With over 130 million individuals estimated to have entered the world of cryptocurrencies since the end of 2021, countless investors may soon find themselves experiencing their first crypto bull run, with some experts suggesting that this could occur as early as 2024.
For those who are new to the crypto scene, it’s important to understand that a bull market is an entirely unique experience, unlike anything you have encountered before, according to Ben Simpson, the founder of the crypto education platform Collective Shift. In August, Cointelegraph interviewed hedge fund managers, research heads at digital asset companies, and other crypto traders to gain insight into how they are preparing for the upcoming bull market and to learn some valuable lessons that they can pass on to newcomers.
One of the most common mistakes made by new crypto traders, as pointed out by Simpson, is holding onto their crypto assets for too long. This often occurs when individuals get caught up in the excitement of the potential for even greater profits. Instead, Simpson suggests that it could be helpful for investors and traders to establish a clear investment goal and have a thorough understanding of the assets in their portfolios, including a predetermined sell price for each one. By setting firm market exit points, the risk of losing out on an investment can be reduced, as “once the music stops in a bull market, it stops really quickly,” says Simpson.
Additionally, James Butterfill, Head of Research at CoinShares, emphasizes the importance of dollar-cost averaging, which involves regularly purchasing or selling small amounts of assets. This strategy can help mitigate the volatility of cryptocurrencies, whether in a bull or bear market. Butterfill explains that implementing dollar-cost averaging allows for a lower average purchase cost and minimizes the impact of volatility on one’s portfolio.
When it comes to choosing which cryptocurrencies to invest in, CK Zheng, co-founder and Chief Investment Officer of hedge fund manager ZX Squared Capital, advises investors to focus on well-established and recognized cryptocurrencies such as Bitcoin (BTC) and Ether (ETH). Butterfill also highlights Bitcoin’s similarity to other alternative assets and its remarkable diversification benefits, surpassing assets like gold, commodities, or real estate. Deryck Graham, founder of crypto hedge fund Portal AM, suggests a balanced approach by investing in both speculative and mature cryptocurrencies. Graham recommends analyzing investment sectors, such as layer 2’s or the metaverse, and selecting related tokens while avoiding those with little or no practical use, such as memecoins. He suggests considering factors like tokenomics, the development team’s track record, whale investor activity, community size, market momentum, and liquidity.
Markus Thielen, Head of Research at Matrixport and author of “Crypto Titans,” points out that Bitcoin has always reached new highs during booming markets. However, he also emphasizes the importance of new themes driving new bull markets, supporting the idea of investing in new cryptocurrencies rather than those from the previous bull run. Simpson agrees and suggests that having high-conviction investments can help individuals stay focused on their goals, as most altcoins have “no chance” of keeping up with a diverse portfolio.
All three experts, Simpson, Zheng, and Graham, caution against overexposure to crypto. They advise against taking loans to invest in the market, investing more than one can afford to lose, or using leverage in trading. Zheng warns that leveraged positions can result in a complete loss of capital when least expected, and it’s crucial to adopt an investment mindset rather than a speculative one. Simpson also stresses the importance of taking breaks from crypto and market watching to safeguard one’s mental health. This advice applies to both experienced traders and newcomers.
It’s important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making any decisions.