Bull market layout manual in the currency circle: We Are Back

Good morning, fellow angel investors

First of all, congratulations to everyone. Bitcoin has broken through 60,000 before you know it. Before you feel FOMO and sell your liver and kidneys and decide to All In cryptocurrency - don't worry, read today's article. I will share my bull market layout manual, including the three stages of the bull market and things to pay attention to when planning.

The bull market officially begins

At the end of last year, I wrote an article on Substack, which talked about the four stages of the currency market, namely - Accumulation (accumulation period), Markup (rising period), Distribution (distribution period), Decline (falling period) ). At the time, I noted that we were in the tail end of a bear market (1-3), awaiting two major bull market catalysts.

Fortunately, one of the catalysts has matured. With the large amount of funds brought by the Bitcoin ETF (approximately $7B as of writing), we have survived the long bear market and officially entered the early stage of the bull market (2-1). I put The location we are currently at is drawn (circled in red).

Taken from www.alphatrends.net, the four major market cycles (plus the red circles I drew myself)

Yes, I think the crypto bull market has just begun and the crypto community will be very busy over the next 18 to 24 months. Before sharing my layout strategy, let's first take a look at the three major stages of the bull market.

Three major stages of bull market

In my opinion, the bull market can be divided into three stages: the excitement period, the explosion period, and the rotation period, which correspond to the early, middle, and late stages of the bull market respectively. Let's talk about them one by one.

Exciting period (early stage of bull market)

This is where we are now: the currency circle has completely escaped the haze of the bear market, Bitcoin has led the currency circle to soar upwards, your friends in the currency circle are making great money and are ready to resign at any time, CoinMarketCap gives you new notifications every day, You become very fond of reading the tape.

Interestingly, there were not many retail investors entering the market at this time. The evidence is:

• The number of Google searches for keywords such as "Bitcoin" and "cryptocurrency" has not changed significantly.

• The “increase in subscriptions” of well-known cryptocurrency YouTubers has not yet increased significantly.

• Your other friends who are not in the cryptocurrency circle have not followed you on LINE (XXX, can I buy Dogecoin?)

• For more data, please refer to my Tweet

Explosion period (mid-bull market)

After a period of time, a large number of retail investors officially entered the market, and the influx of funds produced a FOMO effect: the prices of Bitcoin, Ethereum, and XXX coins have exceeded the ATH (All Time High) of the last bull market and are heading to a higher level. . At this time, the market seems to have new narratives every day, VCs are pouring money into Web3, mainstream media are rushing to report that the currency circle is "back", NBA stars are endorsing well-known exchanges, and the overall scene is like a party. Everyone feels that Bitcoin will rise to 100,000, 1 million, 10 million.

Rotation period (late period of bull market)

The market at this time is still hot, but it is out of touch with the real world, and the bubble will be punctured at any time. Market funds will rotate back and forth in different sectors. They may speculate in DeFi today, GameFi tomorrow, or meme coins the day after tomorrow. Retail investors no longer consider the fundamentals when buying coins, but only care about whether they can sell them to others at a higher price. people.

...However, dreams will wake up, and we will eventually return to reality. The total market value of the currency circle during this period will slowly decline until it encounters a black swan event or collapses due to regulatory intervention (of course, we do not Consider the possibility of Supercycle).

Supercycle: In the currency circle, it refers to the continued surge in demand for Bitcoin by countries and users, exceeding the total supply. Supercycle will allow the bull market to continue for several years, although there will no longer be cycles; there will no longer be large fluctuations up and down.

Bull market layout strategy

If you are reading this e-newsletter, then you are very lucky to be a "currency circle person" and not a retail investor who has never been exposed to the currency circle. Now is the time you need to grasp well and try to plan your own layout strategy before the "explosion period".

I have summarized the mistakes I made in the last bull market. Here are the things I will seriously implement and pay attention to in this bull market.

Verification goals

First ask yourself: What is your goal before this bull market ends? Do you have $100,000 or save enough for a down payment on a house? Then we can construct the corresponding "investment portfolio" and "entry and exit strategies" according to the goals.

For example: You hope to accumulate at least $100K in capital at the end of the bull market.

