Placeholder Partner: Don't Set Expectations Too High for a Bull Market, Holding Profits Is the Key

Original Author: Chris Burniske, Placeholder Partner

Translation Author: 1912212.eth, Foresight News

If a friend reaches out to you with questions about Bitcoin, Ethereum, or other cryptocurrencies, providing guidance is not easy given the current market conditions (BTC nearing $100,000). This is especially true when they are inexperienced rookie investors. Here are some lessons I have learned over the past decade.

Ensure that the actions they take are their own responsibility. You may have more experience and knowledge, but that does not mean you are always right. No one understands everything happening in this market. If someone claims to know it all, they are definitely lying.

You can try to explain to them the stage we are currently in within the market cycle. For me, we have been in this bull market cycle for 2 years now (with the bottom being November 2022 at the bottom of the chart).

When calculated from the bottom 2 years ago, BTC has risen over 6x, ETH over 4x, and SOL over 30x.

The harsh truth is that as token prices rise, more attention is drawn in, and this attention eventually translates into buying power. Therefore, the more the price rises, the more people focus on the potential for future returns. However, in general, the later we enter the "attention cycle," the less advantageous our position.

So, the best entry point is often when almost no one is paying attention, but that was 2 years ago. What should they do if they are eager to buy tokens, although the timing is not ideal now?

Keep it simple: personally, if they are rookies, I would lean towards recommending holding a certain percentage of BTC, ETH, and SOL (50/25/25%), with other risks managed by them. At least, if they mess up the "entry / exit top," they can still maintain a certain digital fund. If they choose smaller coins, encourage them to learn and allocate less than 10% of the total allocation to reduce risk.

Given the current entry prices, if they double their money, encourage them to take out the principal at that time to secure profits. Then, if their funds have tripled, they can cash out all of it, or if they are willing to take a bit more risk, cash out the doubled funds they have earned and maintain the remaining funds (cost), but try to make them understand the potential crazy crashes that could occur in a bear market. (If they are staunch Bitcoin supporters and never want to sell, that's okay, but they must be prepared to face challenges at some point.)

In a bear market, selling is driven by panic and fear, but exiting in a bull market becomes relatively difficult. Sometimes, if they feel they sold too early, they will resent you, but they will thank you later.

They also need to be careful. If they choose to take profits and then can't resist re-entering the market, reinvesting those profits, if the market continues to rise, they will experience FOMO — this mindset usually leads to unfavorable outcomes.

Because if the market suddenly crashes, they may ultimately find that, in the event of a sharp drop in asset value, they owe more in taxes on realized gains than the remaining assets they hold (this scenario often occurs).

Every sale of a cryptocurrency asset is a taxable event, even if it is an exchange of cryptocurrency assets for another. Once I start truly cashing out, I plan to park it in a traditional finance (TradFi) interest-bearing account for 12 to 18 months — high-yield crypto stablecoin accounts do not fall under the category of cash custody because there is still crypto market risk in these accounts, and the leverage accumulated during a bull market can leave you with nothing. First, I will settle my tax liability before seeking new investment opportunities, often occurring when people lose their rationality due to panic, or ideally, when the market cools off and people become indifferent (which often happens 12 months or more after the market peak).

Although Exchange-Traded Funds (ETFs) and potential sovereign nation buying behavior may mean that Bitcoin (BTC) will not experience an overly brutal bear market in the future, every bull market arrival sees people come up with various reasons to prove it will skyrocket to unreasonable highs or claim that there won't be a bear market.

The "supercycle" is always a collective delusion without exception.

I can see the reasons for the repeat of cycles (peaking in the fourth quarter of 2025) and also why the cycle could be prolonged and break the four-year pattern. Although we may see consolidation after the new U.S. president takes office, I do not believe in the idea of a shortened cycle. It's just post-traumatic stress disorder (PTSD) from the bear market trauma at play.

That being said, structurally, anything that grows at a rate of 100x is prone to at least an 80-90% retracement at some point — mainly due to too much profit-taking.

If SOL reaches $800 in this cycle, then in the future (e.g., 2027), it may drop to $80-160. So, if someone buys at $240 and holds steadfast, then in the upcoming bear market, they will lose money. It's hard for people to realize this amidst the frenzy of a bull market, but since you've been through it, you understand, and now you can educate them :)

From the current price perspective (SOL has already increased more than 30 times from its low point), no one can get rich quick or achieve crazy return multiples. However, they will see someone making big money, so it's hard to resist the temptation. If you tell them not to buy and to wait because the "ultimate crash" will bring the price below the current level, they will feel pain because, depending on the asset, there is still a 2-5 times or even higher upside potential before reaching the peak, so everything is very unstable.

One last point I'd like to further elaborate on is that many inexperienced investors tend to think more in terms of dollars ($) rather than in terms of X (multiple) or percentage (%). For example, if you say SOL might rise to $1000, they will think, "Wow! That would increase the value of each SOL by $760!" However, going from $8 to $240 only adds $232 in value per SOL.

What they fail to realize is that going from $8 to $240 is a 30x increase, while going from there to $1000 is only a 4x increase. It is crucial for investors to truly understand this point.

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