The Psychology of Selling

Happy $BTC ATH! Again… this is becoming tiresome.. NOT! We have waited a few years for this and things appear to be only getting started. https://twitter.com/dan_pantera/status/1450576151248789505 $BTC has historically gone on a tear in the weeks following reclaiming it’s all time high. Added to this the institutional buying pressure from the titans of the financial industry funding the strong demand for their various ETFs, the incoming $BTC halving (expected 20^th of April) and you have a very compelling argument for higher for longer…. If that is indeed what you are looking for.

The Siren song of round figures – a historical example

This is why we thought we would take a break on taking about various categories of crypto and talk about the one thing that a lot of crypto investors never plan for – selling! The markets are emotion driven, hence algos do not rule the financial world, they give you an edge but are not infallible. It is human nature to want to buy low and sell high, hold on for that little bit of extra profit and sell at the absolute top. As the legendary John Bollinger said at a recent Chartered Market Technicians Association conference in Dubai, (we are paraphrasing): the market will give you two gifts, you may buy at the bottom and sell at the top – ONCE in your life. So guess what, you are NOT going to buy at the bottom and sell at the top. But that’s fine, some of the ranges in crypto are insane. You only need to get a small percentage of the move and that will be more than enough.

The power of round figures can be mesmerizing. In one rather infamous example the writer is aware of an individual who bought $Shirtum https://www.coingecko.com/en/coins/shirtum  on his recommendation for around $0.02. The investor bought a seven figure amount of tokens and rode it all the way up to $0.9245 without selling anything!!! The writer had exited his position as the narrative (fan token engagement) was becoming a little saturated at the point and there were only so many top tier sporting associations to find a home. The writer called the investor aghast that he now had a huge position in a microcap and would have difficulty selling, the slippage would be enormous as the liquidity pool would not be able to absorb such size without crashing the price. The investor (in crypto since 2017) wanted to wait to $1 USD to make one million USD on one exit. You can now guess what happened:

There were five mistakes here, now with or without hindsight they are pretty basic:

1. Not selling anything on the way up – wanting to keep a round figure bag;
2. Waiting for a wildly speculative selling point. Newsflash, most tokens do not x50 in a short period in a sustainable manner;
3. Willing the pump to pump more, this is not a good investment strategy. Have a look at the chart:

• Once it was clear that the pump was over, not exiting the position fully on the way down. The investor still holds a significant amount of $SHI tokens. He is technically in profit still! And, perhaps most importantly –
• Not listening to the advice of an advisor / mate with crypto experience. This will be crucial for you going into the wild bull market. You will need someone / group of experienced crypto people to bounce ideas off and ask for advice on your positions. The guys on youtube are NOT these people. You advisor/ mate should give you honest advice and tell you if you are being dumb (like the writer did here but the investor was not interested in listening). In the wars to come we need a few people to keep us sane. And crypto is a player vs player fight. It is you versus the world.

Looking closer at the chart in point 3 above, the price went from 0.04 to 0.92 in about 18 days in September 2021. That kind of rise is wild. Explosive pumps generally lead to explosive dumps.

Side note: The investor mentioned above is fine, it is a war story. He made plenty of money in other tokens and is still an active investor in the crypto market. He will not listen to the sirens anymore. He learned from this harrowing experience, and you, dear reader, may just reap the benefit of it too.

Flat Rollercoasters

As a great man once said, “No one likes a flat rollercoaster”. Cryptoland is the biggest rollercoaster there is in the financial markets. You will have ups and downs. If you find that you are checking your phone all of the time looking at your portfolio, STOP! Either you are over exposed, or you are letting crypto interfere with your working / private life) or both!). The writer used to leverage trade and found himself waking up at night to check positions… who makes good decisions half asleep? No-one. So the writer stopped leverage trading as it was taking up too much time (analysis, backtesting etc.) and affecting his sleep. If you find that you are obsessing about your crypto portfolio, reduce your exposure in increments and if you still find yourself obsessing over a small position relative to your net worth, just exit the crypto market entirely. Your real wealth is your health.

This time around the writer expects the crypto market to follow the same pattern of rotations, the price of everything will go up, then retrace, then go up, retrace a few times then the price will drop… and keep dropping and find a base at some point many months after the ATH. It can be pretty overwhelming, especially if your trading “strategy” is to buy… and hold and never sell. You are inviting a world of pain on pullbacks.

Fail to plan, plan to fail

How to avoid failure in the crypto markets? Have a realistic target! Have a plan… and … now this is the crucial bit… STICK TO THE PLAN! You remove emotion out of selling. It is all part of the plan you have written out in detail with price targets;

A sample plan could look like this:

Sale plan for Superverse ($SUPER) – Bull market scenario

The moonbag is a small percentage left over incase it goes crazy, to be sold opportunistically. This is a live plan of the writer’s and we are closing on step No 7.

Next up is the same token – in a Bear market scenario

You will note the emphasis is on getting your initial out as quickly as possible. It is possible to make money on tokens in a bear market, but it is pretty difficult. If your strategy for a particular token during a bear market is simply accumulation (as the writer’s was for $Super) then you buy periodically and don’t sell until you see the bull market return. Here you are unmoved by number go up or down, you are simply market buying with the intention to hold for better days.

If of course the bull market flips back to bear – see your bear case. For $SUPER the writer would sell his entire position now. So if it is looking like we might be going back to a bear market, scale out of your positions into USDT / USDC. You may want to pick up some of the big MCAP tokens like $BTC and $ETH but it would be better to wait until the market has settled down somewhat before buying them, as they can always fall further… remember $BTC at $16k and $ETH at $900??? The writer does!

Crash test dummy

If you like big round numbers like my friend mentioned above, make an exception to the selling programme above and just sell a small amount of the token to:

(a) Sell some of the bag – the first time is always the hardest;

(b) break the siren song of large round numbers; and

(c) familiarize yourself with the process for selling, in crypto you learn by doing.

Particularly if you are new to the space, you will probably be in a blind panic when trying to sell your tokens on one of the many retraces this cycle, in this emotional and distracted state you are easy pickings for the various scammers that lurk in the industry and are more than happy to get you to connect to a fake site and drain your wallet. I would highly recommend that you familiarize yourself with the process of selling on decentralized exchanges (DEXs), who to find the DEX with the best liquidity for – write this out in your plan and update it regularly as things can change – especially for the smaller cap tokens.

With Superverse as an example go here https://www.coingecko.com/en/coins/superverse and scroll down and you will see this table:

You will see that 9 out of 10 listed sources (and there are more – 47 in total) are CEX’s, you may either send your $Super to a CEX if you have a huge amount, or just swap it using Uniswap (No 8 listed above) or indeed use the swap function on your Rabby wallet. Do not, obviously, leave any significant assets on any CEX. Not your keys, not your crypto!

Remember why you are here:

Most of us are spending our time in this frontier market to make money. You actually make money be realizing your paper gains. Do not roundtrip like the writer’s $SHI investor. Sell little and often. You will not sell at the absolute top or buy at the absolute bottom. John Bollinger managed one sale, his entire trading life, at the absolute top. You are not him, don’t try to be.