On Not Being a Bagholder

Just now·6 min read

or “How I learned to Stop Worrying and Love the Volatility”

It’s a new bull market and I see a lot of newcomers heading for the same mistakes many made last cycle. Before the end of this bull you’re probably going to want to hold your favorite altcoin for life. Historically that’s a bad move. The music will stop one day, and you don’t want to be left holding the bags that nobody will buy.

Your favorite altcoin has a small chance of being a top-10 coin in the next market cycle, it’s true. But the odds you picked the 1 in 1000 that don’t drop -90% in a 3 year bear market are astronomically low.

Here are some points to consider:

Bitcoin goes through 4-year cycles where it can fall -80% from it’s peak and then rally to new all-time-highs
Altcoins can be used to make more bitcoin
Most altcoins completely die over a full 4 year cycle. I’m talking -100% loss.
A few altcoins may regain and even surpass their all-time-high value vs. USD over a 4 year cycle
Extremely few altcoins ever reclaim their all-time high vs. BTC over a 4 year cycle

There are exceptions of course, but think about the hundreds of new coins that are being launched every week.

(I also like Ethereum, depending on how you feel about it, wherever you see “Bitcoin” feel free to substitute it for Bitcoin and Ethereum)

Buy the bottom of Bitcoin
Put aside 30–50% of that Bitcoin in cold storage to “never” sell. Don’t track it’s value day to day. You need to almost forget this exists.
[Optional — risky] When alt-season comes, use a small % of your Bitcoin to make more Bitcoin (I may do a separate article on this in future)
Sell most of your bitcoin into fiat/stable-coins when we are close to the cycle-top. Live off the profits or use the stable-coins to farm through the bear market.
Repeat

This strategy is still probably riskier than just hodling Bitcoin through multiple 4-year cycles but it’s the strategy I use. Below I cover some resources I will use for picking bitcoin tops and bottoms.

Source: https://www.lookintobitcoin.com/charts/200-week-moving-average-heatmap/

The 200 Week Moving Average is historically good at picking the bottom for bitcoin. Using this indicator could give you several months to dollar-cost-average (DCA) into bitcoin close to the bottom.

If you’re trying to pick the exact bottom, another indicator is the “All Exchanges Inflow Mean”

Source: https://twitter.com/ki_young_ju/status/1374281866816024580

There are tons of indicators to use for this. Selling close to the top is a lot harder than buying close to the bottom of bitcoin. We may stay close to the top for only a few hours. If I sell within 30% of the top I will consider it a success. Some of these resources also apply to buying the bottom but given the current market timing I’m assuming most people want to use these to find the top.

Bob Loukas and his 4-Year Journey

https://bitcoin.live/4yearcycle

I consider Bob a legend. I have been following his video series on the 4-Year Journey since it began and it has sustained me through dark times. This is essential viewing for anyone new to crypto. I will also be watching Bob closely when it comes time to buy the bottom again in 2022/2023.

The 4-Year Journey videos are released for free to everyone but I have also signed up for bitcoin.live membership where Bob posts more regularly.

Regular YouTube videos from Josh Olszewicz a.k.a. “CarpeNoctom”

https://www.youtube.com/channel/UC587BAG9cLTYtJ7Q4CqcOnw

These videos give a nice summary of reasons to be bullish / bearish. He covers most of the important price-action and on-chain indicators in a concise manner. Josh seems more unbiased than most.

Source: Josh Olszewicz video from April 7th 2021 https://youtu.be/JN8c_qZagn0

Cryptopathic on Twitter (https://twitter.com/Cryptopathic)

https://twitter.com/Cryptopathic

Author of the cursed chart and the Blessed Chart. He called the December 2017 top around $19k weeks before it happened. Follow his tradingview and set up alerts on it: https://www.tradingview.com/u/Path/

Any quotes from “Jason from Telegram” by CryptoCobain

Jason himself doesn’t do Twitter so I just watch for mentions of him by Cobie.

Search link: https://twitter.com/search?q=jason%20(from%3ACryptoCobain)%20since%3A2020-01-01&src=typed_query&f=live

Source: https://twitter.com/CryptoCobain/status/1363438374481240064

OK this price target for Q4 2021 sounds ridiculous but Cobie respects the hell out of Jason for his past calls, so I consider him one to watch.

NUPL (Net Unrealized Profit/Loss)

I’m not sure on this one. It could be over-optimized for previous cycles. But it is still one I watch.

Source: https://studio.glassnode.com/

Bitcoin: Number of new addresses

The day will come when everyone and their hairdresser is buying bitcoin and setting up wallets. In December 2017 this metric got very heated in the weeks leading up to the peak. So far in 2021 it looks like steady growth.

Source: https://studio.glassnode.com/metrics?a=BTC&m=addresses.NewNonZeroCount&mScl=lin&zoom=all

Bitcoin: Stock-to-Flow Ratio

Created by PlanB (https://twitter.com/100trillionUSD) in 2019. Is it just a meme? Maybe it is but it’s also been very accurate so far. Bitcoin has typically over-shot the flat region achieved after a new halving.

End (More indicators will be added here if I feel like it)

My mindset has completely flipped several times since I entered crypto in 2016. At first I was an Ethereum maximalist. I saw Bitcoin as a dinosaur that would be replaced. I became a shitcoin maximalist in Summer 2017. I made some terrible investments and a few lucky ones which completely saved my portfolio. I almost got completely rekt on ICO presales in Q4 2017. I was robbed by teams that spent presale money on marketing and parties and “forgot” to spend any money on development. (Those same people are still very active in crypto…)

In Q1 2018 I cashed out a decent chunk and I started to lose faith in altcoins. By Q2 2018 I had sold off every altcoin that I didn’t think would make it. I sold a lot of them at a loss but those coins are dead now. This meant I now faced a -80% drawdown instead of a -99% drawdown in the coming years.

In 2019 at the bottom of the market I started following Bob Loukas and his 4-Year Journey. He turned out to be completely right and he’s a big reason I was able to hodl all my bitcoin through the last bear market.

Now, in 2021, my core positions are bitcoin and ethereum. I use a small % of my portfolio to trade BSC altcoins and I also have some of my portfolio in low-risk staking on Mirror Finance.

Twitter: https://twitter.com/Sig0O