Best Cryptocurrency Trading Strategies for A Bull Market
Crypto trading is as huge a hotcake as any other hot stock. Players from the average Joe to the richest individuals and institutions are clamoring for a piece of the action. The massive attention of late paints a very different picture than the nascent 2009 launch of Bitcoin, the first cryptocurrency.
It has switched from a geek’s part-time occupation to an all-around credible investment, attracting investors in droves. As people venture into crypto trading, terms like bull and bear markets pop up. One may wonder just what trading strategies to utilize, more so during a bull market. That’s where this article comes in handy.
Understanding Crypto Bull Market
Before one can even dive straight into the strategies to use, it is wise to get to terms with a crypto bull market. Crypto trading isn’t exactly like normal bourse trade. Like any other bull market, a crypto bull market is a period in trade characterized by strong price gains. The gains are expected to be 20% price increments or more from trough to peak.
The opposite of this is termed a bear market. The bull market period may be punctuated by slight price dips but without the effect of halting the overall price trajectory. However, the market situation’s causes differ from those of a normal stock exchange by quite a bit.
Depending on the cause, the price gains may be long and sustained or predicted to be a little shorter by market analysts. This plays a key role in determining what strategies to follow.
Strategies for a Long Bull Run Prediction
Market analysts have the role of making predictions on market movements with better accuracy than the average person. While all bull markets generally call for buying the dip and going for a crypto Hodl, the bull run’s predicted length may influence the specific strategy.
To hodl is basically to keep holding onto your crypto assets. A prediction of a long bull market run is usually based on strong incentives for continued price gains in the market. Causes could be major blockchain overhauls, sustained huge interests by large investors, and blockchain-specific events like the Bitcoin halving.
Below are some of the recommended strategies to follow in the event of a long-drawn-out bull market prediction.
Implementing a Systematic Investment Plan
A Systematic Investment Plan (SIP) is a widespread wise investment strategy associated with Bull markets. It involves making periodic investments of similar sums into the crypto asset of choice. This strategy helps avoid various common investment pitfalls associated with bull market investments. The first is a potential late entrance.
Pumping small predefined fixed amounts will mitigate a potentially huge loss if the bull market has already run its course and suddenly swings to a bear one. The second is a hodling for too long. Some investors may hodl for too extended a period that all their gains get wiped out.
Sticking to One’s Financial Plan
A wise investor always has a financial plan stipulating the allocation of scarce financial resources. The prediction of a long bull market is a delicious temptation to go all-in, but it may not be a sound idea.
While market analysts are usually right, they many times make predictions that fall short of reality. It is never good to see one’s investments lose value fast, especially if they are the bulk of one’s financial assets.
Keep Tabs with The Whales in The Market
A whale trader is either an Ultra-High Net Worth Individual (UHNWI) or a large institutional investor in a cryptocurrency. They are characterized by the huge liquidity they hold in the crypto they invest in. Whales move huge investment sums and influence market conditions by their actions.
Such players’ reactions regarding an ongoing bull run should be of key not to any investor. It is a wise strategy to always react to market conditions similar to the whales, for they may spell a continued bull market or its end. If they invest more or hodl, it is safe to continue with one’s investments. If they start making exits, it’s time to sell one’s cryptos.
Strategies for a Shorter Bull Run Prediction
A shorter bull may be because of various reasons that undermine the price gains’ strength and sustainability. The more common ones include a slight system upgrade by the parent blockchain during a bear market and an incentivized asset swap with a time frame. Trading strategies for such bull markets include;
Always Making Periodic Profit Withdrawals
A shorter bull market prediction tends to have more unpredictable conditions. It may suddenly swing to bear even before the predicted lasting period.
It is wise for investors always to make periodic profit withdrawals when trading here. The crypto’s price may suddenly swing down, wiping out one’s gains. Making periodic withdrawals leaves one with some gains.
Hedging Risks Using Crypto Derivatives
Due to the higher risk of shorter bull markets, utilizing crypto derivatives to hedge risks is wise. It is, however, advisable to always hedge risks, even with longer predicted bull runs. The process may reduce one’s profits since it acts as insurance against sudden loss from price dips. The step, however, serves to lessen the severity of losses when the dips do occur.
Since the predictions of a shorter bull run are based on higher possibilities of market dips, hedging risks is a perfect strategy here. But as stated earlier, it is wise to always hedge risks in all market situations. One may reduce the number of derivatives when the bull market is predictably strong and long.
Always Following Market Reactions
In such bull market conditions, it always pays to be vigilant and follow market trends. A weaker bull run leaves the market jittery, raising the possibility of a premature end in the price gains.
The saying to follow here is “the crowd is always right.” If the market starts dumping its holdings, it is wise to do so since such actions trigger price dips and gloomy cryptocurrency analysis.
Cryptos have proven to be a very sound investment venture and are here to stay. Knowing how to trade in them and eat one’s slice of the pie is a wise decision for any potential investor out there. Trading during a bull market when prices are making strong gains may not be as easy as it sounds.
The predicted length strongly influences the right strategy, hence the strength of the bull run. While all these strategies are tinkered to fit the prevailing conditions, the overlying formula is buying the dip and hodling. All the while, careful analysis of market trends is necessary.