[GUIDE] Exit strategies and how to deal with the upcoming bear market. If you feel lost, it’s because everyone is different and not all strategies are valid for you. Worry not, I got you. [LONG]

Disclaimer

This is not financial advice. Also, I assume you have some basic knowledge of the Bitcoin market cycles and have already invested in Crypto. Always do your own research.

Finally, English is not my mother tongue, so please bare with me.

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I've seen countless YouTubers giving (not financial) advice about exit strategies. But they don't all offer the same advice. Why? Isn't there an optimal strategy? If so, why do they differ so much from one another?

Do I HODL all my coins? Do I HODL only BTC? Do I take my profits in fiat or BTC? Do I buy real estate with my gains? Do I sell and buy other assets to hedge against the bear market? There are no good or bad answers because we are all different.

Someone in Venezuela might change his entire family's lives because he owns a few Sats on an old phone with the crash of the Bolivar. His reality is much, much different than mine. I'm not looking to eat, I'm looking to retire early.

In the end, unless they know exactly who you are and what your goals are, those YouTubers' strategies are merely good ideas, but otherwise ultimately meaningless for most of us.

I've gathered here most of the helpful tricks and tips I've found. I'm sharing those with everyone in the hopes that it will help someone make good choices. Or, at least, an informed one.

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Before deciding on a strategy, you need to figure out what your risk tolerance is and what you ultimately believe in. Let me explain.

What is your risk tolerance?

A risk averse person might decide to invest in BTC, close their eyes and open them again in 10 years. A person that tolerates high risk could go all in on XRP, sell near the top and buy back in again near the bottom of the bear market and make an absolute killing and become filthy rich. He could also lose a ton of money as well. Risk vs Rewards.

Therefore, assessing your risk tolerance and using risk management to pick a strategy is essential.

For those who don't really understand the whole crypto market in regards to risk, it's actually quite simple: The larger the market cap of a coin/token, the lower the risk. The smaller the market cap, the higher the potential upside.

I will not spend time explaining why that is, but it is so. You can confirm this with your own research.

In general, the whole market pumps in the bull run. Some coins do better than others, but every good project will see huge gains.

BTC arguably offers the best risk to profit ratio. It's extremely asymmetric. There is huge upside with almost no risk. That's the main reason behind the institutional adoption. It is not, however, the best way to make lots of money. It will be outperformed by a ton of altcoins, but know that very few (if any) will outperform it during the bear market.

ETH is a little riskier, but arguably not during this bull run. It's almost a sure shot that it will outperform BTC. It's almost a sure-shot that it will underperform BTC during the bear market. However, please keep in mind that it is NOT risk-free like BTC. Something can happen to Ethereum. It's extremely unlikely, so it's still the 2nd safest coin.

ALTs are all risky, period. Any bad news can kill a coin. Even our beloved ADA. Good projects generally are pretty safe (top tier coins). The lower down the rankings, the higher the risk.Small gems' performance can be downright outrageous, though. We're talking in the thousands of percent gains. Almost all (if not all) of them will crash hard during the bear market, according to past history. This could change, but I wouldn't bet on it.

On a scale to 1 [super safe] to 10 [super risky], a safe portfolio looks like 100%-80% BTC. A risky portfolio looks like 50% ETH and 50% Alts. A ridiculously risky one is 100% XRP.

You can assess where you fit on that scale.

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Now that we know your risk tolerance, we need to know what do you believe in.

There are 2 questions to answer:

1- Do you believe in the US dollar, Bitcoin or other assets? And what about the economy?

So, do you believe there will be an economic collapse? Will BTC become the world reserve currency? Will there be (or is there) hyperinflation in your country? Those questions are legitimate and personal.

They are also important when trying to figure out your strategy. I personally think Bitcoin will one day be the world reserve currency, for instance, even though my local currency is somewhat stable for now. I'll put myself into the "Believe in Bitcoin" category. That basically means I want to take some, most or even all my profits in BTC or Satoshis.

