This is an article that goes over some longer-term and popular trades that played off greatly during market crashes. These trades shed light on market sentiment and fear, and how buying into brutal red markets, against sentiment, rewards the patient investor.
We have dubbed the market crash of May 2021 as Elonageddon, it helps lighten the mood. Bitcoin had grown from around 15k in November to its peak of 65k in less than half a year. The market in general was hot, euphoria was everywhere. As a rule of thumb when everyone including the guy at the gas station, or the plumber, are talking about how much money they made on an asset, its generally about to see a massive correction. I like to call this term “sentiment saturation”. By time your neighbor and parents are talking about Bitcoin and the massive gains, the positive sentiment is already saturated. This saturation starts to reverse before it becomes blatantly obvious. Trading opposite of general sentiment from the masses can often reward the early investor.
Many newer wallets holding Bitcoin were massively in profit, tesla announcing their purchase of Bitcoin blew the market wide open. Bitcoin holders who purchased during the pandemic the previous year saw 3,000$ dollar Bitcoin discounts. A one-thousand-dollar purchase of Bitcoin became an astronomical 21,500$, the sell pressure was massive. Elon flipped his stance on the market, announcing Tesla would no longer accept Bitcoin as payment related to environmental concerns. My favorite part about this is Tesla has a MASSIVE conflict of interest since they aim to be the green answer to the planet with their battery technology.
Tesla also reaps most of its profits from carbon credits they sell to gas companies and other non-green, but wealthy energy companies, they also sell these to other car companies. In fact, Tesla makes almost all of its money through these carbon credits, they have a bit of a monopoly in the United States. These credits are paid by taxpayer dollars. Essentially, we the people, are paying Tesla to abuse a system that should not exist. But I digress, the flip of stance was the catalyst for the market dump Bitcoin dropped as low as 32,000$ in the coming weeks. A week or two later Elon tweeted that Tesla has “Diamond Hands”, we wonder how many large investors capitalized on the 50% discount.
The first project I would like to highlight was my biggest trade of the year in dollar amount. It was not the biggest percent gain, but because it was a larger market cap token, I invested much more money into the thesis. DOT during the Elon crash dumped as low as 11$ from the prior 30-40$ range. Many of the early Coinbusters followers decided to dollar cost average this dip heavily, both myself and MoC took part as well. I myself took some Ethereum profits and converted these into DOT. This was back when DOT was not available on Coinbase or Binance US, it pays to be early. I would send my Ethereum to the Kraken exchange, buy DOT, and stake it for 12% APR. I also would send cash to Coinbase buy Litecoin, and then send that to Kraken too. Litecoin is one of my favorite tokens to move funds cross exchange, the LTC fees are minimal, and the network is very fast with high liquidity.
We rode this wave upward to the 45-52$ range and began selling our bags for over 300% profit. A general rule of thumb is to take at least 50% of this profit and put it into Ethereum or Stable coins. The rest can be redeployed into other assets that have not yet seen their day. The most risky thing you can do is deploy a large amount of your profit into low market cap tokens. I invested part of my DOT profits into Moon River which was a loss for me. But the rest went into AVAX, ATOM and LUNA. The important thing is that we were patient, we invested with conviction, AND we made a 300% gain in a timeframe most stocks would need years to duplicate.
Terra (LUNA) & ATOM
I still hold LUNA, I did sell some around the 90$ range to have some UST (stable coin) to redeploy when the market was favorable. We were buying LUNA in October, I had sold my Cardano as my thesis was changing, the Cardano launch was shaky at best. I took the majority of my ADA tokens and sold them into LUNA and Ethereum. This played out beautifully as LUNA provided a generous consolidation period between 35-45$. We were able to sell for a 200% gain, these profits were moved into ATOM, and UST for more stable coin reserves. ATOM I have been dollar-cost-averaging since the 20$ range, it is a great long-term project I hope to hold for months. Remember, LUNA and many other strong networks are built upon Cosmos (ATOM), and with the rework to their economical model, this token is set for massive growth.
Avalanche we were dollar-cost-averaging heavily during October. I was able to take DOT profits into AVAX as well as buy the token on Kucoin. We were buying AVAX before it was on Coinbase, another reward for being early. Do remember, these tokens were purchased during uncertain times. The market had slightly recovered from the Elon crash, and was starting to form a double top, or an all time high, no one could know for sure. AVAX rocketed to the 140$ range, we sold some, I chose to stake the rest and participate in the Avalanche ecosystem. Avalanche has remained fairly strong compared to the rest of the market. For those with a keen eye, a defi project that describes what happens to snow when it is too warm is making major moves. I still hold AVAX and am taking its ecosystem plays into more AVAX, similar to our Ethereum profit taking strategy. The focus of this article is that we bought into these projects during market crashes, when everyone was looking away, pointing fingers at crypto investors. Those who invest with emotion usually lose out. Notice a common theme? We do not buy any of these tokens on the major uptrend, we buy them when they are boring and forgotten.
These are just a few of our larger dollar amount investments we have made in the past. Of course, there were other projects, Harmony ONE is a great example and one of our best performers by percentage (~750%). You just can’t get these types of gains in the stock market reliably. The major takeaway of this article is that, as an investor, do not give up, don’t allow the market to scare you from your thesis. If you believe a project has value and it has developer interest, a community, and strong tokenomics, selling at the bottom of a dip is one of the most painful lessons you can learn. I believe that despite the FED increasing rates, and the FUD bombs we are seeing all over regarding crypto bans and defi exploits, the sentiment saturation is reversing. The Bitcoin price just may be priced in, accounting for all the negative sentiment. We could drop lower, but I will continue to choose to not miss out on this rewarding market. Nothing fundamental has changed about blockchain and crypto, we are seeing a pullback on all equities, many stocks dropped 50% also. Crypto rewards the patient, and the brave. Please remember none of this is financial advice, this is a recap of some of the moves we made last year, for education. Do continue to do your own research and stay safe out there!