Crypto Investing Guide: How to Master the Four Stages of a Bull Market

Author: Edgy - The DeFi Edge, well-known overseas researcher Source: X, @thedefiedge Translation: Shan Ouba, Golden Finance

< p>We are nearing the end of phase one. Here's how to navigate market cycles so you don't miss your best opportunity to create generational wealth.

Here is your manual:

1. Traverse every stage of the bull market

2. Maximize your profits

3. < p style="text-align: left;">Avoid the most common pitfalls

The first stage: accumulation period

We are in this phase now and have been for about a year. After the Terra crash, FTX crash, and USDC de-anchoring panic, the market bottomed out.

(Be sure to bookmark this article. When the bull market comes, you can use it as a reference guide. I wrote this article for myself, And put it on the wall as a reminder.)

The worst is over (unless Binance/Tether screws up).

Market price performance is dull and volatile. Even big news like Paypal launching a stablecoin barely affects the price. Currently, no new liquidity is entering the system. There is no volatility. Just 500 crazy retail investors competing against each other, trying to be the first to get to the next crazy narrative.

This is the preparation stage. Start placing pieces on the board in preparation for your big move. Sow now and reap during the bull market.

Action plan:

• Accumulate quality projects. Look for projects that you think will thrive in the upcoming bull market. These projects have product/market fit, competitive advantages, teams still in the building phase, solid roadmaps, and solid financial metrics.

• Save some ammo. It is tempting to blindly invest in many old projects. They look cheap because they are down 90% from their all-time highs. But here’s the thing…most of the best-performing projects in the next cycle haven’t emerged yet. People prefer to "get a head start" on something brand new rather than buy older items.

• Don’t overtrade. Don’t lose everything out of boredom and get caught up in hamster races and bald exchanges. You must survive before you can win. Don't play bad poker out of boredom and wait for good cards to come along.

• Fill the gaps in your knowledge. A bull market is not a time for learning. A bull market is when money is picked up from the ground. Now is the time to learn. You don’t want to hear about new protocols built on top of GMX, but you have to spend a week during the bull market to catch up on the basics of GMX.

• Monitor liquidity. Watch for money flowing into exchanges. Pay attention to the deployment of stablecoins. Watch for the growth of DeFi TVL. Watch for the growth in total market capitalization of the entire cryptocurrency market. More liquidity means things are changing.

Second stage: Early bull market

Price begins up, and the bears will be in disbelief. Capo pops up every two months to talk about the impending $12,000 Bitcoin.

What gets people into trouble? That's doubt. Their bear market hangover prevents you from profiting. Ironically, you are early in the cycle and should be more adventurous and aggressive before the crowds come in.

What factors may trigger a bull market?

• Major events: such as BTC or ETH ETFs being approved, or new countries adopting BTC as legal tender.

• Bitcoin Halving: 2024 will usher in the Bitcoin halving. Of course, the past is no guarantee of the future. But if enough people believe in it, then...

• New technology: The last cycle was that DeFi and NFT were hot . What will be popular in the next cycle? GambleFi? Telegram bot? Are NFTs coming back? GameFi? RWA? It is very likely that some fields that we have not yet begun to imagine will suddenly become popular. Think Axie Infinity or Stepn, but with better mechanics.

• Macro changes: The Federal Reserve turned around and stopped raising interest rates. This could allow more liquidity to enter the market.

• Regulatory changes: The United States and other countries may provide a more transparent and user-friendly cryptocurrency framework.

• Lower the barrier to entry: It is still troublesome for ordinary people to enter the cryptocurrency field. Better wallets, account abstractions, and more beginner-friendly dapps will help.

• Power from the East: Cryptocurrency Twitter is heavily biased toward the United States. This is why most CTs cannot understand why Tron is so popular (it is widely used in Asia). Don’t underestimate the power of Korean retail investors and Hong Kong’s trend to become more crypto-friendly.

It only takes one major event to trigger a domino effect, and a few crazy retail investors start to earn life-changing wealth. They upgrade their lifestyle and tell everyone about it. The sentiment then slowly spread to their networks.

Action plan:

1. Stop losses and add to profitable items: Don't be emotional and hold on to losing assets. Just because a project has grown 5x doesn’t mean it can’t grow 10x. Pay attention to project metrics, momentum, and market sentiment. Be ruthless in cutting off loss-making projects.

2. Profit appropriately during the rise:  No one can buy at the highest point perfectly. Don’t try to squeeze every last drop of money out of every deal. Establish a take-profit system and strictly adhere to it.

3. Beware of Overtaking Risk:  This is where people start using leverage, dipping into home equity/retirement account, or sell BTC/ETH when chasing junk coins. You can take some risks, but don't rush in blindly.

