The Bull Market Paradigm — bad trading habits

All rejoice! Bear market pain is done, finished, kaput. Pop the champagne, Bitcoin at ATH, it’s red panty night, right guys? Unfortunately for many it most certainly is not. Devastating and record level liquidations at the start of 2021 have left a lasting bruise upon the proverbial crypto chad cheek.

Where did everybody go wrong? A lack of experience perhaps, or was it bad technical analysis? The main issue is actually just a lack of long-term planning.

I came into cryptocurrency relatively late. In 2016 I learned about Bitcoin and liked it as a means of forgoing state imposed tariffs and taxes. It is simply mother’s milk to any milquetoast libertarian like myself. I bought a bunch of it and did relatively well. My ego grew, as did my futures PNL. Until the fateful day that I increased my leverage and got ‘rekt’, well, liquidated. Ego bruised, I sat back in my chair and cried. Binance took everything I had, and I mean everything. What could I have done with the money? A new car, deposit on a house, an engagement ring for my girlfriend!

Sorry, allow me to translate: “Wah, Wah, Wah, it isn’t fair!”

I cant (sniff) believe (sniff) this is happening to me (sniff).

But really it was. I behaved like a pillock and the market punished me, callously but righteously. I will never make the mistake again.

I sat down with a cup of tea. Pondering how to make back my damned riches. My mind went to the great profiteers in real estate. What was the key means of their success? What did they do that nobody else did? Is it applicable to Crypto? The lesson was simple: Know where you are in the cycle and capitalise.

Repeating and Predictable.

This taught me two great lessons. First, cryptocurrency has a broken risk/rewards system. The cycle is, at most 4 years. A quarter of the time it takes in Real Estate. I simply cannot overstate how incredible that fact is. Secondly, that you do not need to enter the market in a Bull phase. You need to accumulate your wealth (FIAT) for the downturn. It doesn’t matter what your Bitcoin is worth, it matters how many bitcoin you have.

The Bear Market is your friend.

You do not need leverage, or to trade futures. You need to understand the medium — long term of cryptocurrency markets. Prepare and preserve your fiat for the Bear phase. Observe Twitter for general fear and gloomy predictions. Counter trade the masses and you will live a comfortable lifestyle. If you want a fun exercise, calculate your gains if you nailed your Bitcoin entry at the bottom of the last cycle. Let me guess, your portfolio balance looks nothing like that number. Cycles are your friend, and they drastically reduce your risk once you understand how to capitalise on them. Accumulate all you can at the bottom and enjoy the ride.

Alexander Mitchell
All images are licensed under Creative Commons.