3 Strategies for Riding the Crypto Bull
In the early ‘90s, the professional bull-riding community was captivated by a 1,896-pound yellow bull named Bodacious.
He was known throughout the rodeo sport as “the world’s most dangerous bull.” He’s still considered “the greatest bull ever to buck.”
Bodacious had a unique move: bucking to get riders leaning forward and then snapping back his head, intent on a violent collision with his human rider.
Over the course of his career, 135 cowboys tried to ride Bodacious, but only six managed to stay on his back for the full eight seconds.
There was glory in staying on Bodacious, but there was also a high risk of injury.
Bull-riding icon Tuff Hedeman was one of the few who stayed on for the full eight seconds. The next time he tried, however, Bodacious literally smashed in Tuff’s face.
A few weeks later, another bull rider took up the challenge wearing a protective face mask. Bodacious still shattered his eye socket despite the headgear.
I’m sharing this story because riding Bodacious is what it’s like trading the crypto market lately.
How to Deal With Crypto’s Volatility
The price of bitcoin surged over 2,000% in less than a year from its March 2020 lows. It then dropped 53% over the course of a few weeks to $30,000.
Altcoins have fared even worse, with some dropping 75% from their highs in a few weeks.
The last crypto bull market was no different. The price of bitcoin went from $900 to $20,000 in 2017.
However, there were seven drawdowns of 20% or more along the way. And too many investors were shaken out and didn’t survive the run to the highs.
Here are some strategies to deal with crypto’s volatility and help keep you on the bucking bull:
- Position size appropriately. Crypto is a highly speculative investment. I don’t recommend allocating more than 5% to 10% of your investment portfolio to the sector. Additionally, if those investments become a big percentage of your overall portfolio, you need to reallocate. If you do it quarterly or after a big surge in crypto, it will lower your overall risk. This also means allocating more toward crypto when prices sink.
- Don’t chase the “zombie coins.” These are old crypto projects that have become obsolete and irrelevant. There are also inferior cryptocurrencies that are mainly driven by hype and marketing, such as Cardano and Ethereum Classic. You should only buy cryptos with real-world use cases, such as Ethereum and Uniswap. If you stick with the crypto assets that are continually growing their underlying ecosystems, you’ll outperform over time.
- Use the underlying volatility for entry and exits. Crypto is similar to Bodacious, a bucking bull like no other. New investors with no guidance quickly get bucked out. I recommend using services like TradeStops to help figure out the best times to get in and get out. You can learn more about TradeStops when we release a special rebroadcast of the presentation I filmed with Keith Kaplan, CEO of TradeSmith, later this week. Keep an eye on your inbox!
Editor, Strategic Fortunes
My career on Wall Street started while I was in college. I spent a summer interning for Merrill Lynch in the middle of the ‘90s bull market. I was fascinated with trading, and as a result, after college, I joined Salomon Brothers in the famed mortgage bond trading department. Later, I spent time at Citigroup working with credit derivatives. Eventually, I needed to walk away from the excess of Wall Street. That’s when I joined Banyan Hill in 2017. Now I help readers get ahead of the market and build their retirements.