How to view early participation opportunities? 5 considerations for making money during a bull market

In our previous article, we mentioned that when a new narrative (including concepts) is born, the first thing to consider is not to outright deny it, but to try to understand how it works and whether it might help us make money.

In the realm of cryptocurrency, we often hear similar statements, such as discovering and judging potential narratives in advance can give us a better chance to make money. However, the question here is how to correctly understand "in advance." Generally, while participating early (or earlier) is not wrong, it does not necessarily mean that the earlier, the better. For example, when PEPE first appeared, many early participants did not actually make money at that time, as shown in the image below.

For instance, taking GameFi as an example, last year (2023), we suggested focusing on three cryptocurrency narratives for this year (2024): AI, RWA, and GameFi. As time has passed, AI and RWA have shown good performance, but comparatively, the overall performance of GameFi, which we have always been optimistic about, seems to be lacking a bit. Although many people still overlook the potential of GameFi, we remain optimistic about the future of this narrative. The specific reasons have been elaborated in previous articles on the topic of GameFi.

Therefore, regarding such issues, we can draw a basic conclusion: the focus should not only be on how to participate earlier but rather on identifying the best timing for participation.

Typically, the birth and development process of any new narrative will exhibit some common patterns. We can divide any narrative into different stages:

Stage One: Emergence Stage

When a new concept first appears, it is often accompanied by some so-called technological innovations, attracting a group of enthusiasts (including speculators) to participate.

For example, remember when the BRC-20 concept emerged in March last year (2023), which made it possible to deploy, mint, and transfer fungible tokens on the Bitcoin blockchain. Subsequently, a notable figure on Twitter named domo created the ORDI token. The ORDI token was also the first token contract deployed based on the BRC-20 protocol, with a total supply of 21 million (to pay homage to Bitcoin). As shown in the image below.

This subsequently attracted more users from the Bitcoin community. As for the various stories that followed, many people have likely experienced them firsthand, so we won't elaborate further here; interested newcomers can Google to learn about the relevant history.

In this initial stage, everyone mainly focuses on continuous improvements and discussions regarding technology. For retail investors who only wish to invest, this stage is actually very early, and the most suitable approach may not be to invest directly but to observe, learn, and wait for the next stage.

Stage Two: Practical Stage

With the enthusiasm from the first stage and the discussions and optimizations of technological innovations by various big names, we should now be able to see some relatively mature experimental products landing and entering the practical stage.

During this period, discussions will shift towards practical value, hoping to find better alignment between relevant products (projects) and current market developments. It is also at this stage that, with the entry of the first batch of speculative and investment users engaging in various hype, some products naturally become effective tools for generating profits.

Although the investment risks during this stage remain relatively high, and with the maturation of various new protocols, the birth rate of corresponding new projects may spring up like mushrooms after rain. However, this early stage is also one of the better opportunities for us to participate, allowing for small-scale investment attempts in representative projects while ensuring real-time tracking and monitoring.

Stage Three: Doubt Stage

As opportunities arise in the second stage, accompanied by the hype and promotion from various KOLs and community users, more and more retail investors begin to enter the market. However, after the first wave of hype, those early smart participants have already started to take profits and exit.

During this period, we may see many projects' upward trends turn into rapid declines, leading many new entrants to be trapped. Many may choose to cut losses due to the unbearable short-term volatility and start expressing bearish sentiments about those new narratives (projects), falling into self-doubt. The risks during this period are often significant; if you fail to enter successfully in the second stage, you will likely become one of those who take over the losses.

Here, let's casually give an example. I wonder how many people are still paying attention to the ERC404 protocol. I remember when Pandora first came out, we specifically published an article introducing this concept, and then two days later (February 9), its price skyrocketed to $32,000. With the popularity of Pandora, many projects based on the ERC404 protocol also emerged. But now, Pandora's latest price is $2,400, perfectly illustrating the journey through the three stages mentioned above.

After going through the three stages above, if there are still new rounds of hype opportunities for the corresponding narrative/project, then patiently waiting may still yield opportunities; otherwise, it may lead to a longer period of doubt or a direct zero outcome. Therefore, for such early opportunities (unlike VC early investment opportunities), our advice has always been to try small-scale investments.

