This article is a collection of the some of the most important concepts that you should be aware of in Cryptocurrency Markets. The article aims to list these concepts and provide a top level overview of what they are and why each of these concepts is important. These concepts are applicable to other markets too, but they’re essential to be aware of as a new or existing crypto investor.
#11 — Timing is important, but not everything
Entering the market at the perfect time is virtually impossible, however, the importance of timing the market is relative to your strategy. Some trading strategies are more dependent on time than others while accumulation strategies, such as DCA (Dollar Cost Averaging) are completely agnostic to market timing.
#10— Picking a strategy (that works for you)
Entering the market without a strategy is like showing up to a race without a steering wheel. If the track is a smooth, straight line with no obstacles, you might actually make it, but that is never the case. So pick a strategy and choose how and when you enter and exit the market. On top of this, you need to figure out a strategy that you can easily fit into your life. Trading on 5 minute candles is probably more than what most people who are not professional day trades can take on. Or you could automate your strategy with a trading algorithm like AESIR.
#9— A strategy without consistency is just a random act
Without a consistent trading strategy, you’re placing random bets that yield random results. If you have an accumulation strategy like DCA or Buy The Dip, consistency is what separates a random result from a measurable one. For instance, if you were to invest $50 a week into ETH from 2019 until today, even in the middle of a bear market your investment would be 326% up. This is the result of being consistent. Of course, that doesn’t mean you can’t adjust your strategy or optimise it.
#8 — Understand market cycles
On a macro level, a market has two cycles — a Bull and a Bear market. In crypto, the lifespan of a bear market has historically been around 2 years, while a bull market has been observed to vary in length. Each of these two cycles can be broken down in subsequent cycles, each with a distinct macro trend.
For instance, a bear market may be divided further into 4 stages: Denial, Acceptance, Accumulation and Awakening. Similarly, a Bull Market may also be broken down in the following stages: Denial, Skepticism, Acceptance and Euphoria. The last stage of each of each market cycle is followed by the first stage of the next cycle.
#7 — Gain time and experience in the crypto market
Investing in a small amount in crypto, if nothing else, will serve as a good incentive to want to pay more attention to the current state of the crypto market. Experience beats financial advice. If you’re new to the crypto market, you picked a great time to join. Right now we’re in the middle of the bear market meaning prices are a lot lower than what we’ve seen this time last year. Many people are silently accumulating in anticipation of a new bull run.
#6 — Be aware of the Bitcoin Halving
This takes place approximately every 4 years and has been playing an important role driving the cryptocurrency market. Historically, the Bitcoin Halving has been a signal for a bear market. The next halving is expected to take place in early 2024, which is when a good amount of the crypto community expects the new bull market to start, after this long period of silent accumulation.
#5 — Do your own research
Leaving relatively safe assets like BTC and ETH aside, before investing into other altcoins, do your best to learn as much as you can about the organisation and the product, and identify any weaknesses that might come out during a bear market. Projects like Terra Luna, Lido Finance and even Crypto.com had massive flaws in one area of business that the bear market shone a light on. Understanding the weak points of the asset you’d like to invest in may save you money and trouble.
#4 — Be able to tell fact from FUD & FOMO
Similar to “do your own research” above, telling fact from FUD is the DYOR of crypto news. While there is a good amount of professional coverage over current crypto events, there is also a ton of FUD and FOMO. This is inevitable in situations where personal interest and finances are so closely tied in together and it’s no secret that bull markets have historically been fuelled by hype. How else could ShibaInu, SafeMoon and Dogecoin acquire considerable market cap with little to no utility?
- Bitcoin is Dead
- Crypto is dying
- This bear market is different
- X coin will skyrocket, find out why
- Top 10 coins that will 100x
- Top investments you should consider for meteoric gains.
#3— Hedge your bets
Continuing from the point above, sometimes there will be situation when a project fails or gets hit hard for reasons that were not at all obvious. In fact, I would go as far as say that no crypto-asset is immune to failure, but blue chip cryptocurrency such as BTC and ETH will provide a hedge against the high risk/ high reward nature of the wider crypto market. Ideally you would be hedging against the crypto market as a whole.
#2 — Understand the Market Cap
In principle, the higher the market cap of an asset, the more dominant that asset is in the market. Market cap has been seen as an important indicator of success in the crypto market, but it does not mean that high mcap assets are not prone to failure (just look at UST, LUNA, ETC, ICP and others). Market cap can be calculated by multiplying the price and the circulating supply. Another metric to consider is Fully Diluted Market Cap, which takes into account the maximum supply that a particular asset can reach, while Market Cap only considers the current supply.
# 1 — Know the tools available at your disposal
When it comes to buying and accumulating cryptocurrency, there is a whole universe of tools out there that you can use. If you don’t mind Centralised Exchanges (such as Binance, KuCoin, FTX etc.) they usually have a wide series of financial tools that you can use in order optimise your investments such as:
- Spot / Margin / Futures Trading (leveraged)
- Locked Staking
- Liquidity Provider
- Peer-2-peer trading
However, most exchanges are limited when it comes to algorithmic solutions of managing your trades and portfolio. For that, you can look Algorithmic Crypto Trading Platforms such as AESIR or 3Commas. These can help you create powerful trading logic meant to automate your existing strategies, or through testing, help you find new strategies.