• With only $10k in principal, you need to invest in project tokens that can multiply your investment by 10 times

• With only $1K in principal, you need to invest in project tokens that can multiply 100 times

By analogy, what I want to say is: depending on your goals, you need to add project tokens with different market values ​​into your investment portfolio, otherwise it will be difficult to achieve your goals. If you invest $10K in Bitcoin, the risk is low, but it is unlikely to make $100K (unless you think that the market value of BTC can increase 10 times in this bull market, compared to gold)

Investment association

I myself divide the currency circle projects into three categories according to their market value, namely large market value (greater than $10B), medium market value (between $1B~$10B), and small market value (less than $1B). According to each person’s goals, Depending on your risk tolerance, you can allocate different proportions of projects to your investment portfolio.

• Large market capitalization: usually already the leader in several tracks, the risk is low, but the increase is also limited, it is a safer investment project

• Mid-market value: This is the range that I think has the best investment risk-reward ratio. The market value is not high but the potential is huge (of course it still depends on the individual project)

• Small market capitalization: Tokens that can increase more than 50 times should be small market capitalization tokens. If you have a small capital but want to pursue high returns, then allocate some small market capitalization tokens.

My holdings in the bear market are mainly large-capitalization projects ($BTC, $ETH), and now I will slowly start to allocate assets to mid- to low-capitalization projects that I think are undervalued (some have already been selected). After the sorting is completed, I will publish my investment portfolio on the Substack newsletter for users who pay subscription, so that you can see what projects I bought, why I held them, and the proportion of each project.

Take Profit

• Timing of entry: Don’t always think about buying at the lowest point, because that is impossible. Just because a project has increased by 50% does not mean that it will not increase by another 5 times. Fundamentals are still important in a bull market, but they also need to be matched with hype and narrative (look more at project market value, on-chain data, sentiment & popularity)

• Stop-profit strategy: No matter how much you love the project you bought, always remember to stop-profit at stages. You can't always sell at the highest point: develop a profit-taking strategy yourself and abide by this discipline. It doesn't matter if the sales are off. What I fear most is that after a bull market ends, we will return to the starting point.

It is recommended to formulate a profit-taking strategy based on the market value of the project. If the market value of Bitcoin is $1T, then your first-stage profit-taking target will not be $2T, because that is too difficult to achieve. Always remember to use "market capitalization" to measure this project, which is not cheap, rather than the "price" of a single token (look at the project's token economic model 2, Dogecoin is not cheaper than Uniswap)

Only focus on certain tracks

There are only 24 hours in a person's day. After deducting work, spending time with friends, and eating, you may only have 2 hours a day to chase coins. This means that it is impossible for you to chase all the projects in the track and earn all the gains. A broad view is not as good as a precise research. Choose 1 to 3 tracks as the main areas of your bull market. Check out their on-chain data, governance proposals, and community popularity. This will get you more Alpha.

This time Uniswap is a good example. If you have been following the project and bought $UNI the first moment you saw the governance proposal released, you can get the full increase (even after this Twitter post was released) It’s never too late to buy).

Uniswap price trend (Source: CMC)

Don’t buy XYZ tokens out of FOMO when you see KOLs and YouTubers pushing them, because there is a high probability that you will become the “Exit Liquidity” of these people. Alpha is never obtained from "information that can be easily seen", but from your own research.

Don’t be bound by fundamentals

Project fundamentals are important, but how many people understand “good projects”? In a bull market, those who will rise sharply are usually those project developers who can do marketing, tell stories, and hype: retail investors will not care about the "token economic model", the true use of the token, or the market value. . Meme coins are the best example. They are useless in themselves, but their market value is horribly large.

In the long run, projects with good fundamentals are indeed more likely to succeed, but prices may not necessarily respond in a short period of time. In a bull market, we need to spend more time observing "community popularity" and "belief power"

Path To Altcoin Season

According to the backtesting of the past few rounds of bull markets, the flow of funds in the currency circle is roughly as follows:

Bitcoin leads the rally → Funds move to Ethereum → Funds move to large-cap projects → Funds move to mid- and small-cap altcoins

Of course, this bull market is different from the past. It is led by the $BTC generated by institutions buying Bitcoin spot ETFs - most of these funds will stay in traditional finance, and it is more difficult to flow in the currency circle like the last bull market. , so it’s hard to say whether this bull market will still follow this cycle (but I think the possibility of a similar one is still very high)

Finally, if you are a currency circle person who has survived an entire bear market, please give yourself a round of applause — We made it! The next 18 to 24 months will be very busy, so let’s do the best!

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