Riding The Crypto Bull: How To Profit
7 actionable lessons to turbo-charge your crypto portfolio
Crypto provides an incredible wealth generation opportunity for those who play it right. Rapid adoption growth, revolutionary technology, and 24/7 global access - these are some of the reasons why billions of new capital are flooding into this industry to fuel future development. Those who are serious and spend the time to learn - have and will continue to accumulate fortunes.
Now, if you have made it this far, but seek a quick gamble or “get rich quick”, then this is NOT for you. The truth: industry tailwinds are driving tens of billions of dollars of new capital into this space annually… and those who learn how to invest properly, will win and profit. Meanwhile those who don’t put in the work will likely underperform and become easily discouraged - as alas, like most other markets - if your counter party has the edge, then they will most likely come out on top!
Crypto Bits Newsletter is here to give you that edge - and beat the market.
10 year horizon:
Blockchain is going to take the information age by storm as Internet 3.0, central banks will continue to debase fiat, and bitcoin & hard assets will outperform.
2-7 year horizon:
An incredible opportunity exists to earn on strong industry tailwinds, while also capitalizing on predictable volatility driven by forces of emotional human nature.
Experience is not the best teacher. Other people's experience is the best teacher.
- Andy Andrews -
My goal is that you will be able to walk away today, learning from my experiences, and avoid some of the same mistakes yourself. I believe that these 7 actionable lessons will empower you to turbo-charge the performance of your crypto portfolio starting today.
So let’s get into it…
Lesson #1:
When Coinbase Hits #1 In the AppStore: SELL
”The Greater Fool Theory” is a price discovery behaviour in which investors buy an asset, hoping to sell it later to a "greater fool" for a higher price, even if they believe it to be overpriced. The idea is that the asset's price will continue to rise until a "greater fool" is found who is willing to pay even more. Over and over again, emotional human behaviour drives the masses to FOMO into markets until there is nobody new remaining to buy, at which time the price stops going up. When this happens, the “greatest fool” is left holding the bag.
Introducing Coinbase: the largest crypto exchange in USA (the largest crypto market in the world). Activity data from Coinbase has historically provided excellent insight on overall crypto market activity. Take a look at the last 2 dates when the Coinbase App hit the #1 spot in the AppStore - the dates line up nearly exactly with the $BTC price cycle top.
1 May 11 Source
2 Oct 28 Source
The actionable lesson:
Buy bitcoin & crypto when others are not interested
Hold until mass FOMO hits (historically 2-4 years)
Sell when Coinbase App climbs up AppStore leaderboard
Rinse, Repeat, Profit
You better believe, the next time Coinbase is climbing to the top of AppStore downloads, I will be SELLING.
Lesson #2:
Do Your Own Research
It’s your money - only you are accountable for the results. Even if you got the investment tip from the most credible person you know, only you will be responsible to know when it’s no longer time to hold.
An actionable place to start is creating a research checklist and giving each category a score out of 5. Here’s what I would include in that research checklist:
Use Case (quality of use-case & if it’s being used)
Team & Partnerships (previous experience, advisors, affiliations)
Tokenomics (inflation rate, circulating vs fully diluted supply, % owned by insiders)
Liquidity (market cap size, exchanges available, daily trading volume)
Road Map (financial runway, clear growth plan, have they followed past plans)
Communication (quality of communication - blog / twitter / discord)
Take the time to do some research, and focus on your strengths. If your experience is in sales - start by looking into their partnerships and sales success. If you are a developer, start on their github and ask technical questions about their code. Traders can look at the charts, etc. Over time your skills well develop in the unfamiliar areas, but you must start now to begin growing those muscles.
The crypto market is a fast moving space and so is your learning and development. As such, review all of your investments often (every 3 months) and assess if your checklist score has changed. If the score is lower, it may be time to decide to sell so you can allocate those funds into a better investment vehicle. Remember, don’t get married to your crypto holdings, these are simply just vehicles to get you to your ultimate goal of greater wealth. If a better vehicle becomes available, switch to the better vehicle if it gets you to your end goal faster!
