Bitcoin just dropped back below $35,000 in what we can term one ‘dull week’ in the crypto world. All crypto assets, led by BTC, surged after the US Fed decided to hold current interest rates and indicated that future increases may only depend on market data which are looking positive at the moment. Among key altcoins, Solana stole the show registering a local high at $42 before dropping to its earlier $38 levels.
Total crypto market cap also put in a new yearly high at $1.32 trillion.
After a whirlwind October, we are now in November which seasonally has registered four red months in the past five years. Therefore, we have to be careful while buying large positions into the market at current prices. A dip may come, for sure.
One thing we are sure of is… the bear market is ending and a new cycle (and a bull market) is beginning now. At this point, we want to highlight an often-overlooked aspect of crypto investing — locking and protecting your profits.
The saying goes — there is always a bull market somewhere in crypto. A new token will come out of nowhere and excite crypto enthusiasts in the short term. Most times, these vanish equally quick. For example, PEPE was born during the bear market of 2022–23 and is currently amongst the top-100 crypto assets. The entire crypto world was fascinated by WorldCoin this May.
The real bull market — where Bitcoin leads its charge and other assets follow their commander — hasn’t begun yet for this cycle. Given that the market is quite volatile on a weekly basis, we need a plan and a structure to navigate it over time. This is more for the investors who have multiple year timeframes and belief that crypto is here to stay. Let’s dive in.
1) Have an exit strategy that you stick to in spite of market movements
Most plans fail to give you an exit strategy. If your Rs.10,000 grows to Rs.30,000, what do you do?
You can pull out your investment but what if it goes to Rs.50,000 in a month? What if it drops back to Rs.15,000 in the same timeframe? Both are strong possibilities depending on market sentiments, news, and other regulatory developments.
First thing to recognise, no investor can perfectly time an entry at the bottom and no investor can perfectly time an exit. We can definitely aim to get into the market within a % of the bottom and exit within a % of the top. It can be 20% for some, 30% for others. Both strategies work well in growing your portfolio.
We gave you an oversimplified plan earlier in one such Hot Take in August.
We said that the best (and relatively risk-free) strategy is:
• Invest in Bitcoin around Oct-Nov 2023 (6 months before the halving)
• Wait for Bitcoin to reach a new all-time high while observing that BTC dominance is on the rise
• Post halving, diversify some of your portfolio into major altcoins when BTC dominance seems to have peaked
• Reap rewards (and take profits) over the next 2 years
October was the right time to cost average into Bitcoin positions for the long term. We may likely get sub $30,000 prices for Bitcoin hence we do not recommend entering large positions right now.
Is the above too simple? Some investors may fancy the following approach –
But, remember, your exit plan is more critical.
2) Your tokens and their prices
If you had invested some cash into Solana when it was near $10 last year, are you taking profits when it reached $40 this week?
We suggest that you do have a mathematical target for each asset you are entering into to exit some positions. Ideally, 50% of your portfolio can be offloaded when this first target is reached. Another 25% to be offloaded when a higher target is reached. The remaining can be your long-term hold.
And then you wait for a strong dip, which can often take months, to enter positions again. If you don’t want to be too fussed about targets, yearly timeframes are best. Enter a position, leave it for two or three years (high likelihood of strong performance of crypto in next two years) and exit when that time is up knowing you are in profits.
This also comes down to which assets you are investing in. Bitcoin and Ethereum are no-brainers. Anything else, be comfortable with the roadmap of the token. If they held well during 2022–23 bear market, they likely will do well in future. But again, don’t spread your portfolio to more than 5 assets — you really can’t keep a track of them.
3) Invest in a hardware wallet or stake relevant assets for other gains
While your assets sit idle over the years, the urge to use them for a quick trade is high. Investors find themselves attracted to market sentiments and often diverge from their earlier plan. The crypto market penalises such investors brutally.
Use a hardware wallet to store majority of your portfolio if the quantum is significant (Rs.50,000+). Else leave them on an Indian crypto platform you trust — we advise against storing crypto on global exchanges who may not abide by Indian regulations.
You can also stake your assets or deploy them for fixed rewards so that they give you 3–5% annual gains even when they are idle.
You can consider Giottus which is a comprehensive Indian crypto investment platform and has crypto withdrawals enabled while having a strong suite of products such as fixed rewards, staking, SIPs, and baskets.
4) Be aware of arbitrage, exchange fees and spread
Crypto market, by design, has avenues for arbitrage-based gains. However, it is often sophisticated enough that a common investor will only fall into a trap.
Transferring assets from one exchange to another to gain a 1–2% arbitrage is simply not worth the effort. The steps involved are: 1) having your assets in hot wallets; 2) using blockchains by paying fees; 3) waiting for assets to come before the arbitrage disappears; 4) hope for market liquidity to absolve your transferred assets; and 5) pay relevant TDS or taxes on all above transactions.
Prices of crypto assets in India are often 5% higher than US dollar terms. That is because, there is a limited liquidity on Indian shores compared to global trade liquidity. This means that you are buying an asset by paying a premium within India. Add in the 1% TDS on sale (which you can recoup later), a 0.5 to 1% exchange fees on every trade, and a 1–2% spread-related loss, and Indian investors often have to deal with a 5% variance all added up without accounting for already premium prices.
These percentages don’t matter much when the market surges 20–30% every month (like in 2021). But 2022 and 2023 haven’t been so kind. So, plan your investments and targets knowing the above.
Giottus, in a bid to address this variance, has become India’s first crypto platform to waive off all trade fees for crypto-INR pairs. All trades in 200+ such pairs on the platform are zero fee for all customers.
We don’t know how exactly the market will move in the next 2–3 years. But we can be prepared with a plan to maximise your gains given we understand the direction will generally be trending up. Spend some time to think about the above and come up with a customised plan that works for you.
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Disclaimer: Crypto-asset or VDA investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.