How to preserve Capital and Profits in the often Confusing and Highly Volatile Crypto Market

Good morning fellow Cryptonians

Many times in the crypto space a market moves against our long holding positions. This could be because of a complete reversal or because of a correction.

Some of the corrections in the crypto space can be brutal. In fact two big ones were the ones during April to July 2021 with a correction of over 52% and the one during September 2017 with a drop of over 40%. Both in a bull market.

Some of us are not built for such market volatility, and these periods are extremely stressful and full of anxiety and fear.

So below I have added a useful strategy to protect your capital and investment during times of uncertainty.

Of course time in the market is more important than timing the market, but for some of us, the roller-coaster of emotions is just too much to bear.

This is not financial advice, just an extra tool in your arsenal of things you might want to consider if the market has been a bit too harsh for you.

HOW TO PRESERVE YOUR PROFITS IN A CONFUSING MARKET.

I have been asked many times “how can we preserve our current funds in this confusing market? “

How can I save my funds, if the September correction does happen?

First of all no expert has a crystal ball, what if, in this cycle there is no September correction? No one can truly know. All we can do is speculate, and see what the charts tell us and be prepared for any eventuality, while hoping for the best.

But if you wanted to safeguard your current profits…. Then there is a simple option, but it requires missing out on some potential profits… in order to preserve existing capital and profits.

Let me explain… one of the major fear is that BTC will drop 40% from the latest high of $50,500 which would mean a level of $30,300, which I personally doubt will happen, as this cycle was different from previous ones. We had a 3 months long down turn for example and there are many more investors in the space that we did not have in 2017. So if we are still in a bull phase of the market the correction should not be greater than 23%.

But what about if we had the fear that this correction was in fact the start of an early bear market… Or could truly push the market down by over 40%? Again we can FUD and let assumptions and speculation run our life and choices or we can either play the longer term game, or if is too much to bear ,decide to take a certain action.

I cannot tell you what to do with your funds as this would be providing financial advice, but I can share with you what I would do if I wanted to preserve my portfolio capital and reduce or eliminate all risks, and I could not bear the anxiety, fear and concern…

If I did not mind losing up on potential profits in order to preserve the ones that I have already made, I would sell everything, and re-enter when the bull market has been fully confirmed. This of course would create a taxable event.

Then I would wait until BTC has risen above $64K, wait for the first $3K correction down from there and then rebuy back in. As this would prove that the market is definitely still is in an uptrend and it’s likely to head towards the $100K or more in this last phase of the bull market.

In this way my chances of making a profit would increase, and I would avoid been caught in a big correction or a potential bear market.

The potential profit between the current level and the $64K would be lost, as I would not be in the market, at all, but at least I would not be living in constant fear and anxiety.

I repeat, only do this if you can also accept that you’ll lose the profits between the current levels and the $64K and you can cope with this situation.

You see investing and trading is all about mastering ourselves and our emotions. Which means selling when everyone is buying and buying when everyone is selling. Controlling our fears and not allowing them to cloud our judgment. However most people, when the market drops, want to remove the fear and pain and therefore want to sell their positions only to find out that after they sold, the market start recovering. They then feel regret (sell remorse) and rebuy in… but now, they can buy less coins as the price of the ones that they have sold have increased in value.

I have observed this many, many, many times, in fact FEAR or “False Evidence Appearing Real” is the main reason why 95% of traders and short term investors that buy and sell often end up losing money and even becoming bankrupt.

So if you can’t cope, and the fear of losing part of all of your profit is too much to bare, maybe consider the above strategy. It will make you miss out on potential profits between your exit point and the time you re-enter the market, but it will also save you the heartache if the market moves in the opposite direction or the bear cycle starts early.

The moral of the story is: If the market is confusing, or you believe a massive correction or bear market is around the corner, you could exit, to preserve your profits and funds, until you feel that the market is strong again and you can trust the uptrend.

For now, I leave you with this strategy

Be strong, be patient, be wise

Much Light

Paolo