6 ways to avoid costly mistakes in a crypto bull market
Create an investment strategy and stick to it instead of trading emotionally and taking unnecessary risks.
We’re about two and a half months out from the fourth Bitcoin halving. Historically, Bitcoin halvings have preceded full-on crypto bull markets.
This means that you may soon begin to feel the euphoria that comes with rising crypto prices, and, as a result, your judgment may skew, causing you to make costly trading mistakes.
The good news is that you can avoid making these mistakes if you create a strategy and stick to it instead of letting your emotions override your rational thoughts once your brain becomes flooded with dopamine.
Here’s a list of ways to avoid certain investment and trading mistakes many in the crypto space make during bull markets:
1. Use reputable exchanges
Now that the crypto industry is starting to mature, there are a number of trustworthy crypto exchanges and apps you can choose from if you’re looking to invest in the asset class.
So, if you want to invest in an exotic new altcoin on an offshore exchange that doesn’t have the best reputation, consider 1.) whether you really need to invest in said altcoin and 2.) whether you have a non-custodial wallet in which you can store said altcoin after you purchase it.
The second point is particularly important, because while you may get away with buying a certain crypto asset from a less credible crypto platform, you increase your risk of losing your investment if the platform goes under while you’ve left the asset in its custody. The most well-known example is when FTX collapsed in 2022, and many investors lost access to the digital assets they left on the exchange.
2. Don’t trade with leverage
Crypto is an incredibly volatile asset class. Even a digital asset with a larger market cap, like solana (SOL), lost over 95% of its value from late 2021 to early 2023.
Because crypto is so volatile, trading it with leverage is particularly dangerous. Quick swings on the price of a crypto asset can liquidate your position almost instantly.
3. Invest in utility, not narratives
Let’s face it — if you’re looking to capitalize on narratives that will drive the next meme coin with a dog, cat or frog logo to the moon, you aren’t investing. You’re gambling.
When choosing which crypto assets to buy, think about the use cases for the asset in the real world. For example, bitcoin (BTC) has proven to be a store of value, and it’s slowly becoming a globally accepted medium of exchange.
Or you might invest in a token like helium (HNT) because you believe the Helium network — a wireless communications network that uses nodes as hotspots and rewards node runners with HNT tokens — has a genuine chance of success.
4. Take profits regularly
Even if you believe wholeheartedly in the crypto project in which you’re investing, no project is guaranteed to succeed. For this reason, it’s important to take profits as the prices of the assets you hold rise instead of just waiting to sell all your assets at a certain price point or holding forever.
Think about this like hitting a bunch of singles instead of just trying to hit a grand slam.
Plus, maybe you started investing in crypto to pay some debt like student loans or a mortgage. If this is the case, selling some bitcoin (BTC) or other crypto assets to free yourself of burdensome debt can be a liberating experience. Don’t lose sight of that.
5. Trust your gut and take breaks
Crypto bull markets can be quite fatiguing. As they wear on you, you can lose touch with your initial strategy and gut feelings. If this happens or you outsource your trading or investment decisions to a crypto influencer, it’s probably time to take a break.
The secret to investing is to protect against downside risks and let the upside take care of itself. If you no longer trust your intuition and thoughts, you’ll likely start rationalizing losses to a point where you’ll give all your profits — and maybe more — back to the market.
6. Keep records of your trades
Remember that selling crypto is a taxable event, so keep good records of your trades. You might decide to use crypto tax software to calculate your taxes at the end of the year. However, this software cannot always pull the data you need from your centralized crypto exchange accounts and wallet addresses, so it’s important to have your own records to reference.
You may have to input some data into the software manually, which means you’ll want to record details like which assets you buy and sell, when you buy and sell them and the prices (denominated in the fiat currency in which you pay taxes) at which you buy and sell them.
Be grateful, not greedy
If you end up doing well as a crypto investor or trader, be grateful that your net worth has increased — not greedy or discontent because it didn’t increase by enough.
For example, maybe you choose to invest $1,000 in crypto in the coming weeks, and maybe that $1,000 turns into $5,000 by 2025. Take some profits and be happy that you now have some more cash instead of rolling your profits over into riskier and riskier bets because a 400% return on your investment wasn’t enough.
Take heed of the old Wall Street saying: Bulls make money. Bears make money. Pigs get slaughtered.
Stay away from becoming the latter, and you’ll reap the benefits of putting money into the crypto market toward the beginning of a bull run and taking profits throughout it.
Frank Corva is a writer and analyst for digital assets at Finder.com. As someone who’s lived and traveled all over the globe, he loves the idea of the world being connected by Bitcoin (BTC) — a neutral, apolitical, secure and borderless network and digital currency.
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