Long-Term Altcoin Positions?
I have addressed the idea of long-term altcoin positions and how they are generally unwise decisions. However, there are a few reasons an investor might incorporate such a strategy, one being tax reasons. Another reason is creating an income model that can function indefinitely, even if it is somewhat volatile regarding the yields it produces. One of the main benefits is a hassle-free strategy that creates income, plain and simple.
First of all, I would only consider such a strategy under two conditions:
- The asset is heavily undervalued.
- The yield is attractive.
A bear market cannot conquer your entry price if you purchase an asset that increases exponentially during a bull market. I briefly addressed this idea in yesterday’s article. This creates a level of protection, ensuring an investment remains in the green throughout a bear market.
This type of price performance will not be found within the blue chip sector. Very few projects have achieved this level of price action. However, they do exist. Some of my altcoin picks from the previous cycle were still up hundreds of percent at the bottom of the bear market. These were mostly micro-caps and relatively unknown projects. This is where you will have to hunt if you are looking to apply such a strategy.
Yield Matters
It’s difficult to consider such a strategy without the element of yield generation besides tax benefits. However, a hefty yield helps to promote the idea. The opportunities I am speaking of are specific assets within the DeFi space that can generate significant yields. It’s also important to remember that it takes time for a bear market to play out. In other words, the reduction in the value of the underlying assets and yield are not instantaneous.
As a bear market matures, the value of your assets decreases. It’s not an overnight scenario. This means that a decent APR can produce a significant yield-based income. Look at Michael Saylor, for example. He’s developed a strategy that works for him without selling. However, anyone attempting such an endeavor needs to be knowledgeable and have a keen understanding of the market.
Another reason such a strategy is an option is the maturation of the market and the current environment surrounding Bitcoin and Crypto. This could affect the future in two ways. Firstly, we could experience an extended bull market, and secondly, a bear market correction is now expected to be less severe with the institutional element, including ETFs. This is not merely speculation. The previous bear market correction was not as severe as previous cycles.
It’s important to note that this “softening” occurred before institutional participation. As the industry matures, volatility decreases. Altcoins, on the other hand, have yet to show resilience. However, specific projects handle corrections better than others and outperform the benchmark, which is also a sign of maturation. I aim to apply and test this strategy in a specific scenario, as my entry is healthy and should perform well throughout 2025.
As mentioned, it’s all about the entry. If you can acquire yield-bearing assets before an explosion in price and popularity, you are in the pound seats. However, it is a trade-off because even though you want the security of a blue chip asset, you also wish for the price appreciation of a new and smaller market cap project.
Another essential factor to consider is the yield. I will unlikely consider a yield-bearing asset with an APR of 6% or less. I prefer DeFi assets that rack up double-digit yields in a bull market. Identifying the appropriate opportunities is half the battle, so research should always be thorough. When applying such a strategy, you must have reasonable confidence in your asset of choice.
Final Thoughts
Let me be clear. The most profitable way of handling a bull market is to sell the peak and repurchase once a bottom has been established. However, this idea is worth exploring for various reasons. It’s important to note that DeFi yields also take a knock in a bear market. All the best, enjoy the weekend, and I will see you in the next one!
Sapphire Crypto 