The actionable lesson:
Take ownership in your investing
Use a standardized research checklist as your guide
Review all investments regularly to stay informed on notable changes'
Start your research journey by focussing on your areas of strength or experience
Proper research will empower you to take ownership in the decision you make, but it will also help you to create a clear investment thesis (lesson #3).
Lesson #3:
Know Your Investment Thesis
An investment thesis is a well-thought-out explanation of why you believe something is worth owning. If you understand the reason you entered into an investment, you will also be clear with knowing when to exit if/when that thesis becomes invalidated.
An investment thesis can include:
Reasons for buying
Price expectations
Competitive advantages or risks
A roadmap of what to watch for in the future.
Once your thesis is set - the most important thing is the follow through. Unfortunately, the human brain has a tremendous ability to justify bad decisions to protect you from the pain of admitting that you’re wrong. In investing, this is known as confirmation bias, a process where the brain seeks out and interprets information in a way that supports your previous beliefs or opinions.
For example: disregarding information that contradicts the previous idea, potentially leading to poor investment decisions. The worst case scenario is continually holding that investment because you keep justifying that the price is going to recover.
The actionable lesson:
Create a well thought out Investment Thesis
Be aware of confirmation bias & quickly admit when conditions change
Sell immediately when your Investment Thesis is invalidated
IDEA: If you follow all 3 steps above and you still don’t want to sell, do this…
Sell the investment and tell yourself that if you regret it, you will buy back right away. I can tell you from personal experience, that once you have sold, you will no longer want to buy it again! In fact, you may even be excited that you sold!
Lesson #4:
Be A Contrarian Investor
"Be fearful when others are greedy, and greedy when others are fearful"
- Warren Buffett -
Markets involve humans, and humans are emotional. This is the reason why markets repeatedly overreact in both directions. When price goes up strongly - FOMO can drive the price much higher than fair market value. Likewise when price goes down - fear and bad news dominate and drive people to sell during the areas of deepest extreme value.
Fear and greed (sentiment) has become such a useful indicator that you can now track it daily. My favourite crypto sentiment indicator is Crypto Fear & Greed Index3. They post a sentiment score once a day, by compiling data from: market volatility, trading volume, social media sentiment, and Google Trends.
Pulled directly from their website, here’s an idea of how it works:
Extreme fear can be a sign that investors are too worried. That could be a buying opportunity.
When Investors are getting too greedy, that means the market is due for a correction.
Similar to reviewing a price chart, it’s important to match the time frame with your investment horizon. If your buy/sell decisions are based on a holding period of 30+ days, then monitor the directional trend of sentiment for “last week”, “last month”, or even further back (hint: the website has a historical chart with daily values from 2018 to present). I have obtained my most valuable insights with this indicator when the following 2 conditions occurred:
All 4 “Historical Values” simultaneously flashing the same extreme sentiment: Extreme Fear or Extreme Greed - indicating an inefficient emotional overreaction in the market
“Now”, “Yesterday”, “Last Week” are all shifting towards neutral while “Last Month” still displays an Extreme value - this can indicate notable momentum reversal is taking place following an extreme emotionally driven period
The actionable lesson:
Make investment decisions contrarian to extreme sentiment
Sustained periods with extreme sentiment can indicate an upcoming major inflection point - when all 4 Historical Values are:
Extreme Fear: Be a Buyer
Extreme Greed: Be a Seller
Monitor directional trend of the 4 Historical Values to gauge if the market is gaining confidence or losing confidence. Like a pendulum, the dial tends to swing from Extreme Fear ←→ Extreme Greed. Price goes up when greed is increasing, price goes down when fear is increasing.
Lesson #5:
Offense Wins Games, Defense Wins Championships
Play for the upside, always defend your downside. If you don’t lose money, your portfolio can really only go in 1 direction.