Maybe you think the US dollar will survive (or your local currency), at least for the coming years, and just want to make money in crypto. You don't really care what happens with the financial system, as long as you can make money. Then, you are in the USD category. Take profits in Stable Coins or your local Fiat currency, pay capital gains tax (if needed) and buy yourself a Lambo, a house, or just food if that's what you need. There's nothing wrong with that.

Maybe you're unsure. Maybe you like other assets and want to diversify. Gold, Silver, Real Estate. This is not my area of expertise. Consider a financial advisor. Take profits in Fiat and diversify the hell out of your portfolio to reduce the risk of hyperinflation or an economic collapse.

2- How bad do you think the bear market will be?

Understanding the market cycles is important to answer this question. If you have no idea what I'm talking about with the Bitcoin market cycles that (re)start each halving, has 4 phases including a bull run (what we're in now) followed by a bear market (should be in 2022), then you need to study it. It's important. You have a few months left to do so.

There are pretty much 3 school of thoughts on that subject.

1. This cycle will rhyme with the past cycles.

Essentially, this means that BTC will rise to anywhere between 150k to 400k (or so – hard to tell) and crash down hard (about 80-85%) during the bear market (next year-ish).

1. This cycle will rhyme with past cycles, but with reduced volatility.

The argument here is that BTC's volatility is declining and the bear market crash won't be as bad. The last cycle, the major pullbacks were 30-40%. In this cycle they are closer to 20-25%. (more or less – didn't do the exact math). This reduction in volatility leads some of us to believe that the bear market (a multi-months long pullback) will not be 80-85%, but rather closer to 50-60%. Maybe 40%, maybe 70%. No one knows.

I'm in this camp, btw.

1. This cycle will be a supercycle. We have to acknowledge the fact that adoption will one day break the market cycles. Of course, the halving will always have an effect on the price, but the cycles might stop repeating. Some, like Dan Held and Michael Saylor, believe this might be the case this time around. There are a few arguments (covid, money printing, economic collapse, etc.), but the main one, I believe, is the institutional adoption. This should create enough buying pressure to keep Bitcoin afloat during the bear market where the correction would not drop so drastically, but instead only significantly. Consider a possible sideways time-based correction with relatively small fluctuations (30-40% or even less) over a long period instead of a huge sudden -80% drop.

I believe this is a possibility. And regardless of what you believe, it's important to keep this in mind when implementing a strategy. Personally, I think it's still too early. Many, like me, think this will happen, but maybe only on next cycle or even the one after that (in 4 to 8 years).

However, with all the uncertainty and instability in the world, it's safe to assume it is at least a possibility.

Ok, great, now what? We pick a strategy.

Bear market and exit strategies.

Before I start, I want to point out that these strategies are not meant to be followed. Rather, they serve as guides and examples of what is possible. You can mix and match anything to create your own strategy according to your own needs. Everything is scalable with a wide range of possible variations. In other words, it's kind of like a buffet 🙂

Strategy #1: HODL (Hold On for Dear Life) [Risk 1, Bitcoiner]

This is the perfect strategy for people who don't like trying to time the market. It's also the only one I'm 100% confident in. There is a great saying describing this strategy: "Time in the market > Timing the market". It's an investor's perspective.

If you don't know what the hell you are doing, you can't go wrong, here. Buy BTC. HODL forever. You'll do more than fine.

The strategy assumes that you don't care what happens in the bear market. This is not an OPTIMAL strategy, but it is a good and SAFE strategy.

Imagine buying at the top of the 2017 bull run. You would have bought BTC at 19.5k. Looks pretty bad when it drops to 4k the following year. However, you only lost money if you SOLD. If you HODLed, you are doing great right now. There isn't a single soul on the planet that wouldn't buy BTC at that price today. HODLing simply works and is almost 100% safe.

If you HODL, I assume you will do it with Bitcoin. So what do you do if you are a long term investor but own other coins as well?

