Bankless: 8 Tips for Navigating the Next Bull Market

Original Title: 《8 Tips to Master the Next Bull Market：Enter the bull market fray responsibly》

Original Author: William M. Peaster, Bankless

Original Translator: Kaori, BlockBeats

"Is the bull market back?" This is the question everyone has been asking after last week's Bitcoin ETF sparked exciting signs of activity in the cryptocurrency market.

Only time will tell, but there is no doubt that more and more people are beginning to embrace the idea that we may be on the verge of the next cryptocurrency bull market.

So, if you are a newcomer or know someone who is, and you want reliable advice on how to prepare for investing in the next cycle, I have compiled a roadmap that includes 8 essential tips drawn from my personal experience and the collective wisdom of the crypto community to help you gain solid guidance on your journey forward.

1. Develop an Investment Thesis

Investing in cryptocurrency is one of those things in life that requires you to have a thesis. It doesn’t have to be lengthy, original, or set in stone. But without a thesis, you risk wasting money and time in the market without any guidance.

For example, I remember my first experience during the 2017 bull market, feeling like a kid in a candy store. It seemed like every new coin I saw was shinier and more interesting than the last, so I ended up buying a lot of junk because I had no serious thesis other than "Haha, cryptocurrency is cool."

That didn’t get me very far. Fast forward to 2021, after more reflection, I established a guiding vision in the subsequent bull market to double down on Ethereum because, in my view, it was becoming the next great open finance and cultural layer globally. Thus, by deeply researching a real thesis, my second attempt achieved considerable success!

2. What Works for You is Most Important

As you browse cryptocurrency social media, you’ll see a variety of flat avatars, and it’s easy to forget that the people behind these accounts come from different age groups, have various life experiences, and each has their own story and financial situation.

All of this is to say that in the next bull market, you might see people around you pouring large amounts of Ethereum into "the next big coin" or "the next big NFT," which may trigger your FOMO, and you might be tempted to invest more Ethereum than you can afford to keep up with the trend.

Don’t do that! Respect the different stages of your investment journey and recognize that accumulating your crypto assets is a marathon, not a sprint. By taking a methodical approach rather than acting recklessly, you will reach your goals.

Invest according to your financial capacity, only putting in what is suitable for your scale.

3. DCA is Your Friend

In the crypto space, prices can fluctuate wildly within minutes, and double-digit percentage changes in a single day are not uncommon. For newcomers, this can be both exciting and nerve-wracking.

Instead of trying to time the market during volatility, dollar-cost averaging (DCA) is a common and reliable strategy.

The DCA method involves committing to purchase a specific asset, such as ETH, BTC, SOL, etc., for a fixed dollar amount at regular intervals, regardless of their price. Instead of trying to enter the market at the "perfect" moment, you will buy spread out over time, which can be weekly, bi-weekly, monthly, or any other interval that fits your investment plan.

By spreading out your purchases, you reduce the risk of buying at a peak; even if you start investing at a high point, subsequent purchases during dips will average your entry price. DCA also eliminates the emotional factors of investing. You don’t have to constantly try to predict the next market move, which can lead to rash decisions driven by fear or greed. Instead, set a plan, stick to it, and observe your investments over time without the need for constant monitoring or second-guessing.

4. Don’t Avoid Taking Profits

When I first entered the crypto space in 2017, I put my only $300 into Ethereum and grew it to $25,000 through trading small coins that "only go up." In December of that year, Bitcoin had just reached $20,000 for the first time, and there seemed to be no signs of slowing down, with the entire cryptocurrency market looking bright.

However, a month later, the bear market began. I held onto my small coins during the first half of that bear market, thinking things might improve. But those token prices never recovered, and aside from my Ethereum, that $25,000 turned into zero. There’s no doubt that was life-changing money, and I should have taken full advantage of it.

In the 2021 bull market, I didn’t make the same mistake because I locked in some profits along the way. But I know some people thought Ethereum at $5,000 was just a stepping stone to $10,000 and didn’t sell when they had the chance to lock in some substantial profits before the next bear market.

In the next cycle, make sure you have an exit strategy to turn some of your virtual gains into real money; you will thank yourself later.

5. NFTs as Leverage Bets on Ethereum

By investing Ethereum into selected NFTs, you may be able to leverage the bullish momentum of the NFT market to achieve higher Ethereum returns when you sell the NFTs later, which is a classic buy low, sell high strategy.

This sounds easy, right? And many NFTs should not be viewed merely as financial instruments to flip. However, in many cases, flipping is possible in a rising market.

The idea here is the potential for amplified gains, as NFT prices can be highly volatile and have significant appreciation potential. Thus, the gains from investing in NFTs (if you choose the right NFTs at the right time) may exceed holding Ethereum. This strategy is worth considering for newcomers, but I again caution against viewing every NFT as a flip opportunity; some are, but not all!

6. Familiarize Yourself with Your Tools

Sometimes, when visibility is limited, pilots have to "fly by instruments," meaning they can only rely on their mastery of the aircraft's resources to navigate. So when I say "familiarize yourself with your tools," I metaphorically suggest that you practice and personally use all available crypto applications to gain proficiency in your Web3 toolbox.

This process will not only advance you on your personal "crypto skill tree," providing you with experience and mastery, but it will also start to feedback into your application of other strategies, such as what your overall investment thesis is, how you conduct dollar-cost averaging, which NFTs you buy, and so on.

In other words, understand the projects here. Know what they offer, how to use them effectively, what challenges they face, and so on. By doing this, you will gain wisdom that will further enhance your investment approach.

7. Don’t Ignore Taxes

In a bull market, people make a lot of money, and that money is taxable income. When the next bear market begins, their asset values may plummet, but the tax burden from the previous bull market year remains high.

So, what’s the important takeaway? If you don’t set aside some gains during good times and prepare for taxes, you may face severe consequences during tough times. More cryptocurrency investors than you might think have experienced this, and I am one of them.

On the other hand, one tool in your toolbox to address this issue is to strategically lock in capital losses. Selling assets at a loss in bull market years can help offset the taxes you will owe on your gains. This tax-saving strategy is called tax-loss harvesting, and it allows you to minimize your overall tax burden, making it more manageable.

8. Maintain Work-Life Balance

The cryptocurrency space is a non-stop market, without the closing bell of traditional financial markets. Sometimes, it can also become very chaotic. This constant experience can easily turn into a whirlpool, pulling you away from other aspects of life. The frenzy of a bull market can lead to overwork and burnout.

That said, prioritizing your mental peace and regularly stepping back cannot be overstated. Setting specific times for market analysis, trading, and portfolio management is one way to ensure you don’t overexert yourself and create balance.

Additionally, occasionally "disconnecting" can provide a fresh perspective when you re-engage. It’s easy to get caught up in the drama, conspiracies, price fluctuations, and so on every minute. However, if you also invest in rest, you will be much clearer-headed when facing all these things.