How to Ride the Crypto Rollercoaster When the Bull Market Comes
BTC, ETH, and altcoins dissected
The key to surviving in crypto isn’t by avoiding the chaos but by mastering the art of the ride.
Fortunes are made and lost overnight, but strategic navigation through this wild west can avoid many headaches and stress.
Here’s when to buy, when to sell, and which cryptos to look for in this dynamic and unpredictable financial space.
Identify where we are in the market cycle
Due to the Bitcoin (BTC) halving, crypto follows a 4-year cycle (until now).
This cycle can be distributed as follows:
- 1 to 2 years of a bull market.
- 2 to 3 years of a bear market.
During a halving, the reward for validating blocks is reduced by half, slowing down the creation of new BTC. This scarcity, coupled with increasing demand, historically leads to bull markets, creating a cyclical pattern every 4 years. Currently (2023) we would be in a pre-halving year, a period where people are slowly getting hyped again.
Any coin chart you see will most probably have massive pumps and steep declines, evidence of a high volatility environment.
One reason for this is because of whales.
This is a person or entity holding large amounts of a coin which allows them to influence market trends or let’s face it…manipulate it. They usually push the price above or below certain key levels retail investors are watching to force them to make mistakes (i.e. buy or sell in a rush).
Here’s what this looks like.
So if you can’t stomach those sharp changes, this is not the right place to be investing.
Watch what Bitcoin is doing
Whether we like it or not, Bitcoin is the king in the crypto space.
- Bitcoin holds more than 50% of the total cryptocurrency market capitalization.
- The BTC network has never shut down and no Bitcoin has ever been stolen from the blockchain.
- It’s the most decentralized network in the world.
And if you just ask Michael Saylor, he could go on for hours telling you why Bitcoin is above any other crypto.
Money tends to flow from BTC to ETH and then onto other smaller coins. As of now, most of the money is flowing into Bitcoin. You can see this in the Bitcoin dominance chart where BTC keeps increasing its percentage over crypto’s total market cap.
This dominance is expected to continue until next April when we get Bitcoin’s halving.
So how can you effectively track Bitcoin’s movements?
With Bollinger bands. This technical analysis tool consisting of a middle band (i.e. a simple moving average), and two outer bands (i.e. standard deviations away from the middle), has been a good indicator revealing when BTC is overbought and oversold.
When the price reaches or exceeds the upper band, consider it overbought. This suggests a potential reversal or pullback. And when the price falls below the lower band, consider it oversold. This indicates a potential upward correction.
A monthly close below the simple moving average (i.e. a 20-day moving average) suggests a buying opportunity. Let’s see what happens for November, following one of the most successful months of the year in October, marked by a rise of more than 28%.
Focus on Ethereum’s movement
One of the indicators to keep in mind is the ratio of ETH to BTC.
This ratio allows us to see the performance of Ethereum relative to Bitcoin in terms of market value, the strength of the altcoin market (vs Bitcoin dominance), and the market sentiment towards alts.
Currently, ETH is weak against BTC whether you look at the weekly or monthly ratio. It sits at around 0.05, a key level, and it’s squeezing to the downside. An ETH collapse is expected.
We’ve also seen that key figures in the ETH ecosystem, like the Ethereum Foundation, have sold large quantities of their ETH holdings. $30 million worth of ETH in May and recently almost $3 million.
If the bull market is here then ETH insiders wouldn’t be selling right?
And if it’s too soon to accumulate ETH, since insiders are selling, then it’s even more premature to start accumulating altcoins.
What about altcoins?
With high levels of leverage and very little liquidity, trading altcoins now seems like gambling.
It’s a high-risk endeavor with low rewards.
But once the bull market begins, expect high rewards (although not lower risk, I’m afraid). When the ETH ratio against BTC starts gaining momentum, you’ll know that money is rotating from BTC into ETH and eventually onto altcoins.
With this movement comes the retail investor party. While crypto whales tend to stick to BTC, ETH, and larger altcoins, retail investors tend to go into more obscure altcoins.
This is where you can make the most gains but only if you know what you’re doing. Otherwise expect rug pulls, extreme volatility, and any type of scam that will melt your nerves.
A usual mistake crypto investors make is to invest in coins with low price tags regardless of their market cap. This is like investing in a stock that has a low share price but lacks a substantial market cap, potentially overlooking the company’s overall value and growth prospects.
By looking at the market cap, you can determine how much a coin can pump (percentage-wise). A higher market cap generally suggests a larger and more established crypto. As those usually have greater liquidity and stability, they’re less likely to have explosive price movements compared to smaller, low-cap coins.
So which coins could you invest in?
Here’s how to find them:
- Go to CoinMarketCap, set a filter for the market cap, and find an altcoin that meets your risk tolerance. Low market cap: under $100 million (high risk) Medium market cap: between $100 million and $1 billion (moderate risk) High market cap: over $1 billion (lower risk, but it’s still a risky market!)
- Identify which of the cryptos with the lowest price tags have the smallest market cap.
- Assess the crypto’s tokenomics. Ideally, the coin has a supply that is mostly in circulation and evenly distributed. See also if there’s a clear utility for the token, a way to control its inflation, and issuance schedule, among other indicators. A strong tokenomics model should promote ecosystem growth, provide value to token holders, and maintain economic sustainability.
- Do some basic research about the project. Are the goals and benefits easy to understand? Is the community large relative to the crypto’s market cap? Is the coin part of the ecosystem of a larger and better-known project? Answering “yes” to these will set you on the right path.
Price increase
Consider potential catalysts for an increase in the project’s price.
One of the main catalysts is for the project to be listed in a major exchange, particularly a U.S. crypto exchange. This increases visibility and accessibility, attracting more traders and investors. Usually, coins pump for days or weeks after they list on larger exchanges.
Also, watch out for news about the project. Announcements of partnerships with established companies or collaborations within the industry can boost confidence in the coin’s potential and value.
And once the project has made a fair increase in market cap remember to take profits. You don’t have to sell everything, just a percentage you consider that will give you peace of mind.
And that’s it, good luck navigating the crypto space!
Note: this article is for entertainment purposes only and shouldn’t be considered financial advice.
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