The Upcoming Crypto Mania and How I Plan to Navigate it

This is a special addition to Quantify Crypto,  Brett is a cryptocurrency investor with a good trading plan.   "Having an investment plan that takes profits and reduces risk" is item #6 on the Quantify Crypto list of best trading practices.   https://quantifycrypto.com/info/trading-tips    I feel this is an excellent example of an investment plan, and a special thank you to Brett for this quality and timely article on our website. -  J. Barry  CEO Quantify Crypto.

When to Sell Your Crypto

by Brett D. Zinner, Esq.

I should start by saying that Holding on to your bitcoin for Dear Life (‘HODL’ing) is a perfectly wise and acceptable strategy.  I have zero doubt that 1 BTC will be worth over $1,000,000 by 2030.  But bitcoin has suffered horrific crashes and long bear markets immediately following its peak in both of its prior 4-year cycles.  More specifically, as soon as bitcoin reached its cycle peak, it: a) crashed 57-65% in 2-6 weeks; b) entered a 12-14 month bear market declining 85%; and c) took over 3 years to recover to its prior high (see tables below).  You can HODL if you want to, but I’m betting I can do way better than holding through that misery. 

Don’t run for the hills just yet.  Here’s the exciting part…   the 4^th quarter of the fourth year of bitcoin’s four-year cycle (i.e. where we are right now), is the most parabolic.   In Q4 2017, Bitcoin ripped from $4,000 to $19,400 (a 4.8x).  In Q4 2013, bitcoin pumped from $124 to $1,240 (a 10x) (table below).  If history rhymes, bitcoin is about to go parabolic again this Q4.   And then bitcoin is going to crash. 

But who’s to say this pattern will play out again?  In fact, many crypto gurus are predicting a ‘super-cycle’ where BTC breaks free of the four-year cycle, and we stop seeing these steep crashes and long bear markets, in favor of shorter, less volatile ‘micro-cycles.’  While I believe this will ultimately be the case, I heard the same thing back in 2017 -- “this year’s different” they cried – and that didn’t pan out.  The four-year cycle isn’t random.  It’s tied to a ‘halving’ event embedded in bitcoin’s code, occurring approximately every four years, that affects the supply of bitcoin (more precisely, it reduces the rewards miners get by 50%).  So, as far as I’m concerned, until the four-year cycle is invalidated, that’s exactly what’s going to happen again.

But this year is different.  Between institutional interest, exponential adoption, ETF approval, inflation, money printing, etc., this year is nothing like 2017.  Yet I’m still expecting a ‘blow off top’ (meaning parabolic rise followed by a steep immediate crash) because there are two factors that haven’t changed at all -- human emotion and ‘whale’ manipulation.   Retail FOMO is about to kick into high gear (with an extra boost from institutional money) sending us parabolic.  But the bitcoin whales will be lying in wait with their mouths wide open, ready to coordinate a gigantic swallow, sending the ‘newbs’ into a frenzy, turning euphoria into panic.  When there’s enough money on the table, the whales will gulp it down.  They are the ‘big stack’ at the poker table, not institutional money.  ‘New money’ is ‘scared money’.  It takes time -- perhaps up to a full cycle depending on entry point -- until investors are sitting in enough profit that they have the conviction to HODL, or better yet, ‘buy the dip’. 

So how do you know when to sell?  Well, my personal exit strategy -- not just for bitcoin, but for the altcoins too – is based around what I think bitcoin’s peak price will be this cycle.  My goal here is to share some relevant info and my thoughts, so you can form your own strategy.  To be clear, I am not a financial advisor, this is not financial advice, I do not have a crystal ball, and my predictions are based mainly on my gut.  So don’t pitchfork me if I’m wrong.   I should also note that every sale or swap of crypto is a taxable event, so don’t forget to set money aside for the tax man.

To provide context, there are generally two schools of thought amongst highly influential social media accounts when it comes to predicting bitcoin’s cycle peak price.  One camp is calling for a $100k top, and the other is calling for a $250-350k top.  Sure, some are calling for in between, but none are calling for less than ~$100k (that would be a cycle for ANTS).

