How I Approach The Practice of Accumulating Crypto & Taking Profits

in LeoFinance7 months ago


I’ve always struggled with finding the best strategy for taking profits on Bitcoin and Crypto investments. With an asset that you believe in for the long-term (5-50 years+) and something that is extremely volatile, it can be a source of massive stress to watch the prices rise and fall and wonder what you should do about it.

When BTC goes from 5,000 to 10,000 in a matter of weeks, what do you do?

I think we all wrestle with the decision of when to sell. Let’s use the example of someone who bought in mid-march around $6k and is now looking at BTC at $10k.

While many investors would say take your profits, seasoned people in the crypto space know that BTC going from 6k - 10k could be a signal of the beginning of a massive run-up to $20k and maybe even beyond that point. Especially with the converging effects of the halving, the brrrrr activities and economic unrest.

What I’ve Done in the Past and How It Affects What I Do In the Present:

Our past is often the core indicator of our present and future. We use our prior experiences to try and better inform our present and future decision making.

For investments, it’s no different. When you’ve made mistakes or had successes in the past, they’ll often seep into your present day decision making and inform your strategy.

One of the greatest mistakes I made in investing was back in 2017-2018 when I had accumulated quite a sizable amount of crypto and then experienced the incredible bull run that brought BTC up to $20k and many of the alts along for the ride to the moon.

I saw my portfolio 10x and even 20x in some cases. It was a crazy time for me, as that was the first time I (and probably many others) experienced such a drastic rise in portfolio value in such a short period of time.

I started to take profits out of crypto as the prices rose to those amazing heights. What I consider to be a mistake is how I chose to handle the programmatic selling and subsequent programmatic rebuying of my crypto positions.

In hindsight, the smart investor in me should have known to set sell levels as limit orders on the way up and just sit tight on the way to the moon. Allowing my sells to fill slowly as the prices continued to rise higher and higher.

Then, I should’ve done the exact same thing on the way down. Set buy orders that accumulate the positions back slowly and methodically. Then sit tight.

Instead, I did what many investors do — I saw the price go up a lot one day, and I sold a big chunk of what I had. The next day, I did the same.

So on and so forth. I made a killer profit — as I said, 10x and even 20x on some of those positions — but I could have made a lot more had I been more patient and methodical.

The real mistake was on the flip side — when I started buying back in. I saw BTC and other alts drop 20-30% in price on a day and decided to take a huge chunk of my cash position and go back into crypto with it.

The next time it happened, I did the same thing. Buying back in with large chunks in the midst of a major correction.

The problem with that strategy is that a 2 year long bear market was just in its infant stage. I would enter those positions about 1+ year ahead of the lows and looking back on that time is painful. Of course, I was playing with house money as I had sold plenty of profits at the top and hedged into traditional assets and equities.

If I could get a magic do-over button, I would go back and set methodical buy orders and allow my cash position to slowly re-enter the market over the period of several months rather than FOMO back into crypto as the prices corrected rapidly.

How I’m Approaching The Crypto Market This Time Around:

I feel that I’m a bit more seasoned now in terms of approaching this “bull market" - I have a lot to learn and will surely kick myself 2 years from now over some decision that I made. Regardless, I am taking the lessons of the past and trying to follow a better strategy in the present. As we see BTC reach $10k today and (hopefully) $20k+ in the next 1-2 years post-halving, I am already setting my methodical sell levels after the last 2 years of accumulating BTC in a bear market.

All of these sells are massively in the money. The question that I’m attempting to answer — which is the age-old question for investors — is how much profit will I make? Will I cash out too soon? Will I leave enough of a bag to be meaningful in the long-run?

I am fortunate enough to have the ability to hold a long-term bag of cryptocurrencies and not have to worry about paying my living expenses with them in the short-term. It allows me to have a mindset of waiting several years for my eventual payoff, which is how I look at most of my investing practices — focused on the long-term and not on short-term gains.

Taking profits at methodical levels and then patiently buying back in at methodical levels is now the name of my game. I’ve already had a few sells hit on the way to $10k/BTC and now I have a few more orders up to $14,000 and will likely set some more on the way to $20k+

Obviously, these sells represent a tiny amount of the overall BTC that I own. The point of these sells is not to cash out but rather to take profits off the table. To alleviate some risk and open up the window of opportunity to potentially buy back in at a cheaper price should BTC fall back down to 8k, 7k, 6k, etc.

As this all cools down and we see BTC correct to the downside, I’m going to be methodical in my re-entry and follow a similar protocol — setting future buy orders at pre-determined price levels to accumulate more BTC.

