When to sell? Pt 1

Hello crypto friends! This is the first part in a series of posts about when to sell. Originally I wrote this for my friends in the Hegecoin community. But this info is useful no matter what coin you're into. So in the spirit of the season, I'm gonna share it with all of you in here too. Hope you like it and happy holidays from Hege!

In this initial post I'll first cover some basics and outline a strategy. Then I'll dive into the first part of the strategy by explaining the four year crypto cycle and how to view it through the bitcoin dominance chart.

So let's dive in.

As I said, I want to share some thoughts with you all about when to sell. Now is certainly not the time! But let's be real, at the end of the day we're all here to make money. And, Dell jokes aside, this means at some point in time we will have to sell.

But when is that time? When DO we Dell?

The unfortunate truth here is this: nobody knows exactly. And anybody who tells you otherwise, that they can predict the top in advance, well they're either delusional, or they're simply lying to you.

The second unfortunate truth is that you will not be able to play this perfectly. You are not going to get lucky enough to sell at the exact top. But. The good news is that your timing doesn't have to be perfect. It just has to be good enough. And with the help of some key charts, I think good enough is totally possible to achieve for all of us.

But what charts should we keep track of? And how should we interpret them? There are hundreds of different ones to consider, and no single one is going to give us the absolute truth. In my opinion we should select a few key charts and principles and stick to those. Otherwise, we will always be able to find that one chart that confirms whatever it is that we already believe, and we'll end up fooling ourselves. (Confirmation bias is a bitch!)

So with that in mind, I have selected three things to consider:

1. Crypto market cycle dynamics, to get the big picture view.

2. Moving averages, to spot long term trend changes.

3. Classical chart patterns, to give early warning signs.

I can't possibly cover all of these in one post. So I will split this across a series of at least three posts. In this first one I will start to cover point number one: crypto market cycles.

I'm sure most of you are already aware of the four year crypto cycle theory. Basically it says that bitcoin and the crypto market tops every four years. The past three tops have been in 2013, 2017, and 2021, respectively. If this pattern keeps repeating, it will top again sometime in the coming 6-12 months.

Before 2013, we actually had a significant top in 2011 as well, so the track record is not perfect. But it is still good enough that we should pay close attention. However, instead of just looking at the time component, which is difficult to predict, I think a better way to see what is going on in these cycles is to study the so called dominance charts. I have selected two of them: bitcoin dominance (BTC.D), and others dominance (OTHERS.D).

Let's start with the bitcoin dominance chart. It simply shows us how much of the entire crypto market cap that belongs to bitcoin. At the time of writing, the entire crypto market cap is around $3.5 trillion, and bitcoin is around $2 trillion. So this gives us a bitcoin dominance of around 2/3.5 = 56.5%. In other words, bitcoin makes up about 56.5% of the entire crypto market right now.

What we want to study here is how this dominance has changed within the past cycles. And when we do that, we see that it follows a clear pattern: it tops out shortly before the cycle tops, and then it falls sharply leading into the peak. This nosedive into the end of the cycle represents the mythical alt season, where altcoins go on gravity-defying mind-melting rallies.

BTC dominance (BTC.D) from 2017 to 2024.

Looking at the present chart, we see that the bitcoin dominance clearly has started to topple over recently. But we also see that it still has a long way down to go. This means two things:

1. It is very unlikely that the cycle top is in.

2. Alt season is only just starting.

So, judging by this chart, there is nothing to be concerned about right now. It is not yet time to sell.

But. When this chart starts showing bitcoin dominance down in the 40% area, that will be a warning sign that the top is near. This is the important message here. So friends, pay attention to this chart going forward!

We cannot go by the bitcoin dominance chart alone, but it is key to understand what is going on. So make sure you understand it completely. In the next post we’ll have a look at the others dominance, which is a useful mirror image of the bitcoin dominance. So stay tuned for that!

Any questions or comments? Happy to discuss!

❤️ Much love and happy holidays from the Hegecoin community ❤️