In addition to small-scale investment attempts in early narratives/projects, the number of investment targets also needs to be reasonably managed. After all, everyone's funds are limited, and when multiple narratives appear before you, corresponding projects will emerge in the thousands. We cannot buy every project to test our luck. Therefore, we need to consider this issue step by step:

1. First, choose the narrative

Regarding the choice of narrative, our viewpoint has not changed; as stated in previous articles, you should select 1-3 narratives that you are most optimistic about for in-depth research. Each person's time and energy are limited, and you cannot simultaneously conduct investment research on more than 200 narratives currently in the cryptocurrency field.

As for which specific narratives to choose, you need to ask yourself. If you don't know, that's fine; you can start by exploring some of the currently popular narratives. Here are a few examples:

1) RWA

According to data from Coingecko, the total market cap of the entire RWA field is only $6.7 billion. Overall, we believe that RWA still has considerable potential for growth ahead. As shown in the image below.

In our previous article on RWA last year (2023), we introduced several potential projects in this field, such as Ondo Finance and Clearpool. Interested friends can search for and review the historical articles.

Currently, many large institutions are actively laying out RWA businesses. Besides the well-known BlackRock, it is said that several other TradFi giants will also launch RWA projects soon.

As mentioned in our article a few days ago (July 10): large institutions like BlackRock are not only focusing on Bitcoin but have even begun to deeply engage in various cryptocurrency ecosystems. This seems to imply that they are planning a significant strategy, possibly aiming to tokenize all assets in the world (such as real estate, energy, agriculture, etc.) in the future. It is foreseeable that tokenization may become a trillion-dollar industry by 2030.

2) PolitiFi

PolitiFi can be understood as a new concept of MemeCoin related to political figures. With the upcoming U.S. elections in November 2024, cryptocurrency seems to have become a central issue in these elections, and tokens related to PolitiFi have garnered much attention and speculation. Currently, the TRUMP token is the most popular MemeCoin associated with Trump, while the BODEN token is the most popular MemeCoin related to Biden. As shown in the image below.

Of course, PolitiFi is still a short-term hot narrative, and MemeCoin-related tokens are inherently volatile, with their price increases and decreases primarily based on various events or speculation. Yesterday (July 13), someone in the group even predicted that something significant might happen. As shown in the image below.

This morning, upon waking up, I saw news reports about Trump being shot. As a result of this incident, the price of TRUMP even surged by 30%. As shown in the image below.

Not only in virtual currencies, but the incident of Trump being shot is likely to trigger some chain reactions, and the global capital markets are expected to be the first to react sensitively.

3) BTC Eco

The Bitcoin ecosystem is a new narrative in this bull market, and it has also given birth to many new protocols and projects. As the market recovers, the Bitcoin ecosystem may bring about a new round of opportunities.

Currently, after a period of development, the Bitcoin ecosystem has been subdivided into many tracks, such as Layer2, NFT, DeFi, Stamp, Meme, etc. As shown in the image below.

Taking the BTC Staking track as an example, current staking-related projects include Babylon (on-chain self-custody model, providing POS security guarantees for other blockchains through native BTC staking), BounceBit (CeDeFi model), Merlin Chain (MPC + cross-chain bridge model), ChakraChain (user-deposited BTC will be invested in Babylon and other BTC staking protocols to obtain multiple returns), etc.

2. Next, choose the project

If you are struggling to make a choice and do not have time to conduct research, the simplest method is to focus directly on the leading projects (or representative projects) corresponding to the narrative. Moreover, as mentioned in our recent articles, altcoins have recently experienced significant corrections, and you can take advantage of the current pullback to gradually buy into those projects that were previously out of reach (while also using and referencing indicators like Fibonacci retracement).

However, it is important to remind you that the wallet is yours, and you must take responsibility for your investments. For newcomers, the two most important principles in investing are to protect your principal and to avoid what you do not understand.

