Investing in any financial asset can be a difficult process, but this is especially true in the booming cryptocurrency market, which comes with a unique set of pitfalls and challenges.
There’s an old saying that it takes 10,000 hours to master a skill and become an expert. In cryptocurrency time, this is measured by market cycles, which show each trader multiple rollercoaster rides of volatility as a fast track to navigate the market.
Here are five key lessons every trader should learn when it comes to investing in the cryptocurrency markets.
Rule #1: Never break and win
Since the early days of cryptocurrencies, the community has prided itself on the “hodle” nature, when the fluctuations in the price of bitcoin (BTC) and other tokens tossed coins from paper hands to those true believers who today make up the crypto-aristocracy. .
Few would want to be more involved in the Not Your Keys, Not Your Cryptocurrency movement, partly because liquidity and cash flow are important factors in a healthy market, but also because only accumulating as the market rises and then goes down to the disappearance of wealth earned on paper with the onset of a bear market.
When a cryptocurrency makes significant profits, especially if the price has a parabolic shape of an almost vertical line on the trading chart, the best move is to make a profit and direct this money either to stablecoins or other assets that have not yet exhausted trading cycles.
The truth is that nothing goes up forever, and in the cryptocurrency market, a fall can often be as fast and hard as an upswing.
If it is difficult to sell a token due to personal connections and optimistic long-term prospects, it is worth considering that after the parabola phase and the consolidation phase, you can get more tokens for the money spent, once the dust settles.
Rule #2: Not FOMO – there is always another currency
The experience that almost all cryptocurrency investors have experienced is the urge to buy a particular coin and resistance only to see it take off like a rocket the next day and transition into a two-week moon pattern where you see prices skyrocket. ten times.
At this point, the fear of missing out becomes so strong that a large market order is placed and filled at the top of the market. The result of this is usually an unexpected drawdown as a newly opened position loses half of its value in just a few hours as the first holders follow Rule #1 and make a profit.
As soon as the coin begins to turn into a parabola, just look from the side. Mentally congratulate the turnout and repeat: “There is always another symbol.”
A quick look at past beef markets will reveal plenty of token pumps and token dumps by bulls and bears, proving that there is no shortage of opportunities to engage early on promising projects and claim solid profits amid the frantic hype cycles that the cryptocurrency market is known for.
Rule #3: It won’t be like last time
Technical analysts often like to claim that coding follows a predictable series of cycles that they use to test certain parts of their craft. By keeping this perspective, they can use past market cycles on the current price chart as a way to predict what will happen next.
In 2021, this belief led to years of claims that Bitcoin would reach $100,000 or more, only to peak below $69,000 and falter by the end of the year with no sign of the long-awaited peak.
Over the course of the year, the market was compared to a rise in 2017, then a rise in 2013, and finally a combination of two levels of support as charters struggled to make it clear what part of the cycle the market is in and where it will move next.
Finally, growth in 2021 was a unique double-peak unlike some previous market cycles and could extend into 2022, in line with some expecting the four-year cycle to continue.
The most important thing is not to expect the market to work the same as it has in the past and focus on trading the market that you have. Keep an eye on price trends and be sure to keep Rule #1 and Rule #2 in mind.
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Rule #4: Run Directed Loops Carefully
In every cryptocurrency cycle, there is one sector that comes out of nowhere to dominate the headlines and generate profits up to 100x.
In 2021, the advent of memcoins, the advent of non-fungible tokens (NFTs), and the use of games to make money caused a lot of irritation among radical bitcoin users and those who are “in technology”.