How to Make Compounding Gains During Crypto Alt-seasons
Play crypto-cycles right by understanding and planning different stages in advance.
In a crypto bull market, the biggest gains are made during Alt-seasons. At the same time, the risk is greatest. So how do you invest your money wisely during Alt-seasons to optimize returns?
That’s what I’m going to show you in this article.
The 4 Phases of a Crypto Bull Run
Every crypto bull run consists of 4 distinctive stages. Let’s look at them 1 by 1.
1. Bitcoin kicks off the bull run
Money flows into Bitcoin, pushing up prices and initiating the bull market. Bitcoin pulls the entire crypto market up with it but is seeing the biggest gains.
2. Ethereum takes over
More money flows into Ethereum, which eventually starts to outperform Bitcoin.
3. Large caps follow
Money flows into other large caps which see very strong increases in price. Meanwhile, price growth in Ethereum and BTC is slowing.
4. Alt-season starts
After going vertical, large caps are peaking. Next, mid caps, small caps, and shit-coins are all pumping at the same time. Everything seems to soar into infinity, regardless of the fundamentals. At some point, the bull market comes to an end and prices start to drop everywhere.
This is the general way how bull runs play out. The different stages flow into each other, so you can’t time them 100%.
To get a better understanding, let’s focus more on Alt-season which can also be divided into individual stages.
The 3 Stages of Alt-season
1. Begin of Alt-season
Alt-season is introduced by price jumps for innovative mid and small caps that offer new technologies and use cases.
2. Alt-season is fully underway
Lesser known but still solid crypto projects follow and show big price growth.
3. Late-stage Alt-season
Junk projects, shit-coins, meme-coins — everything comes to life and shows huge increases regardless of the fundamentals.
So far so good. All this is not particularly hard to understand. But why is it still so difficult to make the right decisions — that is to buy and sell the right coins at the right time?
Following a Plan vs. Following Your Emotions
Because successful investors have a plan and follow it, while unsuccessful investors follow their emotions. Here are two examples of buying and selling behaviors of bad and good investors.
Take some time to understand what our ‘good’ investor did when compared with the ‘bad’ one.
As it turns out, success in crypto investing consists of 3 parts. Each of them is equally important.
1. Know what Altcoins to buy
When buying Altcoins, it is paramount that you spend some time in researching each crypto project. I wrote a step-by-step guide about how to do this. It’s free and probably the most in-depth guide you can find on the internet. Read it here 👇👇
2. Buy Altcoins at the right time
As shown in the chart above, the best time to invest in a crypto project is when times are calm and prices are low — that is, during a bear market. There is not much price action, you have a lot of time to analyze multiple projects, and there is no pressure to act fast.
3. Sell Altcoins at the right time
Well, duh. If it was so easy, everyone would do it.
For a better understanding, let’s take another look at this chart again.
It is the BTC chart from the 2021 bull market, which shows when selected Altcoins have reached their price maximum.
It’s obvious that these coins reached their peaks at different times than Bitcoin — sometimes the difference was multiple weeks to months.
How much money would an investor have made if he or she had moved their funds from one project to the next one at the right time?
How to Make Big Gains During Alt-season
While it is hard to predict the tops for individual coins and tokens, there are a few ways to maximize returns.
Here’s what you should do.
1. Build and keep track of your Altcoin portfolio
You have a portfolio of well-researched Altcoins. Monitor them closely to not miss the time when Alt-season starts. Here is a guide I published in Coinmonks about creating different kinds of crypto portfolios. Check it out 👇👇
2. Set price targets for each individual project
Set price targets for each coin or token that define when you will sell part of your holdings. For example, if the price doubles, then you sell 50%. If it goes up another 25%, you sell the rest. How exactly these price targets look depends on your risk tolerance. However, it is important that you set goals and strictly follow them.
3. Selling your first Altcoin
One of your Altcoin pumps. As written above, make sure to sell according to the targets you set. Take out these profits and put them either a) into Bitcoin, b) into a stablecoin or fiat.
Do only buy back into an Altcoin if it is top quality! If you buy in again and it doesn’t pump another time (most Altcoins won’t), then you are missing out on potential gains with other Alts.
4. What to do in the middle of the Alt-season
If we still are in the early/middle stages of Alt-season, use some of the profits you made with the first Altcoin, and put them into some of your other Altcoins that haven’t gone up in price yet. When these coins pump, do as in step 3.
5. What to do at the end of the Alt-season
When the end of the Alt-season comes near, sell every Altcoin that is left in your portfolio and convert profits to BTC, stablecoins, or fiat. Do not get attached to an Altcoin because it will see a relentless price drop in the next bear market.
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