Why Hodlers Handle Bull Markets Worse than Bear Markets?
For newcomers to the crypto space, both the bull and the bear phases of their first crypto cycle are good opportunities to lose money. The impact can be reduced if they come across some valuable information that teaches them the basics and what to expect, to the extent of predictability.
The interesting fact I observed from my own experience and that of others who shared it, is that after we understand how the crypto cycle goes and we've actually experienced at least one ourselves, we have more issues handling the bull than the bear market correctly.
Why is that? That's a question I've been trying to find an answer to for some time, and I think I have a number of explanations already.
But before I move on, I'd better establish some context, because otherwise, the premise from which I'm starting that we're not handling bull as well as bear may not be correct.
I am mostly a hodler, with trades here and there, but mostly driven by the two phases of the crypto cycle. Plus, I keep some assets no matter how the market moves.
Regular traders, short sellers, leverage traders, and investors in futures or options, have a completely different experience and the way they look at things is from other angles. What triggers them may not be of interest to a hodler and vice versa.
Let's look at the explanations I found:
1. No Pressure: I'll Do Better in the Next Bull Market
Would you imagine that? Hodlers like to hodl! To the point that if they are thinking about taking some profit in the bull market, they keep postponing it due to hype until the bubble bursts. And then they hodl because it's too late to sell, the bear market already arrived. So they wait for the next bull market.
Yep, it happened to me. I'll talk in section 3 about another reason why they keep postponing selling.
2. Hodlers Love to Accumulate
That's a fact! And when is the best time to accumulate? During the bear market. There is an accumulation phase in the bear market for a reason, right?
That doesn't mean holders don't love bull markets. Quite the opposite. They accumulate when the market is depressed thinking of the bull market, even though some of them have more... deep and fundamental reasons for doing so.
3. Nobody Knows Where the Bull Market Tops, But We Have an Idea How Much It Drops
Everyone is making predictions about how high will bitcoin go during every bull market. I haven't heard of any prediction to come true to this date, so ignore all of them!
But that's a problem, right? Where or when to sell if you don't know how high it goes? All while, recent bear markets meant a %80+ drop for bitcoin and a %95+ drop for alts (generally). So, you have some idea where the fall might stop during the bear (plus support levels that can be checked out, which don't exist when the coin makes new ATHs), but are relatively clueless during the bull.
As I see it, there are two ways to approach this problem. Set target levels and start taking profit at those price levels. Usually starting with smaller amounts and increasing the amounts the higher the price.
Also, keep in mind that, based on what happened in the past, bull markets last around 1 and a half years and bear markets around 2 and a half years. Obviously, these are not exact periods, but rather some sort of guidelines. For example, if a bull market has been going for 1 and a half years one should be very reticent that it might last much longer unless the previous pattern breaks.
Final Words
Hodlers get really attached to their hodlings. Often that plays to their detriment. We have to learn to let go, even if just to get more of the same in the future.
Posted Using LeoFinance Alpha
Our greed is the reason we are not able to handle bull run and bear run.
Greed plays a role, that's very true. And I'd say it's higher in the bull market than in the bear market.
I always seem to sell too early and buy too late!
You have the opposite problem then. You may be too cautious. But as long as it's profitable, it's better than losing every cycle.
Probably right.
Do you think the bitcoin halving cycle is the only real cycle in crypto?
So far this has been the case. When bitcoin dominance goes above 70% at the beginning of the bear market and doesn't go below 35% during the hype of the bull, it's hard to imagine another protocol (not to mention a project) influencing as much the market, for the time being.
We do have the bitcoin and alt seasons (general rule: bitcoin first, alts after). There are alts that may influence the price in the market for some time based on what happens in their ecosystem, but nothing like bitcoin so far.
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Also, some people always panic and that is why they sell even before the right time for them to sell...
While training doesn't make perfect, experience helps us take better decisions and even avoid impulsive actions. If it doesn't, maybe we are not made for the volatile markets and we need to be in calmer ones (like HBD savings or bonds).
It's interesting how hodlers often struggle more during bull markets than bear markets in crypto. When the excitement builds, we tend to delay selling, thinking gains will keep rising. This can backfire when the bubble bursts and we miss the chance to sell high.
Hodlers are known for accumulating during bear markets to prep for the next bull run. However, predicting bull market peaks is tough, unlike bear markets where drops are more predictable.
To handle this, setting target levels for profit-taking as prices rise and remembering past market trends can help. It's about finding a balance between emotional attachment and smart decision-making to navigate these market swings effectively.
Thanks for your comment, Marvin!
Indeed, from my experience and what I have learned from others or their experiences, finding suitable exit points in the bull market may prove more difficult than finding entry points in the bear market.
Hodlers, in particular, may have this bias, because they love accumulating during the bear market but have a hard time letting go of their assets/tokens when the time is right in the bull market. The best thing is to set some target prices before the bull market (or in the early stages) and automatically act when they are hit, without considering updating them.