Well, in this strategy, you HODL those too. Ironically, keeping Altcoins (and even Ethereum) during the bear market is actually a risk. Therefore, this strategy works a lot better if you are 100% BTC, or at least mostly BTC with some other projects you just love and want to contribute to. For instance, while this is not my strategy, I AM planning to keep a small ADA bag to HODL because I want to support Cardano and believe in the project.

Strategy #2: Stacking Sats is the name of the game. [Risk 2-3, Allcoiner]

Disclosure, this is my personal strategy.

Here, we HODL BTC, which makes up most of our portfolio, but we use altcoins during the bullrun to stack more Satoshis. The ONLY use we make of altcoins is speculating on the fact that it will outperform bitcoin and take all (or most) of our profits in Satoshis.

The way we do this is by pricing those alts in Satoshis instead of USD. A variation of the Little Old Lady investing strategy is used to take profits. This strategy is extremely powerful in Crypto.

Essentially, when the altcoin doubles (or whatever percentage you like) vs BTC, we take out our initial investment and let the rest ride as a "moon bag". We take profits along the way to the top, or simply try to time the top as best as we can. Both are viable. It's a personal choice. When in doubt, Dollar Cost Averaging is the safest option. People often forget this is also possible when selling. It's the strategy used by (most) miners, for instance.

If we believe in a super cycle, we can be riskier with our moon bags, but we always make sure we to take out our initial investment. We're not in the business of losing Sats. We Stack Sats.

If we expect a harsh bear market, the goal is to purchase those coins again very cheap when they drop hard (90%+). This should turn into incredibly good profit in the next bull run 3 years later. Of course, fiat (stable coins) can also be used for this strategy, depending on what you prefer.

The ultimate goal is to transform the alt gains into something that will lose LESS value during the bear market to purchase them back again near the bottom while stacking as many Satoshis as possible.

Strategy #3: Sell the TOP, buy the BOTTOM. [Risk 8+, Harsh Bear market expectation]

This is for people like the (infamous) BitBoy Ben. He says he's a crypto guy. He's not. He's a money guy; a businessman. It just so happens that he understands that fiat is not very good money and that crypto gains are insane.

If you are a risk taker like him, you can make huge gains by trying to time the market. For instance, if you own 1 BTC and it reaches 400k. You could sell it for 400k in Stable coins. In the bear market, if it loses 80% of its value as expected, you can buy 400k worth of BTC at a price tag of 80k. Suddenly, you own 5 BTC instead of 1.

This is honestly the optimal strategy to make most out of the bear market. There are issues and risks involve, however. So let's take a look.

First, there's the issue of timing the market. Nobody will time the top and bottom perfectly. So that hypothetical 1 BTC isn't really turning into exactly 5 depending on your performance. You will likely have to scale out when taking your profit. You probably (hopefully) DCA'd in (Dollar Cost Averaging) and you should probably do the same when taking profits.

When the top nears (according to key indicators – more on this later), you want to start to DCA out of your position. Something like selling 20% of your full position every week for 5 weeks, for instance.

Personally, I started DCA since the beginning of 2018. I bought at 18k and all the way down to 3.5k and back up to 17.5k, my last BTC purchase in December 2020. It was not optimal, but it was safe. Every good investor understands the value of Dollar Cost Averaging. If you like risk, you chose a smaller period of time (1 month instead of 2 years, let's say), but you should probably still DCA in. Or, you know, go all in if you really like the price. Since I had funds available, I purchased more at 3.5k than 17.5k, obviously.

Secondly, there is the risk that you miss the top completely. That's the only reason I am not fond of this strategy. For instance, if I believe the top is 200k and eventually sell all of my position around that price target, but BTC keeps going up… 250, 300, 350, 400, 500k! Then it crashes to 250k and stabilizes there for 3 years. That's a pretty big loss.

