If mad cow disease comes, how should we secure our gains?
"Not being prepared means failing to prepare."Source: distilledcrypto X account
Author: Crypto, Distilled
Compiled by: Luffy, Foresight News
Welcome to Q4 2024, where Bitcoin prices have surpassed $80,000, and the long-awaited altcoin season has finally arrived. But when should I sell my cryptocurrency? You might rely on intuition to judge the peak of a bull market, but is there a better way?
Remember: "Failing to prepare is preparing to fail."
The Pitfalls of Price Predictions
Relying solely on price targets to manage investments is a common mistake. Such targets are often subjective and can be influenced by emotions or social media. Accurately predicting prices and the timing of price changes is extremely difficult.
As portfolios grow, investors' fears and greed also intensify. Each dip and rise escalates the struggle for rational thinking. Price targets fluctuate, cognitive biases increase, and investment discipline weakens. This is a battle against yourself, and as the stakes rise, the difficulty increases.
The Power of Investment Philosophy
Is there a reliable strategy beyond price predictions? We have many options: sentiment, technical indicators, or on-chain analysis. However, philosophy-driven strategies often prove to be the most reliable.
Forming an Investment Philosophy
An investment philosophy is a rational argument about a project's potential within a specified timeframe. The factors that form this argument are diverse and not always related to price. A good philosophy should be testable to enable precise and flexible management.
Why Philosophy-Driven Investing is More Reliable
Philosophy-driven investing is reliable for several reasons:
- It expands with your growing portfolio
- It eliminates the influence of emotions and feelings
- It provides clear validation methods
- It removes short-term noise
Example 1
Suppose you are very optimistic about the prospects of a certain L1. You don't need to fixate on its past ATH (all-time high); instead, you can look at:
TVL, trading volume, or the number of active wallets. Furthermore, you can focus on related metrics such as its market share or mind share.
Next, set validations based on the key performance indicators (KPIs) you choose. This helps check whether the L1 is following the path you predicted or has deviated. For example, you could use the 30-day growth of the KPI as a benchmark.
Example 2
Imagine a new project involving AI agents. You can focus on KPIs like the number of agent transactions rather than the price. Based on your belief, you set a benchmark, such as reaching 1 million on-chain transactions.
What if you are fond of those obscure and volatile tokens?
Many companies only have a minimum viable product (MVP) or no active product at all. In this case, focus on roadmap milestones or checkpoints.
Additionally, if your investment philosophy emphasizes event execution rather than metric growth. For instance, as they say, "buy the rumor, sell the news." Sometimes, exiting immediately after confirming a date is wiser than waiting for the event to occur. Subsequently, you can set new metrics and form a new philosophy.
Other Strategies
If you feel that complex philosophical strategies are not for you? You might consider the following alternatives:
- Time-based strategies
- Fear and greed strategies
- Relative performance
Time-Based Strategies
Time-based strategies offer a simpler, more reliable approach. You can sell a small portion of your portfolio weekly or monthly. Adjust the timing and amount of sales based on macro factors, liquidity, and your goals.
Fear and Greed Strategies
Market sentiment fluctuates like ocean tides, intensifying greed. The fear and greed strategy is to take advantage of the rising tide and secure profits before it recedes. You might consider a weighted DCA-out strategy based on the fear and greed index.
Relative Performance
Imagine the market as a race, with each token like a speeding car. Now, the key point is to determine which car accelerates faster relative to the others. One way to realize profits is to sell when it reaches a specific market cap ranking.
Final Thoughts
Cryptocurrencies are highly speculative, and emotions often take precedence. A risk system that operates independently of price can provide peace of mind. Therefore, prioritize forming your own investment philosophy over guessing; this is an essential quality of successful investors.
