Author: Chris Burniske, Partner at Placeholder
Translated by: Yuliya, PANews
If you are involved in the cryptocurrency space, you may have recently received frequent inquiries from friends seeking investment advice. In the current market environment where Bitcoin's price is approaching $100,000, providing guidance to novice investors is indeed challenging. Here are some insights the author has gathered from observing the market over the past decade.
Basic Principles
Personal Responsibility Awareness
Clearly inform that every investment decision is the investor's own responsibility. Even if you are experienced, it does not mean your judgment is always correct. The market has no absolute certainty, and those who claim to be "absolutely certain" are often lying.
Market Cycle Awareness
Try to inform your friends about which stage the cryptocurrency market is currently in, according to the author. We are currently in the second year of a bull market (starting from the bottom in November/December 2022). Bitcoin has risen over 6 times, Ethereum over 4 times, and SOL over 30 times. There is a harsh reality at this stage: the rising prices of crypto assets attract more attention, which in turn translates into buying demand. However, the later it is in the "attention cycle," the less ideal the entry timing often is.
Investment Strategy Recommendations
Asset Allocation
For novice investors, keeping the investment portfolio simple is a wise choice. The recommended allocation for beginners is as follows:
Bitcoin (BTC) 50%
Ethereum (ETH) 25%
Solana (SOL) 25%
Even if there may be deviations in the timing of entry, at least the assets held are of high quality. If interested in other tokens, it is advisable to keep them within 10% of the total position to limit risk.
Profit Strategy
Profit management is equally important. When investments double (2x), it is recommended to withdraw half of the profits while retaining the original investment cost to continue holding. When reaching 3x, one can exit completely or realize 2x profits while retaining the cost portion to continue holding.
It is worth noting that if you encounter Bitcoin holders who are steadfast in their holdings, they may never want to sell, which is understandable, but one must be mentally prepared to endure deep corrections.
Risk Management and Tax Considerations
In cryptocurrency investment, every transaction is a taxable event, including crypto-to-crypto trades. It is advisable to transfer funds to a high-yield account at a traditional financial institution for 12-18 months after realizing significant profits. First, address tax issues, and then consider re-entering the market, preferably during times of market panic or when general interest has waned.
Regarding market cycles, while the launch of ETFs and potential sovereign purchases may mitigate the depth of future bear markets, the notion of a "super cycle" is often a collective illusion of the market. The fourth quarter of 2025 may see a cycle peak, and any asset that rapidly achieves 100x growth is structurally inclined to experience an 80-90% correction due to too many investors holding substantial profits.
Investment Mindset and Awareness
Novice investors often focus more on absolute prices rather than percentage increases. For example, Solana rising from $8 to $240 increases by $232, which is actually a 30x increase; whereas rising from $240 to $1,000, although it increases by $760, is only a 4x increase. Understanding this is crucial for forming a correct investment awareness.
Staying clear-headed in a bull market is more challenging than maintaining courage in a bear market. Chasing high prices after realizing profits is often a very dangerous behavior, as if the market suddenly collapses, investors may face a situation where the tax liabilities on realized gains exceed the value of remaining assets.
The current market may extend until the fourth quarter of 2025 for a peak, or it may break the four-year cycle pattern. Although it may not be possible to achieve crazy multiples from the current price, one can still participate in the market through reasonable strategy planning and risk control. The key is to stay clear-headed, control risks, and manage expectations reasonably.
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