Edgy - The DeFi Edge 🗡️@thedefiedge
There are 4 Phases of a Bull market.
We’re nearing the end of Phase 1. Here's how to play market cycles so you don’t screw up your best chance at generational wealth.
Here’s your playbook for:
1) Navigating each phase of the bull market
2) Maximizing your profits
3) and avoiding the most common traps.
/ PHASE 1: The Accumulation Phase
This is where we’re at and have been for the past year. The market bottomed out after Terra’s collapse, FTX’s collapse, and the scare of USDC’s depeg.
(Make sure you bookmark this post. You want to use it as a reference guide once the bull market’s on the way. I wrote this for myself and am sticking it to my wall to remind myself.)
The worst is over (unless Binance / Tether fuck up).
Prices are boring and choppy. Big news barely moves prices, such as Paypal’s stablecoin. Right now, there’s no new liquidity entering the system. No volatility. It’s the same 500 degens PVP’ing each other and trying to front-run each other to the next degen narrative.
This is the phase of preparation. Start putting the Chess pieces on the board to make your big moves. Plant your seeds now, and reap them during the bull market.
Action Plan:
• Accumulate good projects. Look for projects that you think will thrive in the upcoming bull market. Projects with product/market fit, competitors' advantages, the team’s still building, solid roadmap, and sound financial metrics.
• Save some ammo. It’s tempting to ape into so many older projects. They look like a steal because they’re -90% from their all-time highs. Here’s the thing…most of the best performers for the next cycle don’t exist yet. People favor being “early” to something completely new, than buying an older project.
• Don’t Overtrade. Don’t screw yourself over because you were bored and lost everything in Hamster races and Bald. You have to survive first before you can win. Don’t play bad poker hands because you’re bored - wait for the good ones.
• Fill in the Gaps in Your Knowledge. The bull market isn’t for learning. The bull market is for picking money up from the floor. This is the time to be learning. You don’t want to hear about a new protocol building on top of GMX, but you have to spend a week catching up on the basics of GMX during the bull.
• Monitor liquidity. Look for inflows to CEX’s. Look for Stablecoins being deployed. Look for DeFi TVL increasing. Look for the size of the Crypto’s overall market cap to increase. More liquidity means things are shifting.
/ PHASE 2: Early Bull Market
The prices start rising, and the bears will be in disbelief. Capo will pop up every 2 months, talking about how $12k BTC is coming soon.
What screws people over is disbelief. Their bear market PTSD holds you back from making gains. Ironically, the earlier in the cycle you are, the more risk on you should be before the crowds are here.
What Can Cause a Bull Market to Trigger?
• Major events such as BTC or ETH ETF getting approved. Or a new country adopts BTC as legal tender.
• BTC halving is coming in 2024. The past doesn’t guarantee the future, of course. But if enough people believe it then…
• New primitives. The previous cycle had DeFi and NFTs. What’s going to be hot this cycle? GambleFi? TelegramBots? NFT comeback? GameFi? RWA’s? Most likely they’ll be a few sectors we haven’t even begun to imagine. Think of things like Axies Infinity or Stepn, but with better mechanics.
• Macro Changes. The Fed pivots and stop raising interest rates. This allows more liquidity to enter the markets potentially.
• Regulatory Changes. The U.S. and other companies can provide more transparent and more crypto-friendly frameworks.
• Lowering of Friction. It’s still a pain in the ass to onboard normies. Better wallets, account abstraction, and more newbie-friendly dapps will help.
• The Far East. Crypto Twitter has an extreme bias towards America. It’s why most of CT doesn’t “get” why Tron is so popular (It’s used heavily in Asia). Don’t fade the power of Korean degens, and Hong Kong becoming more Crypto friendly.
It just takes a major single event to trigger the domino effect.
A few degens start making some life-changing money. They upgrade their lifestyles and tell everyone about it. And then this slowly spreads across their network.
Action Plan:
1. Cut your Losers and add to your winners. Don’t become emotionally tied to your bags. Just because a project did a 5x doesn’t mean it can’t do another 10x from there. Look at the metrics, momentum, and sentiment. Be brutal with cutting your losers.
2. Take profits on the way UP. No one can time the top perfectly. Don’t try to squeeze every cent out of a trade. Create a take-profit system and stick to it.
3. Be careful of taking on too many risks. This is where people start using leveraging, tapping into their home equity/retirement accounts, or selling their BTC / ETH to chase shitcoins. You should be risk on, but don’t be redacted about it.
