5 Essential Steps for Small Investors in a Bullish Market
It’s been a great year for cryptocurrencies. The market briefly hit over $1 trillion in value. Bitcoin, the biggest one, and Ether, the second-biggest, reached their highest prices of the year. Other cryptocurrencies, like the meme-inspired Bonk, also got really popular. This growth happened partly because a Bitcoin ETF got approved and because many blockchains got better.
For example, Solana, a blockchain, got a lot more popular because of some big changes. The price of Solana’s token, SOL, went up a lot — it increased by 1,000% since the end of 2022. While this is good news, it’s important for people with less money to know how to handle this market.
This article will talk about five important steps for small investors to do well in this market.
What is a Bull Market
In a bull market, cryptocurrency prices go up, reflecting optimism and boosted investor confidence. This period sees increased investment activity, especially in Bitcoin, fueled by positive speculation about further price gains. As demand for cryptocurrencies rises, so does the value of Bitcoin, pushing its price higher.
Examples of Historic Bull Markets
In history, there have been some big bull markets, each with its own reasons for happening. Let’s talk about a few things:
2017
Back in 2017, after Mt. Gox collapsed and Silk Road shut down, things got better. Bitcoin’s price was steady at $200 to $300 until it suddenly shot up in late August 2015. This sparked the big Bitcoin boom in 2017 when people got super interested in investing in crypto. Bitcoin’s price went crazy, almost hitting $20,000, and everyone was talking about it. The media played a big role in hyping up cryptocurrencies during this time.
2020–2021
Then, from 2020 to 2021, we saw the longest bull market ever. It started in September 2020 and lasted until November 2021. Bitcoin kept going up, especially during the COVID-19 pandemic. There were worries about inflation, more people wanted digital payments, and cool new projects like Web 3 and the metaverse got attention. Bitcoin’s price even went over $65,000. But after that, things cooled down, leading to what people call crypto winter in 2022.
2023 —
In 2023, there was a bit of a comeback for Bitcoin and other cryptos after the tough times of 2022. Bitcoin started the year at around $16,000 and kept growing. Some big events, like US banks failing, shook things up and got people interested again.
Then, in January 2024, a big moment happened when the Securities and Exchange Commission approved 11 funds managed by big names like Blackrock, Invesco, and Fidelity. This was a win for them and a sign that the cryptocurrency industry was gaining more acceptance.
5 Essential Steps for Small Investors in a Bullish Market
Early Entry is Key
In a bullish market, timing is key for small investors. It’s advisable to enter early to capitalize on potential gains, rather than waiting until the market peaks, which could lead to missed opportunities and losses. By acting promptly, investors can ride the upward trend and position themselves for long-term success.
Avoid Recency Bias
The allure of quick profits can be tempting, especially when witnessing rapid price surges in certain assets. However, succumbing to recency bias — the tendency to believe that current trends will continue indefinitely — can be detrimental. Instead of chasing hot trends, focus on making well-researched investments with strong fundamentals. Avoid FOMO (Fear of Missing Out) and maintain a disciplined approach to investing.
Conduct Thorough Due Diligence
Small investors should carefully research assets before investing, as not all assets maintain sustainable value despite short-term price increases. When considering investing, prioritize those with practical use cases, solid technology, and strong community support. Conducting thorough fundamental analysis is essential for identifying quality investments amidst market hype.
Employ Risk Management Tools
Warren Buffett once highlighted the usefulness of derivatives in managing risks, especially during volatile market conditions. Crypto futures, such as USDT-margined contracts, offer a solution to protect against downside risk in bullish markets. Though futures may appear complex, they provide an affordable means to hedge potential losses while preserving profits. Incorporating risk management strategies into investment approaches can effectively safeguard portfolios from unforeseen market downturns.
Have an Exit Strategy in Place
While it’s tempting to ride the wave of a bull market indefinitely, it’s essential to have an exit strategy in place. Define clear goals for taking profits and stick to your plan, whether it’s based on reaching a specific financial milestone or a predetermined timeline. By locking in profits at strategic intervals, investors can safeguard their gains and avoid the pitfalls of market downturns.
Wrapping Up
Successfully navigating a bullish market as a small investor requires a mix of patience, discipline, and strategic planning. Following the above five steps sets you up for success in managing the fluctuations of this market cycle.
Disclaimer: The opinions expressed in this blog are solely those of the writer and not of this platform.
