Bull Market "Survival Guide": While Others "Always Profit," How Should I Keep Up?

Author: Day, Baihua Blockchain

Recently, the overall market performance has been good, with Bitcoin breaking through $42,000 and Ethereum surpassing $2,200. Not long ago, various screenshots of people getting rich could be seen in the community every day, which easily leads to FOMO, resulting in impulsive actions, and ultimately realizing that one might still be at a loss overall, let alone outperforming Bitcoin or Ethereum.

As an old investor with over six years in the market, having fully experienced a round of bull and bear markets, I would like to summarize some survival tips for the bull market for everyone. Even if it is of little use to you, it still counts as the value of this article. After all, knowing and doing are not the same thing; some truths, if not experienced firsthand, will feel irrelevant no matter how many times you hear them. Moreover, when individuals are swept up by public sentiment, very few can remain rational.

01 Only a Few Make Money in a Bull Market

A bull market is a relative concept, referring to a situation where cryptocurrency prices continue to rise in the cryptocurrency market. In this market environment, investors generally feel optimistic about the prospects of cryptocurrencies, believing that their value will continue to grow.

Why do cryptocurrency prices rise? When buying pressure exceeds selling pressure, prices naturally go up. Regardless of any favorable news or technical support, it ultimately boils down to an increase in incoming funds. The bull market in 2017 was due to a surge in the number of participants in the industry, while around 2020, it was driven by a large influx of institutions and central bank liquidity. The current view in the crypto industry is that bull and bear cycles occur every four years, and this rule has not yet been broken. As for what will drive the next market surge, it remains unclear.

Do we need a survival guide for a bull market? Shouldn't we be picking up money everywhere? It seems that when a bull market arrives, everyone is making money. People love to look back at past bull markets and feel they missed out on too much, but when actually experiencing it, there is often not much to seize. What you see is always a few people celebrating; a bull market merely raises that base a bit.

When the market is good, there is really no logic to it; as long as a sector is booming, any related concept or anything that can ride the wave will take off. In such a market, it is inevitable to become restless; earning less makes one restless, being in cash makes one restless, and losing money makes one even more restless. Once restless, it becomes easy to lose even more money. When the market enters a deep bear phase, people usually do not take big risks, but often end up losing a lot of money in the so-called bull market. Remember, Luna and FTX collapsed at the tail end of a bull market.

02 How to Prevent "Getting Your Legs Broken" in a Bull Market

The blockchain industry has developed to the point where there are more and more concepts and sectors, and the barriers to entry are getting higher, making it increasingly unfriendly for the vast majority of retail investors.

Here are a few points to pay attention to in order to prevent getting your legs broken:

1) New Narratives

Every major market cycle gives birth to several new narratives, such as the digital gold concept in 2013, the blockchain application concept explosion in 2017, and the DeFi boom around 2020 that subsequently influenced Ethereum's main ecological application sectors, like DeFi, NFT, and metaverse games. Following that, new public chains began to replicate the Ethereum ecosystem, all narratives revolving around Ethereum. So, what potential main lines might emerge next? Currently, observing the Bitcoin ecosystem seems very promising.

The crypto industry has always been "fond of the new and tired of the old." In the upcoming market, new narratives will be more favored than old ones. Currently, innovation usually starts on-chain. Some of the newer narratives emerging in this cycle include the Bitcoin ecosystem, Layer 2, LSD, account abstraction, robots, AI, and decentralized social networks; feel free to add more.

2) Consensus and Open Mindset are Important

For any concept to break out, it must have consensus; only then will people be motivated to understand it. From Bitcoin to Ethereum, and then to the last round of NFTs and blockchain games. Although everyone says technology is important, without value capture, it might as well be ignored; once there is a price, people will assign it value. Therefore, the most important thing regarding new narratives is to understand them, regardless of how many people criticize or oppose them; always stay informed and maintain an open attitude in this industry.

3) Leaders

How to determine which is the leader in a sector? The simplest and most straightforward way is to look at market capitalization; the one with the highest market cap is the leader. Generally, leaders have pioneering significance and high premium potential, often exhibiting a "stronger gets stronger" phenomenon. Innovative projects naturally carry higher risks and are also very energy-consuming. However, some sectors may not have a clear leader, like the metaverse concepts SAND and MANA, and leadership can also change, as seen in NFTs evolving from CryptoPunk to BAYC.

4) Movements of Top Institutions

Although top institutions are often suspected of "manipulating the market," and projects they handle can easily become giants, leading to retail investors missing out on profits, the influence of top institutions on the industry is comprehensive. It is still necessary to pay attention to their movements and attitudes towards new things, as they are at the top of the food chain and have a relatively accurate grasp of the industry. Here are a few examples: leading platforms, A16Z, Paradigm, etc.

03 Avoiding Common Pitfalls

While the market is good and profits become easier, human nature remains; those who have lost want to break even, and those who have gained want to earn more. Especially when seeing others make money, it is easy to develop FOMO emotions, leading to impulsive decisions that can result in significant losses. Here are four common pitfalls:

1) Leveraged Contracts

Many newcomers have heard not to touch leveraged contracts, but under the prevailing market conditions, platforms keep pushing them. Playing is not the worst part; if you're inexperienced, losing once will quickly teach you a lesson. What’s scary is if you manage to make a profit at the start, like a game giving you a taste of success, you might think you’re capable, and then get completely trapped. Others are aiming to make money in a bull market, while you are just trying to recover losses. Can you profit from contracts? Of course, but very few can consistently make a living from it; those who truly achieve freedom through contracts are extremely rare.

2) Betting Everything Recklessly

Don’t think about making enough in one go; that’s too difficult. In this industry, the most important thing is to have your capital and still be at the table. Don’t wait until the real opportunity arrives, only to find you can’t put down a single chip. Additionally, learn to respect the market; events like 3/12 and 5/19 were truly devastating, and many professionals felt the industry was over after 3/12.

3) Frequent Trading

When the entire market heats up, individuals can easily be swept up by market sentiment, feeling restless when earning less, restless when holding cash, and even more restless when losing money. You might wonder why only your purchases aren’t rising, leading to frequent chasing of highs and switching positions. In the end, you’ll find it’s better to just hold onto one position.

Always remember, when a bull market arrives, as long as the project team doesn’t run away, it generally will rise. When emotions take over, the quality of the project becomes less important. You must be patient, patient, and again patient.

4) Following the Crowd

Many people like to buy in by following the crowd; while this isn’t the biggest issue, the biggest problem is not knowing what you’re actually buying. If you’re unclear about the project’s mechanism and specific rules, it’s easy to get burned, like with Luna; when the stablecoin began to de-peg, if you truly understood its mechanism, you wouldn’t have continued to add to your position after the de-pegging.

These are some common mistakes made during a bull market; feel free to add or share the pitfalls you’ve encountered.

04 Conclusion

Regarding position allocation and when to exit, since everyone’s personal situation and background differ, I won’t elaborate here. Finding a method that suits you is the most important. Additionally, don’t easily believe those statements that create FOMO, such as "if you miss this market, you’ll never have another chance," and maintain independent thinking. This industry is still the same as it once was; some fundamental aspects have never changed.