I’ve accumulated much of the BTC that I want to have for the long-term. That's what truly matters. This practice is simply about staying active in the markets while implementing some risk-management habits. The vast majority of my crypto will sit and look pretty, untouched for the years to come.

How do you approach a bear/bull market? Do you buy/sell methodically, sporadically or ____?

Posted Using LeoFinance

Sort:  

I always tell myself I'm going to cost average and then I start gambling like a mad man just as you describe. It's a lot harder than one would think to perform the right action when you are in the heat of the moment.

Posted Using LeoFinance

Lol ... theory and practice :)

I know exactly what you mean.. in the moment it's hard to make a clear decision. I'm making it a point this time around to put in my sells and subsequent buys in ahead of time.

For example, having multiple BTC sells set on the way up before BTC even starts to rally. It's keeping me more honest, that's for sure

Posted Using LeoFinance

I’m not at all in the position to do what you do, but I’ve heard more traders talk about having a core position. Then they also have a larger trading position that they either dollar cost average or also do what you do.

On hive I find it much harder to do that, since the use of hive power has a compounding effect. If I take a big chunk out, then I need to take into account that on an exchange it won’t give me that steady flow of income from curation.

Do you trade with your hive position?

I think this can be done with any size portfolio. As long as you're mindful of fees (which can be low in crypto depending on how you approach it), I think it's smart to have some kind of plan to take profits/re-buy if the price drops.

I have a similar strategy on Hive that I do for most of my other investments -- I have a core position that I don't touch (this is my HIVE POWER that I use for curation activities) and then I also have a "non-core" position that I will trade relatively actively. Sometimes I even power it up temporarily and curate before initiating a power down to get it liquid again.

The Powered Up position is way bigger than the liquid position. I just like having a bit of a mix of the two to take advantage of things like the recent HIVE spike, for example.

Posted Using LeoFinance

Well that’s a good point indeed. I have just started trading on a small scale from my steem powerdown.

I think I’ll build up some liquid hive for trading purposes. Thanks for sharing.

The brrr..activities? https://brrr.money/

The market is just so emotional. As we get hyped we forget to ask ourselves: what happens after the halving event?Good news? Bad news?No news? How easy can future markets make the rise to "moon" collapse and cause a good known, but the so much in denial possible crash?
Right now it looks very good. I speculate to sell at a market cap of around $1 500 000 000 000. Let's say methodically and move over to the bears camp.
But of course acting emotionless/analytical and dynamically is what I'm learning.

haha

Extremely emotional. We are just inherently emotional creatures and even the best investors fall prey to their "human side".

We're all playing this game of investing and trying to act less emotional and more analytical, my current strategy of setting my orders ahead of the rallies/contractions is proving to be far better than what I was doing before (so far).

Posted Using LeoFinance

My feelings : 😅🥵😰

What do I do with all these feelings!?! Never a dull day in crypto 👨🏾‍💻

Posted Using LeoFinance

At least this time around, with DeFi, you don't have to exit to fiat and give up the chance to make solid risk-adjusted returns. I now maintain a few stablecoin stacks and have started doing some interesting things to monetize those stakes - namely via Opyn_ and Curve - while still, ostensibly, being "in cash."

Posted Using LeoFinance

Absolutely agree with you on that. I've been diving into DeFi more and more lately and have been pleasantly surprised at all the options.

Using stablecoins for quick in-out activities has been a great one. I haven't heard of Opyn_ and Curve.. will look into those.

Posted Using LeoFinance

You could have sold puts on ETH at 150 expiring May 29... and basically get free ETH.

Curve is amazing.

sounds like good strategy but you need to have a decent amount of coins for that.

It's a good strategy for me so far. I think it can be done at any scale - a "decent amount" can be very different relative to the individual. For me, I do this with a sizable amount of money but that is just peanuts to your average wall st. investor.

Posted Using LeoFinance

It's not about how much you can make, it's about how much you can lose...all this investment mantra to drive all your decisions...sounds like you are well on your way.

Very true. Risk management is so important, as we mentioned in today's LEO Roundtable :)

Posted Using LeoFinance

what is your end point?
getting more BTC and crypto or getting more Fiat?

Because that is in the end the most important question of all. For the moment I have some fiat and I have been buying BTC in little chuncks.

My biggest issue is that I do not feel I have enough BTC to make an existential change I see in the future that could really change my life for the better. So if I start trading my BTC and selling at 10 and it never goes back down I am fucked. I do not feel for the moment that the place to take profits is there yet.
I might start doing that in teensy weensy bits as of 20k but not before. I guess for me its to early even though I would have been able to make 20% if I followed your lead.

I do agree that setting the sell levels in advance is smart though and I might have to think on what my levels are exactly.

Posted Using LeoFinance