Altcoin market is definitely famous for the gains which it produces in a very small time frame. Sometimes investing in the right coins can even give us great gains like 2x-10x. Almost all of us have at least seen our portfolio double/triple due to altcoins.
But the question I want to ask you is: Were you ever able to sell the top or take maximum benefit of your profits? I know most of you reading this were not able to do it. I personally was never lucky enough to sell the top.
So in this blog, I will try my best to explain: how to exit the altcoins with profits. I will try to summarize whatever I have learned since 2016. We will talk about three strategies in this blog: Market Cycles, Bitcoin Dominance, and Token Release Schedule.
Always remember this point “Trend Is Your Friend”. Never try to go against the trend because 99% of the time you will get wrecked. So as we all know the crypto market is highly volatile but when you zoom out and see a longer time frame chart there is always a 2-3 year bull market followed by a 1-2 bear market. The below picture gives a quick summary of the past bitcoin market cycles
Cryptocurrency Market Cycle
One must be always aware of these market cycles and should start selling the coins once the market turns bearish. A market can be termed as bearish when you start to see some big correction in bitcoin and altcoins (like 15-20 percent).
Also when you see people FOMO into different types of coins whether or not having good use-case and see that greediness in the market is increasing, These can also be a signal of an incoming bear market.
It's always better to use the stop-loss function to avoid big losses when you know the bull market is slowly vanishing. According to the analysts, Market cycles are caused due to Bitcoin Halving. If you are not aware of the halving process, the below post gives a quick overview of it.
It is the measure of how much of the total market capital of cryptocurrencies is comprised of bitcoin. Bitcoin Dominance is proven as the best tool to identify the trend of Altcoins. When the bitcoin dominance increases altcoins start to lose value and when the bitcoin dominance decreases alts start to gain value.
When the bitcoin dominance is above 70% Alt market is said to be in bearish mode and when it's below 60 % Altcoin market is said to be in bullish mode. In the 2017 Altcoin rally, the Bitcoin Dominance was as low as 30%. You can find the bitcoin dominance chart here
So, whenever you see that bitcoin dominance is increasing rapidly and especially above 65-70%, It is better to get out of the Altcoins and wait until the market recovers.
Token Release Schedule
Almost every Altcoin project has a private sale and ICO/IEO round, where venture capitalists and some individual investors take part in it and help the project raise some initial capital. The project in turn allocates tokens to the investors which most of the times have a vesting/lock period of 1-5 years.
An Example of Token Release Schedule of WRX coin
Also, the tokens which are allocated to the team, development sector, marketing sector, etc have a lock period. The token release schedule of these locked tokens is often specified in the project website’s Tokenomics section.
You can also ask the team about the release schedule directly by joining their respective Telegram group. When the lock period ends the initial investors will receive their coins and obviously dump them to take profits. Due to this sell-off, the coin value can go down by a large scale.
So Whenever you see that coins that were locked previously are being released, it is better to exit the particular altcoin. You can buy back when you see that bearish mode has come to an end. This method of saving your altcoins from losses by keeping an eye on the Token release schedule is given the least importance among all other methods but I should say it plays a major role in knowing when to enter or exit a particular altcoin.
By using the above-mentioned methods, you will be able to protect your altcoin portfolio from heavy dumps/selloffs. Always keep in mind that these processes don’t apply to the Almighty “Bitcoin”. My personal strategy of making money from Bitcoin is holding it for the long term.