In investing, more often than not, it is a test of patience. You should try to overcome your FOMO emotions. When a brand new concept/narrative/project appears, even if we miss the earliest participation opportunity, it is okay. To take a step back, missing out is always better than blindly FOMOing and becoming a bag holder.

Everything has its development rules and cycles. As long as you believe in a concept/narrative/project that has long-term value, what we need to do is quite simple: if you have plenty of time and energy to track and research new things, then you should try to participate in the early opportunities mentioned in the practical stage. If you do not have that much energy to research, then just keep an eye on things and remain patient. When most people start to doubt and fall into despair, you can begin to take action.

Since we are talking about action, let's summarize a few points to pay attention to at this stage (still in the bull market phase):

1. Manage your emotions

Do not get overly excited when the market is rising, nor overly pessimistic (panicked) when the market is falling. If you are not a professional trader, do not always assume you can make money through "buying low and selling high," and try to avoid falling into the trap of "chasing highs and cutting losses."

Moreover, time cannot be reversed, and there is no such thing as a regret pill. It is impossible to travel back to the past with memories. If you have already missed out or failed, then reflect and summarize, and continue looking forward. For ordinary people, the best investment strategy is actually the DCA method mentioned many times in previous articles. Only by effectively utilizing the rules of cycles can you potentially stay ahead of most ordinary investors.

2. Try to stay away from leverage

Many people, after incurring losses, often think about increasing leverage to recover their losses, but most of the time, leverage will only cause your principal to disappear faster.

Sticking to spot investments and the DCA strategy mentioned above is actually the best choice for ordinary people.

3. Be cautious with meme coins

Since starting the investment plan in the second half of 2022, we have consistently advised through our articles that at least 50% of your portfolio should be allocated to Bitcoin/Ethereum, and do not go all-in or invest too much in meme coins. However, many still choose to go all-in on various meme coins, and some even fall victim to scams and lose their principal (some have been scammed multiple times by the same tactics).

Meme coins are the track that can give rise to short-term wealth stories. You always hear stories of others becoming rich overnight by buying a certain meme coin, and you can't help but want to participate, dreaming of becoming wealthy like them. But you must understand that the success rate of such things is actually very low; you just haven't seen more stories of total loss.

This is not to say that meme coins (including shitcoins) cannot be played; just be cautious with your position. If you only allocate 1-5% of your portfolio to operate, then it is definitely fine.

4. Understand futures reasonably

If you are good at learning various techniques and have enough time and energy to conduct research, then allocating a portion of your funds to try new experiences and attempts is also acceptable, but you must control the extent.

In previous articles, we have mentioned that professional traders also have a tough time. They need to customize various strategies, manage risks, conduct extensive backtesting, engage in various research and market surveys, and execute operational discipline, rather than simply staring at candlestick charts to buy and sell.

Moreover, for many professional traders, they sometimes do not pay much attention to market fluctuations because they can make money whether the market rises or falls. Additionally, there are even more professional market makers who manipulate market prices (long/short).

If you are a beginner and naturally want to engage in various futures trading, you might generate some decent returns under lucky circumstances, but in the long run, such operations are essentially a way to lose money.

5. Do your own research

Currently, there are many influencers, analysts, and so-called "teachers" online who frequently publish analyses or opinions about the market. In addition to recommending various projects, there are certainly many "accurate" predictions among them. Of course, I personally respect anyone who can share knowledge, as long as they are not scammers.

What I want to express is that for any KOL's enthusiastic recommendations, you must remain rational. When they are enthusiastically promoting something, they may have received money from the project party (or are selling their holdings). And for any influencer's (including our own) opinions, you should think critically; others' views are not necessarily correct, and you need to continue forming your own effective judgments based on others' viewpoints.

Any information you see is only helping you build or refine your knowledge system and, in turn, form your methodology (including investment strategies). You need to filter out noise from the myriad of information and find the most helpful or valuable information for your thinking, drawing parallels and lessons.

In short, do not casually build your dreams of getting rich on others (especially strangers). Do not blindly follow what others say (or what they want you to do). To borrow a popular phrase, you need to DYOR (Do Your Own Research).