My best guess is that bitcoin peaks at around $125,000-$130,000 at the end of December or January.  Consider that BTC’s December 2017 top was 16x higher than the 2013 top ($19k vs. $1.2k).  The December 2013 top was 42x higher than the December 2011 top.  While bitcoin data from 2011 is analytically unreliable, suffice it to say that each cycle reflects diminishing returns.  My prediction is a mere 6.5x from the 2017 top. 

If the prospect of bitcoin only doing a 2x from here isn’t exciting enough for you, I see the entire crypto market cap doing a 4x from here to ~$10 Trillion, thanks to the altcoins.  Altcoins significantly outpace bitcoin in every bull run, as reflected by decreasing ‘bitcoin dominance’ (i.e. bitcoin’s total market cap measured as a percentage of the entire crypto market cap).   But they get completely crushed in the bear market, even worse than bitcoin’s 85% depreciation, so ‘buyer beware.’   

So given my price prediction, what’s my exit strategy?  I’d be foolish to wait ‘til $120k to sell everything because what if $100k is the peak?  And I don’t want to sell too early and miss out on massive gains.  So, for what it’s worth, here’s my current exit strategy:

1. Sell 33% of my coins when BTC is $75-85k (subject to the clarification* below). This may seem low given my bullish conviction, but selling early is way better than selling late – trust me.  As confident as I am, there’s always a risk of a stock market crash or Covid-type event that could jam us up.  (If I had a small account, I might skip this step and ‘let it ride’.) 

2. When BTC is $95-100k, I want to be 50% out of the market (meaning I will have sold half of the number of coins that I presently have in each position). I’m just not scared of a long bear market if we don’t reach these levels, as I don’t see BTC ever going below $40k again; the support there is too strong now.  Institutional money and billionaires now realize bitcoin isn’t going away, and almost all of them have to first ‘get off zero’.

3. I plan to be 75-80% out of the market by the time BTC is ~$125k, my expected top.

4. Sell the balance sparingly, if at all, in case BTC ‘moons.’ There’s too much risk in having zero exposure to bitcoin, and I can’t be completely sidelined if bitcoin shocks me and rips to $300k. 

*I should clarify that altcoins represent the majority of my portfolio, and my exit strategy applies to my altcoins as well.  However, it’s critical to understand that, in a bull run, bitcoin and the altcoins generally take turns pumping.  So if bitcoin rips straight to $80k, I’d sell 33% of my bitcoin then, but I’d wait a couple of weeks to sell 33% of my altcoins, expecting bitcoin to range (sideways) while the altcoins have their turn to shine.  In keeping with this pattern, the most parabolic ‘altseason’ of each cycle occurs in the 2-3 weeks after bitcoin hits its cycle peak.  It’s super nerve-racking at this time, but the gains are truly euphoric.  

So that’s my plan for now, but it’s not etched in stone.  There are several market top indicators I’ll be watching to get a better sense of when the top is in, including Relative Strength Index, Bitcoin Dominance, Pi Cycle, Fear & Greed Index, and ‘on-chain’ data such as when the whales are transferring their coins from cold storage back to the exchanges in anticipation of selling. 

The goal should be to leave this cycle with enough profit that you are comfortable loading up near the next cycle bottom. Huge profits can be made selling near the top, but buying near the bottom is where life-changing wealth is made.  If all goes well, I plan to re-establish my positions next year and HODL for years because then, the only ‘predictable’ next cycle peak will be years away.  And who knows… perhaps next cycle will be the super-cycle!

Quantify Crypto provides real time technical analysis to support your trading decisions. We have the fastest live price feed of all cryptocurrency informational platform. Our proprietary trend algorithm calculates the predicted direction of future price moves. It is specifically tailored for the cryptocurrency market. Our state-of-the-art displays are designed to provide maximum amount of significant data on a single screen.

None of this is meant to be financial advice and I do not have any financial expertise. 

Full discloser: I do own Bitcoin and other Altcoins.