In the market outlook for the next month, the author believes that investors face a situation where pain and opportunity coexist. Readers are reminded to be cautious in the face of potential pullbacks, while seizing the profit opportunities brought by market rotation. This article is from an article written by Altcoin Sherpa, compiled and translated by TechFlow.
(Background information: This Friday, the largest-ever $14 billion BTC options expiry, beware of violent market volatility)
(Additional background: The psychological barrier in crypto trading: how fear and greed affect the market?)
You must do your own research and not blindly follow others' opinions. I originally planned to write this as a long Twitter thread, but ultimately decided to organize it into an article to see if this format is more suitable.
The next few weeks:
(The following are some random thoughts without a specific order)
Your spot positions may face a significant pullback, whether to pre-emptively mitigate the risk is entirely up to you. This period may be very painful.
If you can persist in holding (hodl, the behavior of long-term holding of crypto assets) through this painful period, I believe the next wave of uptrend will be very favorable to some key cryptocurrencies, and may even completely offset the previous pullback.
The market has not "ended", and I expect a new uptrend phase to emerge within the next 4-8 weeks. The reasons include BTC dominance (btc.d) being at a high level, seasonal factors, the potential rise of ETH/BTC, and the rotation of market funds. In addition, the government's attitude towards cryptocurrencies is relatively positive, and there are fewer macroeconomic headwinds, which theoretically create a favorable environment for the market.
In the next wave of uptrend, you need to gradually become a complete seller. If you choose to continue holding during the trough, I can understand, but your upcoming selling plan should gradually shift towards safer assets.
Safer assets include BTC and stablecoins.
As the market cycle progresses, you need to gradually reduce risk and scale down your positions, and exit the market gradually through dollar cost averaging (DCA) rather than a one-time liquidation.
I don't have a clear prediction about the upcoming market rotation. From now on, I think the market will mainly belong to traders, not long-term holders (hodlers). That is to say, certain cryptocurrencies may attract a lot of buying pressure, while others may rise slowly (e.g., the performance of XRP compared to TIA).
It is difficult to predict in advance which cryptocurrencies or sectors will become market leaders. From the perspective of rotation, it seems that all cryptocurrencies will rise, but there is no overall upward trend. What I mean is: ordinary AI-related cryptocurrencies will eventually see a big rally, but it may only be reflected in 1-2 cryptocurrencies (e.g., the rally of TAO may be very exaggerated, while AKT may only rise by 50%).
Don't hold on to your coins for unrealistic target prices. It is very likely that many cryptocurrencies will not reach their historical highs (ATH) again. Of course, some mainstream cryptocurrencies may reach it, but a bull market does not mean that all cryptocurrencies will return to ATH levels. Although anything is possible, I believe that 80% or more of the cryptocurrencies will find it difficult to achieve this. It is wise to follow the market trend and take profits in a timely manner.
If your portfolio is highly diversified, I suggest selling 50-75% or more of your holdings when the next wave of uptrend ends. For example, when the AI sector is rallying, if you hold FET, you can choose to sell; or if you hold RWA (tokenized real assets) cryptocurrencies, you can take profits when ONDO performs well.
In the recent rally, I have sold many cryptocurrencies that I have less confidence in; I will later reallocate the funds to other higher-quality cryptocurrencies.
In the coming period, you should consolidate your investments as much as possible, reduce the number of new positions opened, and lower the overall diversity of your holdings.
I'm not sure when the next major pullback similar to the summer of 2024 will arrive. I estimate it will take another 3-6 months, and the market may become very bad and experience another round of pullback. As for whether this pullback will be driven more by time factors rather than price factors, as in 2022, I cannot judge yet.
This summer, Altcoins experienced a 75% major pullback, which was mainly driven by price declines triggering a capitulation sentiment, rather than prolonged time factors. Although those 6 months seemed endless to us, compared to the 1.5-year sideways period of Altcoins in 2018-2019 and 2022-2023, this adjustment is actually relatively faster.
The market may enter a so-called "supercycle", as some have said "this time is different". But I remain cautious about this, so I will still choose to act prudently.
My ideal goal is to keep the maximum drawdown of my portfolio from the All-Time High (ATH) around 30%. I understand my risk tolerance, and I can accept a maximum drawdown of 50%, but 30-40% would be a more ideal range.
Your task is to continuously analyze the data weekly and constantly re-evaluate the top and end point of the market cycle. When the market starts to turn, the situation may become very complex. Even when the bull market ends, many people will still be shouting "the bull market is still on". This situation is always difficult to predict, but you need to stay alert. Don't try to predict the distant future, accept market information and adjust your strategy accordingly.
Finally, you must do your own research (DYOR) and not blindly follow others' opinions, analyze and operate your own investment portfolio independently. Everyone's trading strategy is different, don't rely entirely on the exit strategy of the KOLs you like. Some may perform well, but most are likely to suffer significant losses. If you can exit the market with considerable profits, you are already a winner. Good luck!