But first let’s set the record straight. Losses are a completely normal and expected part of investing, and it would be misleading to suggest you can earn massive upside gains in crypto with zero losses. Losses are expected, but the thing that sets the professionals and best investors apart is that they cut their losses early and keep those losses small.
Peter Brandt is one of the best traders around. When he speaks, I listen…
A common misconception is that if price goes down 20% then it just needs to go back up 20% again to return to break-even. This is WRONG! It actually takes a 25% gain to recover from 20% loss. Take a look at the chart below:
Think of it like the law of compounding, but opposite. If you double your money from $1 → $2, you now only need to increase your new $2 by a half (instead of a double again) to get to $3. That’s the law of compounding. The same thing goes on the downside, but this time it works against you.
TRY THIS:
Pick a “gain needed %” from the far right column that you consider as a big win for an investment. Now take a look at the corresponding “if you lose %” of that row.This is your new maximum that you will allow yourself to lose on any investment moving forward.
Determining a set amount you can lose on an investment is called setting a stop-loss. Think of it like a sell target, but on the downside in the case the investment goes in the unexpected direction. Just like a profitable sell order, you can enter a stop-loss order ahead of time using your chosen price, or you can keep that target in your head and enter it when it reaches that level.
Decide the price associated with maximum loss you are comfortable taking
Place the stop-loss order at that price below the current market price
If the price drops to that level, your stop-loss order gets triggered and the sell order becomes activated
HOT TIP:
A “trailing stop-loss” is an effective strategy to use when the price is rising. Trailing stop-loss adjusts the sell price as the price rises, so even if the price drops, you can guarantee that you sell at a higher price than you bought at and limit the amount you give back to the market. You can set the price to trail upwards using either a percentage or fixed dollar amount relative to the highest peak price, starting from the moment you enter the trailing stop order.
The actionable lesson:
Losses are a part of investing; but the best investors protect their downside and keep losses small
Religiously use a stop-loss when investing - this works best if you pre-determine your maximum allowable downside at the time you enter the investment
A stop-loss can be used to minimize losses on losing positions & to protect gains on winning positions - apply both stop-loss methods to improve your portfolio performance right away
Lesson #6:
Take Profit
Unless your end-game is to hold “x” crypto for the rest of your life - the only way you can profit is by actually selling.
The best consistent outcomes result from a systematic approach, aka: a strategy. Similar to creating a system for research, follow a pre-decided strategy for profit taking.
Profit Strategy Examples:
Initial Investment: $100
When initial $100 becomes $200, sell 50% (recovers your initial $100 and now playing with “house money”)
Every time your $100 becomes $200, sell 50% again
A more aggressive strategy would be to do the same, but wait until the initial $100 becomes worth $300, like this:
When the initial $100 becomes $300, sell 33% (recovers your initial $100 and now have $200 “house money”)
Every time your $100 becomes $300, sell 33% again
And when less upside is expected, you can spread the sell orders across multiple levels to help diversify your sell price & sell timing on the way up:
TP1: Sell 20% at 20% gain
TP2: Sell 20% at 40% gain
TP3: Sell 20% at 50% gain
TP4: Sell 20% at 70% gain
TP5: Sell 20% at 100% gain
The key to a profit taking strategy is that it forces you to remove emotions and take profit (sell). As discussed throughout these lessons - crypto markets are highly emotionally driven - so even the best crypto investments will go through periods of high volatility in both directions.
Volatility can provide us with opportunities to sell even our best investments along the way and then buy them back lower in the future.
The actionable lesson:
Selling is a necessary step to make a profit - determine your profit taking strategy when you enter an investment and follow through on applying that strategy
Implement a profit taking strategy that prioritizes recovering your initial investment - once your initial capital is recovered, a worst case scenario will result in losing $0
Regardless of your profit strategy - always sell in parts - this will diversify your sell price & sell time
Lesson #7:
Prioritize security
Last but absolutely not least is security. The crypto industry is still in its early years, so it sometimes feels like the wild wild west. Many customer facing touch points are still in development and you are often required to independently self-troubleshoot as you go.
