The DeFi Investor
Translated by Deep Tide TechFlow
In the first few months of my exposure to cryptocurrency, my investment portfolio was consistently in the red, resulting in significant losses. There were several reasons for this, the main one being my lack of understanding of how the market operated at the time.
However, after a period of time, I managed to turn the losses into gains. If you are a beginner, you don’t have to repeat my mistakes. Here are 7 cryptocurrency tips that I have summarized to help you succeed in the next bull market cycle:
Table of Contents
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Reduce Quantity, Focus on Bets
Don’t Sell “Winners”
In a Bull Market, Understand the Principle of “Speculation > Fundamentals”
Write Down Your Investment Thesis
Review Your Investment Portfolio Every 1-2 Months
Keep an Open Mind to New Ideas and Perspectives
Establish an Exit Strategy
Reduce Quantity, Focus on Bets
Many people like to diversify their investments, and while diversification is a good investment strategy that can protect wealth, it may not necessarily help accumulate wealth.
Indeed, if you know your investments are spread across 15-20 projects, even if one project fails, it won’t have a significant impact on your investment portfolio, and you can still sleep well at night. However, wealth growth is difficult to achieve in this manner. For example, if you like 25 projects, focus your high-return bets on the top 6-7 projects you believe have the most potential.
Managing 6-7 positions is much easier than managing 25 positions.
Don’t Sell “Winners”
This is one of the biggest mistakes many people make. When one of your tokens sees a significant increase in value while another is underperforming, you may be tempted to sell the best-performing token. However, this increases your risk on the underperforming token, making it not a good idea.
Let your “winners” run and take off in the next bull market! There’s nothing more heartbreaking than selling a token after it doubles in value, only to see it increase tenfold in the following months.
When should you take profits? When the price reaches your selling target or when your non-crypto friends start calling you to ask which token to buy.
Original Post:
cevo
In a Bull Market, Understand the Principle of “Speculation > Fundamentals”
Pumpamentals refer to factors that drive token prices to rise rapidly, such as narratives, catalysts, or some positive news, but they have no relation to fundamentals. In the last bull market, XRP reached a market value of $80 billion, which wouldn’t have been possible without its highly active community. Many other tokens also achieved high valuations due to their strong Pumpamentals.
While fundamentals will eventually become the main driver of price increases, in my view, we are still far from that point. Therefore, instead of focusing solely on finding projects with the strongest fundamentals, try to understand what factors drive retail investors to purchase a certain token, and look for the simple logic behind their investments.
In a bear market, these are the most important things:
Fundamentals
Revenue
Product-market Fit
But in a bull market, Pumpamentals become extremely important.
Community Leaders
Social Media Hype
Narratives and Market Fit
Strong Marketing
I have shared more thoughts on “Pumpamentals” on this topic:
Original Post:
The DeFi Investor
Write Down Your Investment Thesis
This may seem boring and not something many people would do. But as Louis Cooper mentioned in the tweet below, writing can help you build investment beliefs.
It can also help you better understand your investment targets and identify gaps in your knowledge. Additionally, forcing yourself to write an analysis article before buying tokens can also help you avoid investing out of FOMO.
Original Post:
Louis Cooper
Review Your Investment Portfolio Every 1-2 Months
Unless you have purchased BTC or ETH, never “buy and forget”. Cryptocurrencies evolve rapidly, and most projects disappear within two years of launch.
Therefore, I recommend regularly reviewing them. When reviewing the projects in my investment portfolio, I check for the following:
Recent developments of the team
On-chain indicators (revenue, fees, TVL, etc.)
Community strength (is anyone talking about the project?)
Roadmap (what’s next for the project you’ve invested in?)
As George Soros said:
The only way to minimize losses is to cut losses early when fundamentals change.
Keep an Open Mind to New Ideas and Perspectives
One way to increase your chances of success is to invest in unpopular or misunderstood projects before everyone else starts talking about them.
In a bull market, dismissing something as “definitely not going to work” without doing some research could be your most costly mistake.
Continuously trying new things can be rewarding, and you might even receive some airdrops. If you can’t easily change your bias when new important information emerges, then you are just a member of the project community, not a true investor.
Accepting the fact that you were wrong at times, the greatest traders have no issues saying “my analysis was wrong, I messed up”.
Establish an Exit Strategy
Those who didn’t profit in the last bull market swear they will make a profit next time, but it’s easy to get caught up in the excitement of the bull market.
At the peak of every bull market, 90% of influential people say we are going higher, we are just getting started. Selling in embarrassment becomes a common phenomenon, and those who made a profit are called idiots.
Therefore, you need to establish an exit strategy and ensure you stick to it. Selling is not easy, and you probably won’t sell at the exact top, but at least you can secure some profits and not just survive the brutal bear market in vain.
A good exit strategy should include the following:
When to take profits
When to minimize losses
Here is a good thread on how to establish an exit plan:
Original Post:
Res
Alright, that’s it for today. Finally, I recommend that the first thing everyone should do is invest/trade based on a strategy and rules determined by their past market experiences, as the saying goes, “A trader without systematic criteria is a gambler.”
Accumulating wealth is difficult, losing wealth is easy, which is why having a clear strategy is essential.
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