Understanding Crypto - Bulls VS Bears
It is a jungle out there in the exchanges, filled with bulls and bears. A bull is someone who thinks that the prices are going to go up, while the bear thinks that they will drop. It is not always a personality trait, as someone can feel “bullish” about one prospect and “bearish” about another. And it doesn’t mean that the “bear” would be in any way weaker just because he is more pessimistic - there are many smart plays one can do if he thinks the price is going to go down. The only difference is how they attack. A bull swings his head up, throwing the opponent in the air, while the bear swats from high up, striking everyone down.
If a country suffers some disaster, the whole market will become bearish with everyone expecting that the companies will do poorly in the next quarter. So everyone is selling their stocks and trying to close positions. It is a real bear market out there and even those who feel more optimistic about the long term prospects tend to sell all they have now and plan to reenter later.
The crypto market is even more volatile and unpredictable - it is way harder to predict what the future will be like. Sure, it is clear that a company in the way of a hurricane will be devastated, but what about a coin that is not tied to any real life asset, country or industry? Something so independent no single thing can impact it? What to do when the market moves on its own? In this article we will look at the possible plays in both markets.
Everyone is in a permanent buzz. Articles on the internet are constantly publishing new high numbers and people are already imagining their lives in mansions. Everyone is a winner right now. And under all that euphoria is a simple fact - there will be someone who will sell at the peak and someone who will buy at the peak. And the one who bought at the peak will lose hard.
Remember, bull markets do exhaust themselves. Contrary to the popular belief that is always present during a bull run, the price of a coin can actually go down. An obvious truth that is so often forgotten. There is temptation to believe those who say that the price will climb forever and you’ve basically found the infinite money cheat code. That can happen even if you think that you’re thinking rationally. You have already bought on the rise and maybe you think that the inflated price you bought it for is the real, base price.
So always have some sort of an exit strategy. There are too many stars in everyone’s eyes and they seem to have forgotten the times when 15% return was a good deal. Now everyone considers a 300% return to be insufficient, because “that one guy earned way more.”. Don’t fall for this faulty way of thinking. It can only lead to unfulfilled expectations. Are your profits already up 300%? Isn’t that good enough? Wouldn’t you cash out in any other situation?
So do not be afraid to take profits. There is no such a thing as “waiting for the peak”, the peak exists only in historical graphs, not when you are actually trading. You can’t predict it. So now take a look at your portfolio. Do you like the profits? Then take them. Anything else might be just your greed talking.
Sure, you need to be calm in all situations. Calm in a bull market and even more so in a bear market. But in a bull market you need to let the market do its own thing. You place your bets and then follow through.
Some people see another coin or token having a 20% climb in a day and they jump to that, selling all their positions in one coin and then transferring the funds to another, just to see another coin jump the next day. This is needless chasing, just making you jump the fence where the ticker is greener. Constantly. While you jump in thinking that the coin has started its growth, the players who have owned the coin for a long time and actually know what is going on understand that it is peaking now, so they leave. So you jump from a market you have followed to a new market you know little about and have decided to join only after everyone else has already joined. So sit still and see how your bets play out.
“But I have more money, so I could stay in that position and buy other coins too!” And this is the biggest mistake to be made. Never invest more than you have planned to invest. The market is unpredictable and maybe you are joining in the last possible moment, you can never know. So use only that amount of money you have previously set aside.
It is a disorganized chaos. One person can decide that they want to exit the market now. Maybe they are jumping to another coin. Maybe they are in dire need of money. Maybe, just maybe, they are actually a smart and calm person who has decided not to wait for some imaginary numbers and is just satisfied with the profit they already have. So they sell and leave.
At the same time other people have decided to set the sell order to sell if the price drops to a certain point. So the aforementioned person exits the market, the price falls, triggers the sell orders and the price falls even more. Some folks who were really nervous since the start panic sell their own stocks, turning a snowflake in an avalanche. But in reality? Nothing had happened at all to the coin or the sentiment of the user base.
That is a “bear trap”. It means that those who are waiting for the bull run to end imagine that it is happening and start selling everything they have. While in all actuality 90% of the community are still optimistic and many won’t even notice this drop, as they have done the smart thing, set their orders and turned off the computer. So be careful, not everything is a red light. Not everyone who sells is some sort of a mastermind who knows something you don’t know.
The same sentiment that drives the market forward can be the one that halts it. So everything that has been said about bull markets applies here as well - be calm, don’t panic, set your sale orders. But there are a few specific things more applicable to bear markets.
Exit the markets that you entered because of a hype surrounding them. Many people buy tokens because they think that the price will rocket, but when it doesn’t, they refuse to take the loss and convince themselves that they actually bought it because they like the project. Be careful, as it is very easy to get sucked in the hype. Remember the game you were playing when you bought the coin. You risked to get profits and the gamble did not pay out. Take the loss and leave the coin for those people who are still convincing themselves that they joined for different reasons.
Instead look for projects with real technology behind them. Look for projects that do not have Facebook or Telegram groups talking only about how the most important part of the project is the chance to be rich. If the community and the owners of the project are stressing just the ability to make a quick buck, remember that it only works in bullish markets. In a bearish market you need something more stable, something based on a real thing.
So you have sold many of your most volatile coins, thus you have a considerable sum of cash in your pocket. And it might be a new feeling, as you have always been on the lookout for the next best thing to invest in during the bull run. It might feel strange to leave cash in your pocket, because sleeping money doesn’t make money. Now you need to consider that maybe not playing is the best play right now. Fight the urge to reenter the market on something else just to be able to check that ticker every day. To find that one smart coin that will go up against all odds.
It is ok to hold cash for a while and not enter a market. It is not a smart trader in the market who can always make a sale. The smart trader knows when not selling is the smartest option. Just like that, you should not always participate. Sometimes you can just wait it out a little. Sure, keep looking for the best projects and keep looking for something that catches your eye. Just remember that there is nothing wrong with not playing a game you feel you’ll lose.
But if you have bought a coin because you believe in it, keep it. Sure, someone has tweeted something, the value of Bitcoin fell and everyone in the crypto world got scared. Does that change the initial investment? Does that change your own chosen projects? Markets recover, they always do. So be patient with our money and be patient with your assets.
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