Quickly review 10 key signals and techniques for escaping the top

Author: CRYPTO, DISTILLED

Compiled by TechFlow

1. Introduction:

As Cryptocurrency gradually enters the mainstream market, the opportunities for ‘easy profits’ are decreasing.

Unfortunately, not everyone can successfully seize the opportunity.

Here are 10 signals and tips to help you exit at the peak of the market cycle.

2. Balloon > Foam:

The term “bubble” is often overused. Instead, the market can be likened to a balloon.

Although the bubble suggests fragility, the balloon can over-inflate, deflate, and re-stabilize.

The key is to gradually exit as the balloon approaches its maximum volume.

3. Mastering the dynamics of balloons:

The metaphor of a balloon helps explain why market tops are difficult to identify.

No one knows the limit of balloons.

It’s not as simple as waiting for the frenzy on Twitter or your neighbor buying BTC.

4. Need a new top signal:

Cryptocurrency has many omens, blurring the boundary between adoption and old top signals.

With the development of the industry, signals are also changing.

In the previous cycle, tracking encryption transaction applications through the Apple Store rankings was very popular.

However, with the rise of BTC ETF, this approach may no longer be effective.

5. The risk is higher than ever before:

2017 was the tulip bubble. 2021 gave us a glimpse of dreams. 202X could be real.

Will it end with a bang or quietly?

Although the outcome is still uncertain, this period is very different.

6. Signal 1 - Leveraging Over long:

High leverage often leads to Forced Liquidation and collapse.

New, unforeseen risk factors and Ponzi Schemes may trigger a chain reaction.

Let’s delve into each in depth:

(i) Quick Risk Mitigation (and Black Swan Event):

When new, unforeseen risks are quickly priced in, rapid risk reduction occurs.

This will trigger a large-scale portfolio to risk, catching investors off guard with excessive leverage.

For example: LUNA crashed in 2022.

Source: CoinGape

(ii) Ponzi Scheme:

Pursuing short-term gains while ignoring fundamentals will lead to instability.

Over-reliance on price momentum requires a constant influx of ‘dumb money’.

Studying the tulip bubble can provide a more long insight.

7. Signal 2 - Corporate Financial Assets:

Many companies’ use of BTC as a reserve asset may be a signal.

Although bullish, this may mean that we are further along the adoption curve than many realize.

Even President Trump is talking about it now.

Source: Forbes

8. Signal 3 - Sovereign Wealth Fund (SWFs):

Furthermore, sovereign wealth funds may enter BTC due to the fear of missing out on opportunities, marking the ultimate exit from Liquidity.

BlackRock insiders have revealed the interest of sovereign wealth funds.

For example, Norway (USD 1.4 trillion fund) or Saudi Arabia (USD 1 trillion fund).

9. Signal 4 - Golden Cross:

In the 2021 cycle, the ‘flip’ narrative (ETH > BTC) is very strong.

Now, the flip between BTC and gold may define this cycle.

With BTC being hailed as digital gold, private and public capitulation may signal the final stage of the Bull Market.

10. Signal 5 - Liquidity Depletion:

Liquidity tightening is a potential market top signal.

In history, Cryptocurrency has a strong correlation with global Money Supply.

When the increase and contraction of Liquidity are imminent, the market will show concerns.

Liquidity typically leads Cryptocurrency prices by at least 6 months.

Source: RaoulPal

(i) Oil is exhausted and the lamp is dry:

Without Central Bank intervention, market frenzy may continue until funds are depleted.

The asset price accelerates pump as it runs out of oil, but Liquidity has long been depleted.

11. Psychological Top Signal:

Emotions are an important driving factor in human behavior, especially in the Cryptocurrency market.

Let’s delve into two common psychological signals at market tops.

12. Signal 6 - Fear and Greed Index:

Long periods of extreme greed may foreshadow imminent problems.

They often come with the rise of excessive leverage and Ponzi Scheme.

A common approach is to gradually sell during periods of extreme greed.

Source: Alternative.me

13. Relying on “ordinary people”:

Many people decide when to exit the market based on their ‘most stupid’ fren entry time.

However, this may be misleading.

For our final signal, let’s have some fun and expand on this common strategy:

14. Signal 7 - Left Curve:

In a frenzy, your ordinary fren may perform better than you. Why?

Because the return of ‘left curve’ is much higher than others during the frenzy period.

Ordinary people can buy your fundamentally sound currencies, while you miss the opportunity to buy their currencies due to fear, thus surpassing you again.

15. Mental Preparation:

You may not be able to accurately grasp the top, but by mastering emotions and training market intuition, you can improve the chances of success.

Here is how to best prepare yourself:

16. Adopting Signs of a Bubble:

Adoption and foam may look similar.

If this cycle is really different, the past patterns may be completely useless.

Rely on your intuition and long-term theories, keep an open mind to deal with paradigm shifts.

17. Emotion Regulation:

Consider potential losses in advance, assuming that you may be wrong in your theoretical judgment.

For example, what would you do if the market has already peaked?

This proactive prevention method can minimize future pain and financial pitfalls.

18. Speculation Trumps Fundamentals:

In high-risk markets, speculation prevails over fundamentals.

On the contrary, in the low-risk market, fundamentals dominate.

However, as the industry matures, fundamentals become increasingly important.

Source: The Decentralized Finance Edge

19. We are all retail investors:

Although new users may join later, it is very important to acknowledge the fact that 99% of CT users are ‘retail investors’.

Many people end up losing money by buying junk coins and selling them to “stupid retail money”.

In the final stage of the Bull Market, it’s just a competition for profit.

20. Leave some earnings:

To counteract your greed by leaving some profit for others.

For example, the goal is to fully exit in the first third of the cycle (rather than at the exact peak).

Respect your competitors to avoid being disrespected by the market.

21. Thread Summary:

Monitoring agencies are greedy (enterprises + sovereign wealth funds)

Beware of new/potential Black Swan Event

Beware of excessive leverage/Ponzi Scheme

Research Liquidity (AltCoin follows closely behind)

Leave some profit for others