5 Tips to Help You Prepare for the Next Crypto Bull Run

How to build and investment plan, research winning tokens and achieve your financial goals

By James Edwards

Cryptocurrency looks poised for another bull run. 

But if you've been on the sidelines during crypto winter, then you might be feeling a bit out of shape.

While it's easy to get overwhelmed by FOMO and rush back into the market, it's important you hold back and put a plan in place first.

This will prevent you from making rash decisions and ensure you're able to maximise any gains you find along the way. 

Here are 5 tips to help you prepare for the next bull run.

1. Create an investment plan.

Cryptocurrency is known for its volatility and unpredictability. 

Avoid the temptation to jump in head-first at the sign of a rally with all of your funds.  

First, sit down and create an investment plan or thesis to help you decide where to allocate your funds. 

Think about how much you're willing to put into blue-chips like Bitcoin and Ethereum, and how much into altcoins. 

For altcoins, consider which industries you think have potential and consider dividing up your portfolio between them.

For instance 20% to AI, 30% to Real World Assets, 10% to Layer-2s etc.

Then consider dollar-cost averaging into your position in order to take advantage of any dips. 

2. Set profit targets – and stick to them.

One of the biggest mistakes in investing is not knowing when to take profits. This is especially true for cryptocurrency, where the market is driven by emotion, social media, overnight sensations and let's face it – greed.

As prices surge, set realistic targets for taking profits and stick to them.

A disciplined approach to profit-taking can protect you from sudden market downturns. 

If you're unsure of where you want to exit, then consider scaling out by using a dollar-cost averaging strategy to sell. 

For instance, sell 25% of an altcoin at price point 1, another 25% at price point 2, etc.

This will help ensure you take profits while still enjoying further upside – if it arrives 

3. Diversify your risk.

While Bitcoin and Ethereum are considered blue-chip cryptocurrencies, many investors look to altcoins for higher risk-reward assets.

Given the higher risk of altcoins, you should consider restricting them to a small portion of your portfolio. The opportunity for reward is higher, so you still have the potential for reasonable gains without over-allocating and exposing yourself to excessive downside. 

But keep in mind that any gains can be short-lived and many altcoins are not suitable for long-term buy-and-hold portfolios. Most altcoins falling out of favour between market cycles and downturns of 95%+ are common. 

That means it's important to have clear exit strategy with a target price that you set before you enter the trade.

So if you are considering a portfolio that includes altcoins, make sure to balance your portfolio with a mix of high-cap cryptocurrencies and altcoins to mitigate volatility. 

4. Research-based decision making. 

Avoid investing based on hype or FOMO.

Cryptocurrency is a unique asset class because every transaction is recorded on chain for the public to see.

This means you have ample tools and information available to you to help make educated decisions, instead of having to sift through the tea leaves like in many other markets. 

Here are few free tools you can add to your kit:

• ai. Put in any address to get an analytical breakdown of its portfolio, transactions and more.
• Get an overview of in-depth data for individual blockchains, dApps, layer-2s and DeFi with metrics like Total Value Locked and trade volume.
• Fi. Like an "anti-virus scanner" for cryptocurrency and smart contracts. Intended to detect intentional rug-pulls and malicious or flawed smart contract code.
• Arkham intelligence. Arkham is a blockchain visualiser that lets you see the relationship between wallets in an easily understandable way. You can use it to flag suspicious transfers or prevent a Sybil mistake when airdrop farming.
• Crypto-fundraising.info. This tool tracks VC funding for new crypto projects, giving you an insight into the amount raised and from which firms. 

Use these tools to conduct thorough research into a project's fundamentals, team, and market position. 

You can do this by conducting a SWOT analysis which will help you identify strengths and weaknesses within a project.

Always seek to challenge your thesis, and look for reasons why a project will fail, rather than information that will confirm your existing bias.

5. Risk management. 

Risk management is the first strategy every new trader needs to learn, but is often overlooked until it's too late. 

Manage your risk effectively by calculating how much you can afford to risk on your overall investment and then stick to it.

Follow this up by calculating how much you can afford to lose on any given trade and then stick to it by using a stop-loss order to limit your losses when the market moves against you.

Support these strategies by avoiding emotional decision-making and create an investment plan that includes target entry and exit prices.

While it's important to stay abreast of news and market events, try to limit your consumption of social media which can often be full of hyperbole and encourage you to be greedy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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