Is the bull market back? That's the question on everyone's mind after the recent surge of excitement around Bitcoin ETFs injected new life into the cryptocurrency space. Only time will tell for sure, but there's no denying the growing sentiment that we might be on the verge of the next major crypto bull run.
If you're new to the space, or know someone who is, and you're looking for solid advice on how to prepare your investments for the next cycle, you've come to the right place. Drawing from personal experience and the collective wisdom of the crypto community, here are eight foundational tips to help you build a robust strategy for the journey ahead.
Develop a Clear Investment Thesis
Cryptocurrency investment is one of those areas in life where having a guiding theory is crucial. This thesis doesn't need to be lengthy, novel, or set in stone. However, operating without one can leave you wandering directionlessly through the markets, potentially wasting both money and time.
For example, during my first exposure to crypto in the 2017 bull run, I was like a kid in a candy store. Every new token seemed shinier and more exciting than the last, leading me to purchase a collection of low-quality assets. My reasoning went little further than thinking crypto was simply "cool." This approach didn't get me very far.
By the time the 2021 bull market arrived, I had developed a more thoughtful, guiding vision. I doubled down on Ethereum, convinced it was on its way to becoming the world's next great open financial and cultural layer. Having a real thesis made a significant difference in my focus and overall performance.
Invest Within Your Means
When browsing platforms like Crypto Twitter, it's easy to forget that the accounts behind those profile pictures belong to real people of all ages and backgrounds. Everyone has a different financial situation and story.
In the next bull market, you'll likely see people around you making large ETH bets on what they call the "next big token" or "next big NFT." This can trigger intense FOMO (Fear Of Missing Out). You might feel tempted to invest more than you can afford in an attempt to keep up.
Remember, accumulating cryptocurrency is a marathon, not a sprint. Everyone is at a different stage in their journey. Reaching your goals requires a methodical and disciplined approach, not recklessness. Always invest within your means and choose a scale that is appropriate for your personal financial situation.
Embrace Dollar-Cost Averaging (DCA)
In the crypto world, prices can swing wildly in a matter of minutes. Double-digit percentage changes in a single day are not uncommon. For newcomers, this volatility can be both thrilling and nerve-wracking. Instead of trying to time the market perfectly, consider Dollar-Cost Averaging (DCA)—a popular and steady strategy.
The DCA method involves committing to regularly purchasing a fixed dollar amount of a specific asset—like Ethereum, Bitcoin, or Solana—regardless of its current price. Rather than attempting to buy at the "perfect" moment, you spread your purchases out over time. This could be weekly, bi-weekly, monthly, or any other interval that fits your plan.
This strategy lowers the risk of buying a large amount at a peak price. Even if you start investing during a high, subsequent purchases during lower prices will average out your entry point. Furthermore, DCA removes emotion from the equation. You avoid making hasty decisions driven by fear or greed, and instead adhere to a set schedule, allowing you to watch your investments grow over time without constant monitoring.
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Have a Clear Exit Strategy
During the 2017 bull run, I turned a modest $300 into $25,000 through Ethereum and altcoin trading. When Bitcoin first hit $20,000 that December, it seemed like the rally would never end, and other cryptocurrencies appeared to have unlimited upside.
A month later, the bear market began. I held onto my altcoins through the first half of the downturn, hoping for a reversal. Those assets never recovered, and I watched my $25,000 gains—aside from my initial ETH—evaporate back to zero. That experience was life-changing and taught me a critical lesson.
In the 2021 bull market, I didn't make the same mistake. I locked in profits at various points along the way. I knew many others who viewed a $5,000 ETH as just a stepping stone to $10,000 and chose not to sell, missing the chance to secure significant gains before the next downturn. For the next cycle, ensure you have an exit strategy to convert some of your paper gains into real-world funds. You'll thank yourself later.
Consider Strategic NFT Investments
By investing ETH into selected NFTs, you might leverage the bullish momentum of the NFT market to achieve higher returns in ETH when you later sell those digital assets. This is a classic "buy low, sell high" strategy applied to the NFT ecosystem.
This is, of course, easier said than done. It's also important to remember that many NFTs shouldn't be treated purely as financial instruments; they often have cultural or utility value. However, flipping NFTs for a profit is possible, especially under bullish conditions where many projects see significant rebounds.
