{"id":3835,"date":"2024-08-04T13:57:38","date_gmt":"2024-08-04T13:57:38","guid":{"rendered":"http:\/\/localhost\/dpetkovski\/?p=3835"},"modified":"2024-08-04T13:57:38","modified_gmt":"2024-08-04T13:57:38","slug":"the-art-of-de-risking-a-mid-curvers-take-on-the-crypto-market","status":"publish","type":"post","link":"http:\/\/localhost\/dpetkovski\/the-art-of-de-risking-a-mid-curvers-take-on-the-crypto-market\/","title":{"rendered":"The Art of De-Risking: A Mid-Curver’s Take on the Crypto Market"},"content":{"rendered":"

Are your legs shaking, anon?<\/p>\n

For those of you reading from the future, I’m writing this on a red day where most gamblers’ portfolios are down bad. Many speculate that it might be the end of the bull market.<\/p>\n

Instead of giving you my opinion on that, I’ll cover what has been consistent in the previous cycles<\/a>.<\/p>\n

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Note: this post is not applicable to hold-forever positions. I’m an investor with the majority of my portfolio, but want to address the trader’s perspective in this post. The art of mid-curving: not joining cults, building short-term convictions, and exiting at a respectable multiple.<\/em><\/p>\n

Note2: some of the things you’ll read might not be relevant in subsequent cycles. Most of the text is evergreen, but certain narratives and projects that I mention today might be ghost-towns after 2025. That’s why I plan to hold $0 crypto until then (not applicable to Bitcoin ofc).<\/em><\/p>\n

Previous Cycles Peaks<\/h2>\n

I already covered the\u00a04 year cycle theory<\/a> in detail, so I won’t explain why and how it happens.<\/p>\n

But in summary, the market peaks around 12-18 months after the Bitcoin halving<\/a>, which happened on 20th of April this year (2024).<\/p>\n

\"4<\/p>\n

This is also consistent with the various cycle top indicators<\/a>, and as every cycle, Bitcoin’s performance is heavily correlated with the rest of the crypto market.<\/p>\n

Of course, past performance is never a guarantee for future results, but you now have a time window in which historically it made sense to start de-risking.<\/p>\n

If you’re happy to be in the middle of the curve and <\/strong>to overperform any traditional benchmark<\/a> consistently, you should be out by then.<\/p>\n

Of course, if you started buying this year (2024), then you’re probably hoping for a higher return than it might be realistic. And you’ll probably end up disappointed and bag-holding for 4 more years (for your blue chips) or forever (most cryptocurrencies will trend towards 0 in the mid-to-long-term).<\/p>\n

You Need an Exit Strategy<\/h2>\n

Spend some time thinking about your goals and stress-test them against probable realities, in a manual and sloppy Monte Carlo simulation<\/a>-like analysis, typical for a gambling addict.<\/p>\n

Jokes aside, you have a decade of history to understand what a realistic expectation might be.<\/p>\n

One idea, for people that accumulated during the bear market<\/a>, is to start taking profits from later Q3. Not exiting fully, but slowly DCA out<\/a> month over month, starting with the riskiest positions first.<\/p>\n

A n00b-friendly approach would be: assuming new ATHs in September, start selling 10% per month starting from then until the end of June 2025. Having a strategy will prevent emotions and price volatility to impact your decision-making process, potentially leaving you with heavy bags in the subsequent bear market.<\/p>\n

I’m not saying that this is the perfect strategy nor that I’m doing exactly that. It’s just an example of the direction you should start thinking in if you have accumulated unrealized gains.<\/p>\n

I documented how I did this in the previous cycle with Ether<\/a> and I’m positioned to do the same thing again.<\/p>\n

TLDR for those that prefer a picture over a thousand words:<\/p>\n

\"ether-2021\"

Buy orders (left) and Sell orders (right)<\/p><\/div>\n

De-Risking in Practice<\/h2>\n

Personally, my entry points allowed me to start taking profits already.<\/p>\n

Not with Bitcoin <\/strong>–\u00a0that’s my long-term hold<\/a>. But with many of the positions I built and the airdrops I received<\/a>. I basically trimmed the riskiest holdings, as I’ve already made multiples of returns with those.<\/p>\n

This is what I mean by de-risking.<\/strong><\/p>\n

You start with the highest risk positions and you get rid of those first.<\/p>\n

For example, I rode the memecoin mania wave and exited it fully. For context, my timing was close to perfect – the entry point was at the end of February 2024 (chart below + a tweet with public statement):<\/p>\n