Remember: Once everything is easy for the masses to participate, the extreme upside profit potential will no longer exist.
Crypto differs from traditional banking in 2 main ways:
Self custody of funds
Pro: borderless & permissionless accessibility, no risk of bank freezing your account, globally inclusive network requiring only a phone and internet
Con: responsible for own security, funds not insured (yet)Decentralized nature
Pro: no intermediaries, increased privacy, faster transfers, 24/7 processing
Con: increased risk of getting hacked, no customer service to help you
Self custody of assets fulfills our human right to privacy and gives us full control of our personal property. Crypto provides an incredible advancement on this compared to traditional banking. And so it is important we give it the respect it deserves by protecting our privacy in the following ways:
Websites & Apps
Only ever download apps from official company websites, never from a Google or AppStore search!
Many scammers will create websites that look similar to official websites and pay to have it listed at the top of Google or AppStore, and then once you enter your information they will steal your funds
Wallets
Hardware wallets (cold wallets)
cold wallet is highest security, use cold wallets whenever possible
most recognized hardware wallet brand is Ledger
only type private key into the physical wallet (never into the computer)
update the software regularly using the dedicated app from official website
Mobile wallets & browser extension
only use for day to day operations
if someone hacks into your computer they can access the funds in these wallets
regularly disconnect “connected sites” on browser wallets like Metamask
Private Key Recovery Phrase
Only keep your private phrase offline & don’t share with anyone
If you lose your recovery phrase the funds are no longer accessible
Write down multiple copies and hide in a safe, bank vault, hidden location
Passwords
Use strong and unique passwords for all crypto accounts
Enable Two-Factor Authentication (2FA) on all accounts - Google Authenticator is most popular
Some exchanges require 2 forms of 2FA - I choose Google Auth & email - because SMS is annoying when travelling on “Airplane Mode”
Crypto Exchanges - “not your keys, not your coins”
Only use reputable and regulated exchanges to buy & sell
Binance, Coinbase, Kraken are the 3 safest exchanges at time of writing
Do not store funds on exchanges - if you do not own the private keys to your account then you do not own the rights to those funds *IMPORTANT*
Use exchanges only to buy & sell, then remove funds to private wallet
Ongoing Maintenance
Review your security measures and systems every 3 months
Regularly monitor your accounts to ensure no unauthorized activities
Avoid sharing information online - many scammers will message in telegram and twitter offering to help you, but they are trying to scam you
The actionable lesson:
Only ever download crypto apps from official websites, not from Google or AppStore search
Prioritize hardware wallets & keep your private keys safe and offline
Always use 2FA
Use reputable exchanges & don’t keep your funds on exchanges
Review your security systems regularly
The biggest thing I’ve found over time is that as my account has gotten bigger, I have continually felt a stronger need to upgrade my security. It is a constant work in progress and I expect it to always be that way! By understanding and implementing these security measures, you too can protect your assets!
Conclusion:
These 7 lessons will give you both a combination of an edge for upside potential, while also providing a safety net to protect downside when your edge fails.
A properly executed strategy requires implementing a combination of some or all of these lessons to develop a well rounded plan. If you master all of these strategies together, it can be highly effective in adding stability to your crypto portfolio while simultaneously accelerating your performance.
The Crypto Bits Newsletter aims to deliver you the alpha so that you can implement a plan and make informed decisions. With a 5-7 year timeframe in the crypto space you can profit, compound and obtain life changing wealth.
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https://cointelegraph.com/news/coinbase-overtakes-tiktok-for-1-position-on-apple-app-store
https://cointelegraph.com/news/coinbase-regains-1-position-on-apple-app-store-as-crypto-com-jumps-to-third
https://alternative.me/crypto/fear-and-greed-index/