4. Lower Your IQ - Some of the best performers will have the worst fundamentals. The tokenomics will be complete shit. But remember this: prices only go up when other people buy. And people are too stupid to understand the high iq plays. Don’t mid-curve it.
5. Cult Leaders - This is where cult leaders start gaining power. They know how to pump tokens and sway emotions. Inevitably, cult leaders all seem to die off in the end. You can either hop in early for the ride and take profits before it crashes or avoid them altogether.
6. Don’t Ignore Retail - It’s easy to get caught up in the Crypto Twitter DeFi echo chamber where everyone circlejerks each other over “real yield curve war flywheel effects.” Retail doesn’t understand any of that shit. Go to places where they hang out like Reddit and YouTube comments.
7. Focus. Find a few sectors to specialize in. It's impossible to keep up with the entire market. Be ok missing a few bets, then entering too late and becoming exit liquidity. Build your squad now to cover your blind spots.
/ PHASE 3: Peak Bull Market
This is where retail users start FLOODING in. They’re entering phase 3 out of 4 (In their heads, they think they’re entering Phase 2 out of 5).
Bull markets are self-reinforcing. As the price goes up, this drives fomo. There’s a positive feedback loop that keeps driving prices higher and higher.
Everything goes up. $10k in a shitcoin can turn into life-changing gains. You can’t get a haircut or hop into an Uber without hearing about Crypto.
FOMO and Euphoria kick in. It feels like the party will never end, and all common sense goes out the window.
People start quitting their jobs to become full-time Crypto traders. Others will sell their house to invest in Crypto.
Everyone’s in a fucking great mood.
Can you spot the top signals?
• Mainstream media starts covering Crypto. You’ll hear repeated stories about the guy trying to find his hard drive with 8,000 bitcoin or who bought 2 pizzas for 10,000 bitcoin.
• Financial Youtubers like MeetKevin, Max Maher, and Graham Stephen will start uploading 3+ Crypto videos daily.
• Mainstream brands like Pepsi and McDonalds will start mentioning Crypto for clout. Mainstream celebrities try to cash in through sponsorships or launch their NFT collections.
• Everyone's Flexing. Rolex Submariners on the timeline. New cars. When there’s too much bragging on your Twitter timeline, your spider senses should be going off.
Everyone’s going to try to convince you that this time’s different. You have to fight against your instinct.
The most important thing during this phase is thinking about your exit plan. Be level-headed and realize that the party’s not going to last forever.
Take chips off the table. Your future self is praying that you’re not an idiot. If you don’t take profits, the markets will take them back.
/ PHASE 4: The Mark Down Phase
What goes up might come down - the peak of the bull run has peaked. And now everyone’s wondering if that was the peak or if it will extend into a “super cycle.”
They’ll try to tell you that this time is different - we’ve finally gone mainstream! Watch for super cycle chatter, Bitcoin lengthening theories, or made-up charts. The cycle’s going to last a few more years!
Remember, everyone’s financially incentivized to keep the party going. Have to keep the audience engaged for that sponsorship money. Must keep getting more liquidity into the shitcoins.
And there will be moments of glimmer and hope. Bitcoin peaked in November 2021. But there was still action with OHM forks, FTM / Solidly, and Luna.
Once prices crash, this is where Capo emerges to say, “I told you so,” after missing the 2-year bull cycle and generational wealth.
/ What Gives me So Much Conviction That There Will Be Another Bull Market?
I’ve staked my career and the next decade of my life to DeFi. I have the utmost conviction in this space.
I’m going to make it simple.
Life fucking sucks for the average person and is getting worse.
• Credit card debt at a record high
• Everyone’s debt is at a record high
• Student loan re-payments are starting soon
• Credit cards interest rates are at a record high
• Interest expense on debt to reach record high
• Average monthly payment for a new car at a record high
• And don’t get me started on housing prices
Society and culture have turned life into ultra-hard mode for everyone. Going to college and getting a job isn’t enough to survive and own a home. The cost of living keeps rising, and the middle class is disappearing.
All this is happening while societal pressure to succeed keeps increasing.
No one in the new generation is interested in maxing out their 401k and getting rich when they’re 65 (I’m speaking as a Boglehead).
They want to get rich now. Everyone wants instant gratification. Everyone’s dopamine receptors are fried. There’s pressure to show off a fantastic lifestyle and to show everyone you’re the main character.
Basically…humans are greedy and will want the 100x.
Crypto’s not just selling a new financial infrastructure - it’s selling dreams. And there’s no faster way for people to realize their dreams than Crypto.
Crypto is our best chance of making it and not just settling for a life of survival.
P.s. If this would be useful to your audience, then help me out by giving this a retweet.