Is that a likely scenario? Probably not. Is it possible? Fuck yes. Certainly, those who believe in a super cycle think it can be much worse than that. So, who's right? I don't know. Neither do you. Nobody does. Risk management.

If you, like BitBoy Ben, truly believe in a harsh bear market and a top around September, this is the ultimate strategy to make the most gains. If you dislike the risk of timing the market or the risk of a supercycle, you probably should stay clear or only consider doing this strategy with a fraction of your portfolio.

In my case, even though this is not the strategy I will use, I could still convert a very small part of my BTC portfolio to stable coins and try to buy the bottom.

Or…

Strategy #4: Short the bear market [Risk 9+, No super cycle]

The last thing I would like to talk about is shorting the market. Trading portfolios should never, ever be refilled. When trading, you accept the risk of losing it all. Once you are OK with this, you can try margin trading.

I highly advise against it, but it's a valid option.

Just be extremely careful.

However, if you do believe in a long bear market, placing a long term short on low leverage with a big margin can be quite rewarding.

If you are a trader, you are unlikely reading this. If you aren't, consider studying a LOT before trying to margin trade. It sounds easy. IT. IS. NOT.

Strategy #5: The best strategy (Yours!) [Everyone]

There is a high probability that you should not use the previous 4 strategies. The important parts are the concepts I shared, not the strategies themselves. You should make up your own strategy according to your goals and risk tolerance.

After assessing your own needs, you can come up with a fair plan for YOU. It doesn't need to be perfect, because it CANNOT be perfect. Don't be too greedy. Regardless of your risk tolerance, risk management is important.

Even if you believe in something (USD IS SCREWED!), it doesn't mean it will happen. Have a plan in place for scenarios where what is expected doesn't plan out.

Manage your risk responsibly.

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How to time the TOP?

Unfortunately, the answer is that you can't. It's not really possible. Once again, the goal is to be as close as possible, not hitting the jackpot. That's why DCAing out of your position has the best chance of getting you the best outcome. The riskier you are, the smaller the time frame. I would DCA out within a couple of months, personally. Someone might want to do it all in a week. To each his own.

I will also not tell you how to use the following indicators, nor will I list all of the useful ones. You need to do that research yourself because I am not confident I can be of much help. Just know that there ARE cycle top indicators, and many of them are pretty useful.

I'll briefly explain the three that I will be using. But I follow quite a few market analysts and value their opinion greatly. PlanB and Willy Woo for instance. Lots of good YouTubers (Coin Bureau specifically) can clue you in as well. Again, do your own research,

– The first indicator is the cycle length. By determining when in the last 2 cycles top were (by counting the number of days the top was reached after the halving), we can approximate when the top will be this cycle. Since the last two were very similar, we assume this one will be as well. There are plenty of better resources than me on that subject, but it is expected to be late Summer to early Fall. September / October is a fair guess. This can vary. It could be in July, it could be in January 2022. It could be never. Who knows? What's certain is that it is not tomorrow (April). We still have plenty of upside left.

– NUPL (Net Unrealized Profit/Loss). This has been very accurate in the past. In essence, when too many people are in unrealized profit, we can expect mass selling. This can trigger an avalanche of fear in the whole market and everything crumbles quickly. That's what happened in the last 2 cycles. The danger is a double top scenario like in the 2nd cycle. It hit the "euphoria" level (I think it's 95+), crashed, then picked up again, reached "euphoria" once more, and THAT was the top. In 2017, it only reached it once and it was the top. It's a good indicator, maybe one of the best, but it has shown a fake top before. There's no magic recipe.

– BTC Exchange flows. This graph shows how many BTC is deposited or withdrawn from exchanges. Since the main way to sell BTC is by first depositing them on an exchange, when the in flows are too great, it's a sign that a lot of sellers are entering the market. At the moment, the out flows (BTC withdrawn from exchanges) are quite high and it clearly shows a shortage of sellers (and a shortage of supply on the exchanges).