What goes up will not go up forever, so we should book profits on the way up. But how should we do that? Is there a specific method to follow?
Let’s cover each part in this guide. For any crypto investment, profit-taking should depend on three criteria:
- Market Cycle Type (Bull Market, Bear Market, Sideways Market)
- Type of coin (Large, Mid, Low Cap)
- Number of X.s (2X,5X,10X,50X,100X)
What is Our profit-taking strategy?
Our profit-taking strategy will vary depending on the market conditions. In a bull market, we prioritize holding coins and taking profits steadily, while in a bear market, we optimize our portfolio and hold coins that can survive and perform. Also, the holding period and conditions will depend on the marketcap of the coin and the percentage ROI it achieved already. A bull market can be of two types: Early Bull and Bull Market. Our strategy will differ in early bull and bull market conditions.
Bear Market Table
We consider coins with three categories:
- Large Cap (300M+ Marketcap)
- Mid Cap (100-300M Marketcap)
- Low Cap (10-100M Marketcap)
In a bear market, double-digit gains are rare in large caps. Often, some low caps pump and fade away. For midcaps, the pumps are mainly because of an upcoming event and marketing. We should take profit in each rise.
| Price Movement | Large Cap (300M+) | Mid Cap (100-300M) | Low Cap (10-100M) |
|---|---|---|---|
| 20% | 10% | 10% | 10% |
| 50% | 10% | 15% | 20% |
| 100% | 30% | 40% | 50% |
The percentages are take-profit %ges of your holdings
After the bear market, there comes the early bull. The indications of the early bull are:
- Expansion in trading volume (Trading volume goes high, evident by the rise in 7-day moving average 7MA).
- Investors are tired (minimum VC involvement).
- Bitcoin outperforms the market by a margin.
Early Bull Market Table
Once the early bull is confirmed, we should solidify our altcoin bags and portfolio. Coins that are consolidating should be given preference, and infrastructure coins (Layer1, Storage, Oracles) will be the best performers. In the early bull, we start taking profits for a 30% rise onwards.
| Price Movement | Large Cap | Mid Cap | Low Cap |
|---|---|---|---|
| 30% | 10% | 10% | 10% |
| 50% | 10% | 15% | 20% |
| 100% | 20% | 25% | 30% |
The percentages are take-profit %ges of your holdings
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Note that we are less aggressive in profit-taking, and the thresholds differ. We are no longer trying to recoup the initial investment in large and mid-caps. Early bull will end with a considerable correction in the market. Then, we can confirm the bull market from the following indications:
- Increase in search volumes for Bitcoin, Crypto
- Pumps in old meme coins (Doge, Shib, now Pepe, too)
- Increase in deposits to centralized exchanges
- Increase in revenue for stablecoin companies – This comes as the final confirmation – Tether buys Bitcoin with this increased revenue, which triggers enthusiasm in the market.
Once the bull is confirmed, we stop DCA and accumulate good-quality projects at current prices for quick flips and sustained pumps. Note to avoid underperformers in the previous bull markets (Any coin failed to reach its all-time high).
Bull Market Table
In a bull market, there is a continuous transformation of coins from Low caps to mid-caps and from mid-caps to large caps. It is best to create a portfolio page in Coinmarketcap and Coingecko and monitor it daily. A large cap with a 300M marketcap can reach a 30 Billion marketcap in the peak bull (rare and almost impossible to achieve because of VC exits).
But a coin with 1 Billion or more can not do 100X in the existing conditions. Thus, we should manage expectations from large caps and mid-caps. By the time large caps do 5X, we will have pulled initial investment and 100% profits. The remaining holdings will be worth at least 2X the initial investment.
| Price Movement | Large Cap | Mid Cap | Low Cap |
|---|---|---|---|
| 2x | 30% | 10% | 0% |
| 3x | 30% | 10% | 10% |
| 5x | 40% | 20% | 10% |
| 10x | 10% | 30% | 20% |
| 15x | 10% | 20% | 20% |
| 20x | 10% | 20% | 30% |
| 30x | 20% | 15% | 10% |
| 40x | 20% | 15% | 10% |
| 50X | 20% | 15% | 10% |
| 100X | 30% | 30% | 40% |
The percentages are take-profit %ges of your holdings
It is always better to aim for five coins that do a 10X each rather than one coin that does a 100X. Holding a 100X is not an easy feat by any means. By the time it reaches that 100X, it will have undergone intraday dips of 40% or more. Only massive FOMO can push any coin to 100X.
The downside to holding a coin without taking profits would be massive. Many crypto investors hold a coin through 30X pumps and 99% dump without taking action. On the other hand, aggressive profit-taking is also not advisable if you are holding just stablecoins when every other coin does a 30% in a day lead to FOMO and getting rekt.
