps a good opportunity to exercise the 50/50 rule.
Let’s look at why this is such a powerful approach, and why I advocate such a decision when markets begin to top out. Let’s say you invested $10K and you managed to top out above a 10X return. Remember, I have addressed this before, 10X is a relatively modest return for an altcoin during a bull market. If, as an investor, you decide that 10X is significant enough, you can close 50% of your position.
What this in fact does is provide a 5X return on your initial investment. You don’t merely regain your $10K, but you are now holding $50K. Simultaneously, you still hold 50% of your investment. This allows the continuation of influence and income on that particular blockchain. HIVE is a good example of such a token. A Hive user will always want to be holding some HIVE. It’s imperative for functionality and securing a form of residual income.
Altcoin strategies require rather specific actions. Thinking that you will simply sell when the price peaks are how many investors travel a full cycle… only to find themselves at the bottom of a cycle still holding their bags. Altcoin investing requires a lot of thought and planning. You need specifics, and you need to be vigilant, in regard to adhering to your predefined plan.
Failure to consider and execute such a strategy leaves you neither here nor there. Investing rests rather heavily on discipline, and the undisciplined tend to shipwreck years of accumulation and patience. Hopefully, this cycle will be one of many smart investment decisions. All the best, see you in the next one!