It's definitely hard for HODLers. I think it's better to build a plan for entering and exiting out of some coins. Taking some profits seems like the better option and I didn't do well on that last bull market.
Yes, it is. But maybe more difficult for inexperienced traders. It's interesting, that many of us probably started by trading crypto at first, instead of accumulating them. And that's how we lost enough to learn our first lessons in crypto.
We definitely need a plan! And we need to stick to it.
If you are HODLer that can keep your emotions under control, you have no problems with the bear market as you don't want to sell cheap at all! In those moments, it doesn't matter if it falls 90 or 95% when you will not sell it... 😃
The bull is different if you want to take profits... The sky is the limit and you should choose whether will you take a rocket, a plane, or just a ladder to take some profits... 😃
I have picked this post on behalf of the @OurPick project which will be highlighted in the next post!
True hodlers shouldn't have issues hodling... I understand emotions can play a role, but if one is characterized mainly by a hodler mentality, one would not sell but rather accumulate during the bear market.
In the bull market, it is different, but only if you want to take profits. Otherwise, the hodler keeps its portfolio and accumulates no matter the price. That may not be the most profitable, given we have a rather clear succession of phases in the bitcoin cycle, but it is one option.
I like how you put it, in case someone decides to take profits in the bull market:
But we have to be careful with rockets. They sometimes explode on takeoff. :)
We also have to be careful not to get caught holding our bags when the market turns. And the problem is we don't even realize sometimes that's the end. We often hear then that it's a needed correction before it goes back up to the actual target.
I am guilty of it too!
Yep, so am I! I need to do better this bull market, or else I'm all talk and suck in practice! :)
Great read. Basically, I think taking profit can be a tough subject. Some people want to take at the apex and end up losing due to greed, one thing I believe is that people should take profit in small proportion, so that even if their target didn't eventually hit, they'll have taken some sizeable profit.
Thanks! Yes, greed often gets in the way. On one hand, people might refuse to take a tiered approach to taking profit because that reduces the end result, on the other hand they might wait too long before taking profit in full because nobody really can time this 100%, and after the the top they can enter in a stage of anxiety and then denial.
It's true. Holders are mostly not profit takers. Maybe it's because they're probably just trying to stack for the long-term prospects of crypto in general. However, taking profit is one way to find fufillment, even if long-term is the goal.
One can take profit on some assets and not on others or only take profit partially. Personally, I don't intend to power down any of my main HP stake, for example, but I do have a plan of taking profit for Hive.
I will say the best is to be able to control your emotions
That comes with experience. And some people will never be able to control their emotions, which makes them a bad fit for a volatile type of market. They should stay in fixed APR markets and products (bonds, HBD savings) or leave their accounts under professional management.
@gadrian Everything is so true but how about adding some stop loss in the bull market until the positions are in green/profit? What do You think, can this be something for HODL'ers?
Hmm, if positions are in the red in the bull market something is wrong with those positions. On certain platforms there is something called "trailing stop loss" which is set as a percentage of loss instead of fixed price, and moves with the market. These might work in the bull market, but we have to keep in mind that institutional investors use specialized TA tools for finding and triggering stop loss orders, particularly from retail investors who aren't as sophisticated.
My 2015 experience in the stock market is similar to my 2021 entry into cryptocurrency. 2015 was a disaster followed by six years of profitability. Though I entered cryptocurrency near the peak of the bull market in 2021, crypto is different from the stock market in at least two ways. In crypto, though we see prices crashing, the quantity of your holdings is growing and such growth is branching out to other tokens. This somehow offset the loss. This changes my mindset in the way I do my trading-holding strategy.
This doesn't happen in all cases though. Hodling bitcoin in a cold wallet, although recommended for bitcoin for security reasons, doesn't grow their numbers. On Hive (but not only), there are many ways to grow the number of your tokens, regardless of market conditions. In fact, you've just increased the amount of your HIVE Power (and other tokens) by making this comment and by receiving my upvote.
And I appreciate your upvote.
Looks like you !love the upvotes. 😎 Good thing there is #dustsweeper to help boost dust votes! 😏
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I managed to not sell enough at the start of the decade. I am a living proof of the the thesis of this article. I plan to do much better in the next two years. I have learned the lesson the hard way. I had a large portion of my portfolio invested in CUB + POLYCUB. I wish @leofinance will focus more on DeFi in the next year.
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I locked all of my CUB and POLYCUB the moment the 12 month and 2 year staking was made available. I'm hoping to see those ATH price again with more investors joining in a bull market. The social media can become a powerful onboarding tool to get more users invested in CUB + POLYCUB.
Yep, bull markets have a way of pumping everything. Let's hope it'll happen for Leo's defi projects, although I expect they might need to brush them up a bit.
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