Ever since I wrote my previous blog in December, the crypto markets have been plummeting. As I’m writing this one, it is not fully clear whether the bottom has yet been hit. In the process, I’ve lost about 70% of my portfolio’s worth compared to the All Time High (ATH) in January. This was A LOT of money.

Why did I sit idly by while my portfolio was bleeding money? The answers have been imprinted in my head from reading business books, Reddit and getting friends’ advice. You have to HODL. No matter how much money you lose, HODL. And believe in the tech. And wait while the weak hands are shaken out. Eventually, you’ll come out on top.

Although the sheer amount of money lost during the bear market can make one’s stomach turn, the rational mind says this situation could not have been avoided. Yes, I could have sold — but I could not have predicted the right moment to sell and the right moment to get back in. Therefore, holding and enduring the occasional crash seems the best way to get rich over the long haul. Or does it?

Graph: The total crypto market cap between Oct 1, 2017 and Dec 1, 2017 (CoinMarketCap.com). How to perform the Limit Sell strategy: Sell at #1 (price drops below 200B), buy at #2 (price rises past 250B) and sell again at #3 (price drops below 300B). Although HODL is the more successfull strategy in a bull market like this one, the tables turn in a bear market.

Let’s compare the two strategies: #1 is HODL and #2 is sell and buy back at sensible moments; we’ll call this Limit Sell. #2 requires an objective system for determining when to sell and buy to prevent FOMO and other emotional responses. This system we’ll specify as follows: Sell your entire holdings when the market drops below a set limit, and buy back whenever the market’s up 50B. Please check the image above of the crypto market between Oct 1 and Dec 1 2017. Both HODL and Limit Sell buy in on Oct 1 for $1000 in a diversified crypto portfolio. Mr. HODL does nothing and ends up Dec 1 with $2061 in crypto. Mr. Limit Sell however has three actions: when he notices the crypto market plummets a little at 200B, he sells his entire portfolio. He buys back at 250B and sells again when it drops below 300B (to put his next buy target at 350B). Mr. Limit Sell thus ends up at Dec 1 with $1621 in fiat. Over this period, HODL is the winning strategy. But wait..

Graph: The total crypto market cap between Oct 1, 2017 and Apr 15, 2018 (CoinMarketCap.com). Although the Limit Sell strategy fell behind in the bull market Oct-Jan, it outperforms during the bear market Jan-Apr.

Watch what happens when we extrapolate these strategies over the bull and bear markets from Oct 1 2017 — April 15 2018. Althrough the Limit Sell strategy falls behind in the bull market, in a bear market this strategy actually makes money! The HODL strategy has turned from $1000 to $1888 in six months (a nice 89% return by the way), but the Limit Sell strategy has turned $1000 into a staggering $4679; triple the results of HODLing! Oh, did I forget to account for transaction fees? These add up to $60. The return of the Limit Sell strategy adds up to 360%. Pretty amazing, right?!

The Limit Sell strategy is similar to trading based with more advanced figures like RSI (Relative Sales Index) levels. It is just simpler: the only number it requires you to monitor is the total crypto market cap on coinmarketcap.com.

Looking up the Total crypto market cap on CoinMarketCap is easy.

If you were to rephrase the Limit Sell strategy for individual currencies, you could automate it by implementing Conditional Sell and Buy commands on an exchange. This would require even less monitoring, you’d only have to update the Sells/Buys when they hit. However, the strategy does not work as good on individual currencies — they are too volatile and oscillate heavily around psychological price levels, as can be seen in the the ETH graph below. Also, a diversified portfolio is in general a more secure asset.

Graph: ETH price from Oct 1, 2017 to Apr 15, 2018 (CoinMarketCap.com). The Limit Sell strategy works less well because the price of a single currency (even one as big as ETH) oscillates too frequently, leading to an awful lot of buying and selling. If this is your thing, start investigating RSI levels.

So why doesn’t anybody use the Limit Sell strategy? Because of the (wrong!) perception that HODLers are heroes. As it appears, the layman crypto investor would be a lot better off if HODLing were called FOLDing, as the latter term captures better the risk of bleeding money in a bear market. The Limit Sell strategy is also underused because it requires you to DO WORK. You have to be diligent in following the system, but then again you’ll reap the rewards.

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ETH | 0x1da11d4033cc7063060e57d71eed07a656861ec8

NEO | ANJu1ELArntCyVndUz1kmZyatYhNQUm4w9

NANO| xrb_18scehjg39j9w5q9jys68e58j91ckfsky3sr1xh7cefomwg67mutho73ncsq

Don’t know how to buy crypto? Here’s a small guide:

This is an example for Binance, but KuCoin and Bittrex essentially work the same.

Step 1: Buy Ethereum (ETH)

ETH has trading pairs at all mentioned exchanges and has fast transaction times and low fees. So don’t use BTC, it will take more time and cost more. Buy with fiat (dollar/euro) at for instance GDAX/Coinbase or Kraken.

Step 2: Sign up to Binance (or one of the other exchanges mentioned)

You can sign up by at https://www.binance.com/ (or if you want to be nice, you can use my referral link: https://www.binance.com/?ref=10867339). Once you’ve signed up, you’ll receive an email with a verification link. Once you’ve verified your email you will then need to set up 2-factor authentication.

Step 3: Set up 2-factor authentication with Google Authenticator

Binance requires you to set up 2-factor authentication before they will let you deposit money onto the exchange. This is to ensure your security to protect against hackers trying to access your account. To do this you will need to download the Google Authenticator app on your phone.

Step 4: Transfer your ETH from Gdax to Binance

To transfer your ETH from one exchange to the other, you just need to get your ETH wallet address from Binance first. To find this, click “funds > withdrawals/deposits” found in the top right corner of the Binance page. Find ETH and to the very right you will see “Deposit” or “Withdraw”. Click on “Deposit” and you will receive your ETH wallet address. Copy this address.

You will now need to go back to Gdax and click on the “Accounts” tab at the top of the page. Click on “Send” in your Ethereum Wallet and you will be prompted to enter an address that you wish to send your Ethereum to. Paste the address that we copied earlier from Binance and then hit send.

Step 5: Exchange your ETH for your desired coin (e.g. TRX)

This is the final step! On Binance, click on the “Markets” tab at the top of the page. You will be taken to a page with a list of trading pairs. Scroll until you find the TRX/ETH pairing and click on the green “Buy” button. You’ll have to use the Google Authenticator app again one last time to confirm the transaction, but then you will be done. Your TRX will be in your account!

Step 6: To the moon?

Watch as the price of TRX/[your favourite coin] soars to the moon!

If you want to be nice and help me out, use my referral link or code when signing up to Binance or KuCoin. It will cost you nothing and will give me a small bonus for writing this analysis

Binance Link: https://www.binance.com/?ref=10867339

KuCoin Link: https://www.kucoin.com/

Bittrex Link: https://www.bittrex.com/