Cryptocurrencies

Taking Profits – Further Considerations

It is with some concern that I already see a substantial amount of talk about taking profits. This is especially applicable to Twitter.

Clarification: there is nothing wrong with taking profits, especially if planning to reinvest them back into crypto later on. Having a profit-taking plan is a good idea, it will help you keep your focus, and enable you to remain calm during the worst of the hype phase. I blogged about this myself in the predecessor to this post: “Taking Profits – Considerations”.

What I’m talking about is people selling too early, FOMOing their way out of the best profits because they are too afraid of missing the boat. I’m talking about the people who already have sell orders and who are mentioning five-figure BTC price targets.

No.

If BTC does top out within the five-figure range, and that is possible (but unlikely), then it’s not worth selling. Then it will only be a short and small crash which will soon lead to the next price surge, something like we saw in 2013. (Discussed in this post as “Scenario 1”)

Selling early does you no favours. We’ve literally been waiting YEARS for this bull run, give the bulls a chance to do their thing properly! Don’t hop off the train early because you got chicken, if you really are that afraid, then why are you investing in crypto anyway? Crypto is volatile – we all know this, so let that volatility work in your favour.

In the real world, remember that nobody ever sells at the very top of the market. That’s fine, it’s normal. But I’d rather sell at 70-75% of the top price than at 30-35% of it. It’s true that we don’t know where (or when) that top will be, none of us have a crystal ball which tells the future. What we do have is a community of experienced individuals who have ridden these market cycles before. Even crypto legend Bit Brain, for all his arrogance and stubbornness, is listening to those who have ridden through multiple crypto hype phases before (the 2013 hype was before Bit Brain’s time), paying careful attention to what they say about the patterns and indicators which they observed in the past.

If you really MUST have sell orders already, then set trailing stop-losses well below the recent highs or short-term MAs, so that they won’t trigger early (I would suggest about 40% below). They won’t maximise your profits, but the will lock smaller profits in safely. The last thing you want is a short, sharp dip in a bull run wiping out your potential profits prematurely. Whales will try tricks like that, they have in the past, there IS market manipulation in crypto. The clever (but greedy) money is desperate to get BTC (and other good cryptocurrencies) at discount prices. Don’t let them get yours.

Remember: In January of this year BTC dropped from $42000 to $28800 – a 31% drop. In February it dropped from $58350 to $43020 – a 26% drop. Either of those situations would have hurt anyone with more conservative 25% stop-losses in place. Personal opinion: any type of sell order during a bull market is a bad idea. Visit Ecoinometrics at https://ecoinometrics.substack.com and take a look at their drawdown charts. You’ll see where I get the figure of 40% from. The most recent one can be found in this article: https://ecoinometrics.substack.com/p/ecoinometrics-march-24-2021. (Ecoinometrics is a good website to bookmark, I generally concur with their analysis – which means that it’s pretty darn good!).

In order to maximise profits, it is vital that we try to spot the top of the market. While I am watching the regular charts religiously, there are a few additional tricks available to us. As I said before: listen to the advice of those who have been through these events before. I’m looking out for BTC in mainstream news, for increased mainstream FUD (like Ray Dalio saying yesterday that the US will outlaw Bitcoin), for panicked government reactions, for every second person to be buying into crypto with no idea of what it is or why they are buying it, for everyone to be bullish and thinking the run will last forever, for the time when nobody is selling.

I’m also watching a few technical indicators. I find “look into bitcoin” to be an invaluable resource in this regard. I pay particular attention (since not all charts are equal in terms of predictive value) to the following charts of theirs:

· Pi Cycle Top Indicator

· MVRV Z-Score

· 200 Week Moving Average Heatmap

· RHODL Ratio

· Reserve Risk

It’s exceedingly difficult to call the top of a market from some way out. For what it’s worth, my best estimates, formed and refined during 2020, had the market topping out at the very end of October 2021. The addition of 2021 information suggests that the top may come a little sooner than that: within three to six months time. That places the top neatly between the very beginning and very end of Q3 2021. That does seem realistic, but it could change significantly if we see a pseudo-top/double-top scenario as in that 2013 “Scenario 1” which I spoke about earlier. I’m VERY wary of selling a false top and then missing the optimal buy-back time, and you should be too. If in doubt, I will default to back to “HODL” mode – never a bad move in the long-term. That’s not being chicken, that’s being wise.

Yours in crypto

Bit Brain

All charts made by Bit Brain with TradingView

“The secret to success: find out where people are going and get there first” 

~ Mark Twain

“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful” 

~ Bit Brain

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