A reader asked the following questions in a recent comment:

How were the investment thresholds of $35,000 for BTC and $2,500 for Ethereum determined? Can they be higher? Is there still a chance for BTC to reach $35,000 in this round?

The set values of $35,000 for Bitcoin and $2,500 for Ethereum were largely estimated based on my experience.

In all bull and bear cycles before the last bear market, Bitcoin's decline from its peak to its low point exceeded 50% every time.

In that market cycle, Ethereum experienced a bull market in three areas (DeFi, NFT, and blockchain games) and produced phenomenal applications. Such a vigorous ecological outbreak was unprecedented. According to the general rule of "the higher the rise, the longer the fall," once this bull market collapses, the subsequent bear market is likely to be quite severe.

Therefore, I speculate that Bitcoin and Ethereum are still likely to experience declines of more than 50% from the peak of the bull market to the low point in the upcoming bear market.

Later, when we witnessed the collapse of the entire cryptocurrency market, the peak values for Bitcoin and Ethereum were determined to be less than $70,000 and less than $5,000, respectively.

Therefore, based on conservative estimates, I chose half of $70,000 and half of $5,000. This is the origin of my selection of $35,000 for Bitcoin and $2,500 for Ethereum.

Looking back at this estimation process, there is a crucial underlying assumption: that the decline of Bitcoin and Ethereum in the bear market cannot be less than 50%.

Without this underlying assumption, all subsequent estimations are not valid.

However, upon careful examination of this assumption, I realized a problem:

I was actually speculating on prices and then formulating strategies based on those speculations.

Over the years, as my understanding has evolved, I have become increasingly skeptical of this approach. Because relying on speculation is not a sustainable method.

In the past, this strategy worked because I guessed correctly, but such guesses largely relied on experience and intuition, which are difficult to permanently replicate. A method that cannot be permanently replicated is not a reliable long-term strategy.

So, in a recent article, I wrote a passage along the lines of: I have been thinking whether I should try to hold onto the assets I believe in forever, or at least significantly increase the proportion of long-term holdings after this bull market.

As for whether the investment thresholds can be raised or changed?

Of course, they can.

Each investor has their own understanding and intuition about the market and can completely find an investment threshold that suits their own risk tolerance, especially based on their own understanding and intuition.

Can BTC reach $35,000 again in this round?

This is speculation about the market, and I cannot answer that. I hope it can. If it does, I will buy more; if not, it doesn't matter.

After discussing investment thresholds, let's talk about selling thresholds. This was also a question that many readers asked in the recent comments.

According to my previous practice, the so-called selling threshold refers to starting to sell when the market (such as Bitcoin) drops by 20% from its peak.

The implicit problem with this approach is actually the same as the setting of the investment threshold mentioned earlier: it has an underlying assumption.

That assumption is that the market will continue to decline after dropping 20% from its peak and will not surpass the previous peak for a relatively long period (at least 2-3 years).

This is also speculation about the market and requires accurately predicting the market's performance over the next 2-3 years and formulating strategies accordingly. This is even more difficult.

What if the market briefly hovers and washes out after dropping 20% from its peak and then rises again, surpassing the previous peak?

Then the selling threshold completely misses the subsequent market trends.

The market generally enters a technical bear market when it drops 20% from its peak. This is a general rule in financial markets and has been quite effective in the past. However, especially in the US stock market, although it is effective, the effective period is getting shorter.

Taking the S&P 500 index as an example, in the past decade, anyone who sold all their holdings after the S&P 500 index dropped 20% and expected to wait for a significant pullback (such as a pullback of over 50%) before re-entering the market would have been wrong in almost all cases and would have missed the subsequent rapid recovery of the bull market.

Why?

Because although the US stock market experienced a decline and entered a bear market, the duration of this bear market was relatively short, and the decline was limited. In this market, it is almost impossible to wait for sufficiently low prices. If you insist on waiting, you will miss future market trends.

Therefore, in the US stock market, it is very difficult to set investment and selling thresholds with sufficient price differentials.

The most suitable method in the US stock market is actually to buy and hold for the long term—this is the experience summary from the lifetimes of the two masters, Buffett and Fisher.

Of course, what they mean by buying and holding for the long term is not never selling, but their criteria for selling are not based on speculating on market prices as we might imagine.

Will this trend and characteristic of the US stock market one day be replicated in the cryptocurrency market?

I don't know, but I am becoming increasingly cautious about speculating on the market.

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