Trading Guru Tells You How to Invest Correctly in a Bull Market

Investing Correctly in a Bull Market Tips from a Trading Guru

Author: Jesse Coghlan, Cointelegraph; Translation: Song Xue, LianGuai

Since the end of 2021, as many as 130 million people have been exposed to cryptocurrencies, and millions of investors may soon experience their first cryptocurrency bull market, with some believing it could occur as early as 2024.

However, Ben Simpson, founder of education platform Collective Shift, says that unlike the current bear market, the bull market “is unlike any other market you have experienced.”

“It’s complete and utter chaos. It’s a tornado.”

In August, hedge fund managers, research directors at digital asset companies, and other cryptocurrency traders were interviewed to understand how they are preparing for the upcoming bull market and what advice they can offer to newcomers.

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In and Out

Simpson says one of the biggest mistakes new cryptocurrency traders make is holding onto cryptocurrencies for too long—the most common reason being caught up in the excitement of making more money.

“In my first cycle, I had no plan. As early as 2017, I rode it up and then rode it down.”

Instead, Simpson says that it can be helpful for investors and traders to write down clear investment goals and understand the assets in their portfolio, setting a hard sell price for each asset.

Setting strict market exit times can reduce the likelihood of investment losses, as “once the music stops in a bull market, the bull market stops quickly,” Simpson says.

Similarly, James Butterfill, research director at CoinShares, says that dollar-cost averaging (buying or selling small amounts of assets regularly) can mitigate the volatility of cryptocurrencies, whether in a bull or bear market.

“Implementing dollar-cost averaging can help lower the average purchase cost and reduce the impact of volatility on the portfolio,” Butterfill says.

Avoid Meme Coins

CK Cheng, co-founder and chief investment officer of hedge fund management company ZX Squared Capital, suggests that investors focus on more mature and widely recognized cryptocurrencies, such as Bitcoin and Ethereum.

Butterfill believes that Bitcoin behaves similarly to other alternative assets and has “significant diversification advantages beyond assets such as gold, commodities, or real estate.”

Meanwhile, Deryck Graham, founder of cryptocurrency hedge fund Portal AM, says that it’s important to consider a balance of speculative cryptocurrencies and mature cryptocurrencies in investments.

Graham adds that it’s important to segment investment areas—such as Layer 2 or the Metaverse—and choose relevant tokens while avoiding those that are “rarely or have no practical use,” such as meme coins.

“Considering token economics, the development team’s track record, the entry and exit of whale investors, community size, market momentum, and liquidity,” he added.

Finding New Themes

Markus Thielen, Head of Research at Matrixport and author of “Crypto Titans,” said that Bitcoin “always sets new highs” in a booming market, but new themes drive new bull markets – investing in new cryptocurrencies instead of the previous ideas about cryptocurrencies.

Meanwhile, Simpson said that making highly confident investments would help stay focused because most people “don’t have the opportunity” to keep up with the pace of their altcoin portfolios.

“A few days ago, I talked to someone who had 80 altcoins in their portfolio. Individual investors cannot accurately understand what 80 different tokens are doing at the same time.”

Simpson and Zheng both warned investors not to borrow money to invest in the market, invest more than they can afford to lose, or engage in leveraged trading to overexpose themselves to cryptocurrencies.

“When a person is not adequately prepared, leverage positions can lead to the complete loss of capital,” Zheng said. “It’s important to have an investment mentality rather than a speculative mentality.”

Simpson added that it is important to stay away from cryptocurrencies and observe the market. He advised both experienced traders and newcomers to prioritize their mental health.