\"memecoins\"<\/p>\n

Long story short, it was a hectic period with lots of micro-cap opportunities for short-term trades.<\/p>\n

But most importantly, I’m currently\u00a0<\/strong>out of memecoins.<\/p>\n

I didn’t join a cult and I didn’t commit to “diamond hand” forever. Mid-curving<\/strong> means developing intuition, confirming it with careful analysis and market sentiment, and building conviction to deploy enough capital so that a 5-10x already means significant profits in absolute terms.<\/p>\n

I also exited most of my mid-to-high market cap<\/a> positions at 3-10x ($NEAR, $TAO, $STX, $AR, etc.). And by the way, I’m aware that these can perform well from this point too. But I took my profits and it’s not worth the risk for me anymore. I’m not overstaying in projects I wouldn’t have held in the long run in the first place. And once I’m out, I’m out. I still hold a couple of sub $100M market cap projects and a few larger ones (such as $RUNE and $KAS, on which I’m already ~4x and ~10x respectively) and those will be the next to go before touching my largest holdings of $ETH and (partially) $BTC.<\/p>\n

Again, if you’re reading this from the future, some of these tickers might be irrelevant or less profitable in subsequent cycles, so extract the point rather than being too literal.<\/em><\/p>\n

Exiting DeFi Protocols and Airdrop Hunting<\/h3>\n

Leveraging DeFi to boost your returns can be life-changing when done right.<\/p>\n

And as we go deeper in the bull market, “done right” is less about positioning for the future and more for avoiding unnecessary exploits<\/a>, losses, or opportunity cost<\/a>.<\/p>\n

In other words, I’d strongly suggest starting to be<\/em> more selective and risk-averse.<\/p>\n

This means: not jumping on third-tier airdrop opportunities<\/a>, avoiding chasing yield<\/a> on stablecoins, dumping airdropped governance tokens, etc.<\/p>\n

Note: there is still serious money to be made. But avoid locking up funds indefinitely and for uncertain rewards. The airdrop meta has changed, the bull market matures, and if you were accumulating during the bear market<\/a>, then non-first-tier airdrops probably are becoming less attractive to you too.<\/p>\n

PS I got over 80 airdrops this year. Most of them were smaller amounts (3 digits $USD), but a handful were substantial (in my case: zkSync, Wormhole, Saga, and the Ordinals\/BRC-20 ecosystem), and a few more are coming my way (feel free to DM on X<\/a> for details).<\/p>\n

And\u00a0all of this<\/strong> is sold and sits in FIAT accounts earning 3-4% risk-free interest for the time being.<\/p>\n

What Do We Do Next?<\/h2>\n

First of all, maybe it looks as such, but don’t take this post as “start selling now!”<\/em>.<\/p>\n

Do whatever\u00a0you\u00a0<\/strong>think is right.<\/p>\n

The mature stages of a bull run are a gold mine of opportunities for those that know what they’re doing. August only will change lives for many (IYKYK).<\/p>\n

However, what\u00a0I’m not doing<\/strong> is “rotating profits”. What’s out is out. It’s taken off the table and there’s zero\u00a0<\/strong>urge to risk existing profits for the sake of deploying them.<\/p>\n

No inclinations to “buy the dip”, no desire to outperform the\/a market on a weekly timeframe.<\/p>\n

And there is no rush, really.<\/p>\n

Accumulating $BTC in the depths of a bear market<\/a> makes you focused on the macro-perspective and immune to day-to-day price movements.<\/p>\n

\"btc-buys\"

My sell orders from the previous cycle (red arrows) and buy orders from the current cycle (green arrows)<\/p><\/div>\n

After we exited the levels from the image above, I stopped buying, almost completely.<\/p>\n

For the first time since the bear market, sitting on heavy FIAT stack and being on lookout for asymmetric opportunities. And when there are none, there are none.<\/p>\n

And regarding my long-term $BTC position – there will\u00a0<\/strong>be a bear market after 2025. It will be long and miserable, just like the one in 2022. And we will have the chance to accumulate Bitcoin at the depths for $35-50k (for example, this is just casual speculation, so don’t take it for granted. DYOR, NFA, all that).<\/p>\n

And of course, I have a hold-forever Bitcoin<\/a> stack that will never be traded or speculated with. But I also have an allocation of digital assets that I’m riding the bull\/bear cycles with. The profits from these will be reallocated accordingly<\/a> once the right time comes.<\/p>\n

If you want to read more about my approach to market cycles, head to:<\/p>\n