How to deal with all the struggle we face while taking decisions during a bull-market.
A few weeks back, I read a tweet by the popular crypto-thinker Chris Burniske that struck a nerve. He drew parallels between the exuberant sentiment surrounding the approval of spot ETFs and the euphoria leading up to the Coinbase IPO, a period that coincided with a market peak in April 2021.
Initially, like most I brushed off his observation, reluctant to entertain the notion that the market might be overheated. But as fate would have it, the markets soon corrected by around 20%, leaving me to rue the missed opportunity of adjusting my risk exposure or hedging against potential downturns.
I’ve always held a steady bullish outlook on digital assets for a couple of reasons. As a developer, I firmly believe in the transformative potential of blockchain technology and decentralized networks. Moreover, my conviction stems from a broader skepticism towards fiat currencies, which I fear are susceptible to devaluation owing to unchecked government spending and ballooning debt.
However, while this long-term perspective informs my investment thesis, I’ve come to realize that being perpetually bullish can be suboptimal, especially when considering shorter time frames. Having devoted considerable time to studying market cycles, I’ve compiled a list of signals and indicators that help identify potential market tops and bottoms.
For instance, signs of market euphoria—like incessantly checking one’s portfolio, entertaining lofty price predictions, or witnessing a surge in mainstream attention—are often red flags for an impending downturn. Conversely, indicators of market despondency, such as widespread pessimism or a dearth of buying interest, may signal a potential bottom.
Top Signals :
- Desire to tell someone about gains
- ETH GAS > 999
- Phone calls from friends
- First sign of trouble after parabolic move
- Desire to move up the risk curve
- Looking at expensive stuff that became affordable
- Euphoria on Crypto Twitter 5-10x price predictions
- Coinbase top of app store
- Checking portfolio every day 4-8 months after breaking previous ATH
Bottom Signals:
- Stink bids, could it go to zero?
- Collapsing corporations, projects, infra
- Crypto is dead.
- No-coiners rushing to shout “I told you so”
- Traders/Influencers leaving the industry
- Consistent selling pressure/deleveraging
- Dissolution/disbelief
- Terrifying to place a bid knowing it’ll go lower
- No idea what you might wake up to
- Market Boredom
- Event & extreme fear marks absolute bottom, i.e. covid crash, FTX
- If this doesn’t make someone sell, what will?
Yet, despite the listed signals above being glaringly obvious in hindsight, navigating market emotions and timing market movements remains a daunting task in practice. Personally, I’ve often found it particularly challenging to buy into market panic -blood in the street scenario- , especially when rumors abouts funds/ firms are near implosion despite the inherited idea that the current trajectory is the inevitable future of finance.
To counteract these emotional hurdles, I’ve devised long-term plans and set price targets that serve as guideposts during periods of heightened excitement, helping me resist the allure of herd mentality and stick to a rational investment approach.
Looking ahead, if we’re fortunate enough to witness another bull run in the coming years, it’s imperative to contemplate an exit strategy and long-term goals. By doing so, we can navigate the market’s ebbs and flows with a clear-headed approach, ensuring that we stay on course towards our desired financial objectives.