Sell or hodl? How to prepare for the end of the bull run, Part 2

To read Part 1 of “How to prepare for the end of the bull run,” click here.

So, you’ve made a million bucks this cycle and you’re trying to work out how to transform those life-changing gains into money in the real world before the inevitable crash. But at the same time, you don’t want to sell now and miss out on potential upside. So, what should you do?

For Quantum Economics founder Mati Greenspan, the answer is simple: Be optimistic. He’s not an advocate of trying to time the market.

“As somebody who has been trading my entire life — I mean, way before cryptocurrencies — you’ll find that it always pays to be optimistic, and pulling out your money from the market has almost never been a good long-term strategy. Not for any market over almost any time frame.“

Greenspan points out that even those few people who bought Bitcoin at the top of the 2017 bull run are up 250% just three and a half years later.

“Anybody who was wise enough to foresee the crypto winter and took all of their money out, when do you get back in? Nobody can time the markets to a T. The best we can do is to kind of figure out, given the information that we have, what are the best investments to make over time.“

No one can predict the top

Unlike Decentrader analysts Filbfilb and Philip Swift in Part 1, Greenspan doesn’t believe it’s possible to use on-chain indicators to accurately foresee the end of a bull run. He warns that unexpected events like bad regulatory news from China or a tweet from Elon Musk can occur at any moment, sending markets into bear mode.

Filbfilb says that this is why good traders don’t just look at one type of data but consider on-chain analysis in the context of sentiment, cyclical data, technical analysis and everything else to gauge where the market is headed.

“If you’re sort of sitting around waiting for some on-chain analysis to tell you the answer, and we have a black swan event, you’re not going to do anything about it in time,” says Filbfilb. He adds that even black swan events don’t present major issues for sophisticated traders, pointing out that the March 2020 “Black Thursday“ crash had been foreshadowed for weeks:

“If that kind of thing were to happen again, as a trader myself, I would have enough time to take action. I’m in and out of the market all the time.”

“For me, it’s a much more fluid situation. I’ve got other tools, like I know how to hedge. I’ve got other different ways of managing risk, which means I don’t necessarily have to sell my Bitcoin in order to get myself into a position where I can cover any downside risk.”

Needless to say, it takes a lot of hard work, time and training to be able to play the market like Filbfilb. What about the rest of us?

Filbfilb recommends taking enough profit to keep yourself happy in the downturn. “If you’ve made life-changing money, consider changing your life a little bit now. For me, I personally have done that — I’ve taken some money off the table,“ he says.

“What that’s allowed me to do is to sort of be able to hold on for the rest of the cycle, potentially to much higher prices.”

Profit from profit-taking

Scott Melker, also known as “The Wolf of All Streets,” agrees that taking profits on your trades all the way up is the key to success, whether at predetermined levels or more randomly. “People should be taking profit on the way up just as you should be dollar-cost averaging into an asset on the way down,” he says.

“I’m a firm believer that once your investment has doubled, take your initial investment off the table. So, if it was $100,000, now you’ve got $100,000 to play with, and you have absolutely no risk.”

This has the added benefit of reducing the chance that you’ll make a big mistake by selling too early, too late or too much, when you believe the top has arrived.

“You know, when you’re taking profits, every time you sell something you’re taking the pressure off your future decisions. Which is mentally a very good place to be.”

He adds, however, that you are allowed to have diamond hands with your high-conviction, long-term holds. “I buy Bitcoin for my kids — I am not worried about cycles,” he says.

The constant process of adjustment

Greenspan’s approach is to take profits when he needs the money, and he switches his allocations from coins that have had a big run-up to newer projects he believes will perform better in the future. He tends to take profits 10% at a time at various stages — back in Bitcoin or to cycle into new investments.

“You can limit the downside in your portfolio while maintaining upside potential through diversification,“ he says.

While he’s not convinced it’s even possible to identify the market’s top when it occurs, he points out that it’s usually fairly obvious when you are in a bear market or bull market — so, you should act accordingly.

“Prices are going down, and they’re expected to go down: That’s the time to reduce exposure. I don’t see any reason to try and pinpoint the top,” he says.

“We can recognize when we’re in a bear market — that’s the time to hunker down. So, take things in, consolidate your portfolio, take off the leveraged bets,” he adds.

this JPEG of a tulip is selling for $3.2 million pic.twitter.com/7ppboKsBwO

— Turner Novak