The idea here is to amplify your potential gains. Because NFT prices can be extremely volatile and have the capacity for substantial appreciation, the returns from a well-chosen NFT investment—bought and sold at the right time—could potentially outpace simply holding ETH. Beginners should keep this strategy in mind but remember: not every NFT is a flip. Some certainly are, but not all!
Learn the Tools of the Trade
Sometimes, when visibility is compromised, pilots must rely on "flying by instruments," navigating solely based on their mastery of the aircraft's resources. Similarly, when I advise you to "learn your instruments," I mean you should get hands-on practice with all the crypto applications available to you. Become proficient with the entire web3 toolbox.
This process will not only advance your progress on the personal "crypto skill tree," allowing you to accumulate experience and mastery along the way, but it will also reflexively improve your other strategies. Your understanding will inform your overall investment thesis, your DCA choices, your NFT purchases, and more.
In other words, get to know the projects in this space. Understand what they offer, how to use them effectively, and the challenges they face. This acquired wisdom will significantly enhance your overall investment approach.
Plan for Tax Implications
During bull markets, people often earn significant sums of money, all of which is considered taxable income. When the subsequent bear market begins, the value of their assets may plummet, but the tax liability from the previous bull run remains.
The takeaway? If you don't set aside a portion of your gains and prepare for taxes during the good times, you can easily be caught off guard by a large tax bill during the downturn. More cryptocurrency investors have experienced this than you might think, myself included.
A key defensive tool is strategically realizing capital losses. Selling assets at a loss during a bullish year can help offset the tax burden from your gains. This tax-saving strategy, known as "tax-loss harvesting," can minimize your overall tax liability and prevent it from becoming unmanageable.
Prioritize Mental Well-being
The crypto space is a 24/7 market, lacking the closing bell of traditional finance. At times, it can be utterly frenetic. This relentless pace can easily become a vortex, pulling you away from other aspects of your life. The excitement of a bull market, in particular, can lead to overwork and burnout.
It cannot be overstated how important it is to prioritize your mental peace and regularly step back. Allocating specific times for market analysis, trading, and portfolio management is an excellent way to ensure you don't become over-involved and to maintain a balanced routine.
Furthermore, "unplugging" from time to time allows you to return with a fresh perspective. It's easy to get sucked into the minute-by-minute drama, intrigue, and price movements. Taking breaks helps you engage with the market more clearly and avoid emotional decision-making.
Frequently Asked Questions
What is dollar-cost averaging (DCA) in crypto?
Dollar-cost averaging is an investment strategy where you invest a fixed amount of money into a specific cryptocurrency at regular intervals, regardless of its price. This method reduces the impact of volatility on your overall purchase by averaging out the cost of your investment over time, and it helps remove emotional decision-making from the process.
Why is an exit strategy important in a bull market?
An exit strategy is crucial because it provides a predefined plan for securing profits. Bull markets can create a sense of euphoria and invincibility, leading investors to believe prices will rise indefinitely. Having a clear plan for when and how to take profits helps lock in gains and avoid the common pitfall of watching paper wealth disappear when the market eventually turns.
How can I start learning about web3 tools and applications?
The best way to learn is by doing. Start by exploring major decentralized exchanges (DEXs), lending protocols, and NFT marketplaces on testnets or with small amounts of capital. Follow educational resources from reputable projects, participate in community discussions, and don't be afraid to experiment hands-on in a controlled and safe manner to build your understanding.
What are the tax implications of cryptocurrency trading?
Cryptocurrency transactions, including trading, selling, and earning, are typically taxable events in many jurisdictions. Profits are often subject to capital gains tax. It's vital to keep detailed records of all your transactions and consult with a tax professional who understands cryptocurrency to ensure you comply with local laws and implement strategies like tax-loss harvesting.
How can I manage FOMO during a rapid price increase?
Managing FOMO starts with having a solid investment thesis and a plan that you stick to. Remember that markets are cyclical, and there will always be new opportunities. Invest within your means, avoid comparing your portfolio to others', and focus on your long-term goals rather than short-term hype. Taking breaks from market news can also help maintain perspective.
Is it necessary to invest in NFTs during a bull market?
No, investing in NFTs is not a necessity. While some investors use NFTs to potentially amplify returns, they come with high risk and volatility. Your investment choices should always align with your personal thesis, risk tolerance, and overall strategy. Many successful investors focus solely on major cryptocurrencies like Bitcoin and Ethereum.