Opinion article by CryptoJelleNL
If you have been reading crypto twitter over the past year, you will probably have seen one or two of my bullish-biased tweets pop up on your timeline. In the 3 years I have been sharing my thoughts on the markets, I have only once before been as vocal about my bias – when I sold out of the market in April of 2021.
This is how I opened my recent article "Three narratives to drive the next bull run" – a stark contrast with the title of the article you are reading now. In the following paragraphs, I'll dive into a few reasons why Bitcoin *probably* no longer is the rags to riches vehicle it once was, and how altcoins have taken on that role instead.
Is the Bitcoin hype over?
I'll start by stating the obvious: I am strongly bullish on Bitcoin. I believe we're in the early stage of a bull market, and I'm fairly positive Bitcoin will reach a 6-figure price in the not so distant future. While that price target sounds great, a 6-figure Bitcoin is less than 300% away.
When we add to this the implications of Bitcoin's diminishing returns (the idea that each Bitcoin bull market has lower returns than the previous, we can safely assume that the next bull market will not drive Bitcoin much further than – let's say, the $150,000-$180,000 range.
Then there is market capitalisation. If Bitcoin would reach a price of $180,000 – it would surpass every single asset in market capitalisation – except Gold. A value of $150,000 would already make it rival Apple for the second biggest asset in the world.
Bitcoin has matured as an asset, which means it will be harder and harder to pump it higher. This effectively puts a ceiling on Bitcoin prices, at least for now – until we see another massively inflationary cycle where ALL assets go up by a significant amount.
Essentially, while I consider bitcoin a very sound investment, it's upside potential is limited, and with many people getting into crypto in an attempt to "make it", Bitcoin probably isn't the best bet anymore.
Altcoins can make you rich, or not
Right, okay – we've established that buying *just* Bitcoin will probably not make you a billionaire. It can get you from four to five figures, or from five to six, but if you want to really move your net worth higher, you need to take more calculated risk.
Does that mean you should ape your entire net worth whenever you see the next HarryPotterObamaSonic10Inu? Not exactly. It's been close to six years since crypto OG Cobie (CryptoCobain) shared this below tweet, and it still makes sense today.
He describes his approach to crypto using a pyramid of four colours, purple, orange, green, and yellow, where purple represents the largest portion of his portfolio, and yellow the smallest. The smaller the portion of the portfolio is, the more risk Cobie allowed himself to take.
This strategy tells you to put the majority of your capital into relatively risk-free investments such as long-term Bitcoin holding, while putting a smaller amount into high-capitalisation altcoins and more actively managed low-risk positions. An even smaller amount is put into mid-caps, and a minor amount into high-risk ventures such as on-chain microcaps and/or leverage trading. Approaches like this are more labour intensive, but as the below meme suggests – money does not come for free.
Another great benefit of such approaches is that it effectively allows you to take more risk, while still minimizing the potential for financial ruin. Even if you lose the most risky part of your portfolio, you still have a rock solid foundation chugging along. Chances are though, especially in a bull market, that your risky plays will pay off.
While previous bull markets allowed you to just buy Bitcoin and make a truckload of money, I don't think that approach will yield similar results again. If you already made money in previous cycles, you can probably get away with focussing on the majors alone, but if you want to use this cycle to break out of the rat-race, it'll take more effort, constantly researching different potential investments, re-evaluating your current portfolio, and investing your limited capital in the projects that you believe in most.
It is worth spending time to figure out what strategy works best for you, whether it be a passive approach with tiered risk, or dedicating more time to active trading. No matter what your approach will be, do not forget to exercise risk management, and do your due diligence before making any financial decisions. Take risks, but have a plan for when things go the other way.
We wish you the best of luck in refining your trading strategies, and we hope this article proves to be useful on that journey.
Author's Disclaimer: This article is based on my limited knowledge and experience. It has been written for informational purposes only. It should not be construed as trading or investment advice in any shape or form.
Editor's note: CryptoJelleNL provides insights into the cryptocurrency industry. He has been actively participating in financial markets for over 5 years, primarily focusing on long-term investments in both the stock market and crypto. While he watches the returns of those investments roll in, he writes articles for multiple platforms. From now on, he will be contributing his insights for WOO as well.
Check out his twitter: twitter.com/cryptojellenl
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