4. Lower your IQ: Some of the best performing projects may have the worst Fundamentals. Token economics can be a mess. But remember: the price will only go up if other people buy. And people are too stupid to understand those highly intelligent operations. Don't buck the trend.

5. Cult Leader:  This is where cult leaders begin to gain power. They know how to pump up token prices and sway sentiment. Eventually, it seems, the cult leaders all fall. You can choose to ride the wave early and profit before the crash, or avoid them entirely.

6. Don’t ignore retail investors: It’s easy to fall into the crypto Twitter DeFi echo chamber where people There’s mutual touting of the “real flywheel effect of yield curve battles.” Retail investors don’t understand these things at all. Go where they hang out, like Reddit and YouTube comment sections.

7. Focus: Select a few areas for in-depth research. It’s impossible to keep up with the entire market. It's okay to miss some opportunities, but don't get in too late and become the receiver. Build your team now and cover your blind spots.

The third stage: the top of the bull market

Retail users The influx began. They think it's stage 3 of stage 4 (in their heads, they think it's stage 2 of stage 5).

The bull market is self-reinforcing. This can trigger panic buying (FOMO) as prices rise. It’s a positive feedback loop that keeps pushing prices higher.

Everything goes up. $10,000 in junk coins can turn into life-changing gains. You can even get a haircut or take an Uber without hearing cryptocurrency being discussed.

FOMO and euphoria started to set in. It feels like the party will never end and all common sense goes out the window.

People started quitting their jobs and becoming full-time cryptocurrency traders. Some people even sold their homes to invest in cryptocurrencies.

Everyone was happily immersed in it.

Can you spot the top signal?

• Mainstream media are beginning to cover cryptocurrencies. You’ll hear stories over and over about people trying to find their hard drive with 8,000 Bitcoins stored on them, or buying 2 pizzas for 10,000 Bitcoins.

• Financial YouTubers like MeetKevin, Max Maher, and Graham Stephen upload more than 3 cryptocurrency videos every day.

• Mainstream brands like Pepsi-Cola and McDonald's will begin to use cryptocurrencies to increase their influence. Mainstream celebrities have tried to cash in on this by sponsoring or launching their own collections of NFTs.

• Everyone is showing off. The timeline is full of showing off content such as Rolex Submariner watches and new cars. When there’s too much showboating on your Twitter timeline, your alertness should be heightened.

Everyone will try to convince you that this time is different. You have to fight your instincts.

The most important thing at this stage is to consider your exit plan. Stay calm and realize the party won't last forever.

Remove some chips from the market. Your future self will pray that you are not a fool. If you don't make a profit, the market will make you lose everything.

The fourth stage: callback period

"The extremes of things must reverse" - the end of the peak of the bull market will come. Now, everyone is speculating whether this is a true peak or whether it will turn into a "supercycle."

They will tell you that this time is different - we have finally entered the mainstream! Be wary of “super cycle” talk, Bitcoin extension theories, or those fanciful charts. The cycle doesn’t last for a few more years!

Remember, everyone has a financial incentive to keep the party going. They need to fund sponsors to keep their audience engaged, and they have to get more liquidity into the spamcoin market.

There will also be a brief moment of light and hope. Bitcoin peaked in November 2021. But then there were still a series of events, such as the OHM fork, FTM/Solidly and Luna.

As soon as prices plummet, Capo appears, shouting "I told you so," even though he missed out on the two-year bull market and creation generation Opportunities for wealth.

Why am I so confident about the next bull market?

I am betting my career and the next ten years of my life on decentralized finance (DeFi). I have absolute confidence in this field.

Let me put it simply, life for the average person fucking sucks and it’s getting worse.

• Credit card debt hits record high

• Everyone's debt is at an all-time high

• Student loan repayments are about to begin< /p>

• Credit card interest rates hit record high

• Debt interest payments hit a record high

• The average monthly payment for new cars hit a record high

• Forget about housing prices

Society and culture put everyone’s Life has become super hard mode. Going to college and getting a job is no longer enough to survive and own your own home. The cost of living is rising and the middle class is disappearing.

While all of this is happening, society's pressure to succeed continues to increase.

No one in this new generation wants to throw all their money into a 401k plan and be rich at 65 (I say this as a Bogliologist).

They want to get rich now. Everyone wants instant gratification. Everyone’s brain reward system is worn out. Everyone is under pressure to show off their lavish lifestyle and show everyone that they are the star.

Basically speaking... humans are greedy and they want to achieve 100 times the profit.

Cryptocurrency isn’t just selling a new financial infrastructure, it’s selling a dream. And cryptocurrency is the fastest way for people to realize their dreams.

Cryptocurrency is our best opportunity to create wealth rather than compromise just to survive.