This guide is a message in a bottle to my future self. So next time the market is crushing all time highs and I’ve got that euphoric, “top of the world” feeling. I can smash the glass, re-read to this and remind myself the lessons I learned in the previous cycle.
The 2021 cycle seems to have come to a screeching halt. It feels like, the “energy” has been sucked out of the market.
Even though Bitcoin is still up 50% over the 2017 cycle top, nothing really moves the needle like it did a year ago - except fear, fear still works fine.
It’s funny you know, 6 months ago everyone was asking, “are we in a bear market!? I don’t know!”. And today, it’s so frkn obvious. Hindsight is 2020.
It’s an energy right? Isn’t that weird? It’s what I’ve been trying to explain. If you’ve never felt this energy before, now you know. The reason there’s no chart, or graph or on-chain data you can look it is because this energy is an immeasurable thing. Maybe the closest thing we have is the fear and greed index, but it has wild swings through the entire cycle!
The best tool I’ve found for monitoring this energy, is my gut. And until you’ve personally experienced this before, you don’t know what it feels like. This is my third time going through all of this, and I still forget.
So I though today I’d lay it all out, as a sort of, message in a bottle to my future self. So next cycle, when I’m feeling that euphoric/bullish feeling that I think will never end, I can smash the glass and listen to a beat up version of myself reminding my future self that this feeling will pass and to focus on my goals for life - as oppose to the vanity metrics in my portfolio tracking app
I did some things right this cycle, and I made some mistakes. I’ll start with what went right.
Having Concrete Goals
First, I had a goal of selling enough bitcoin to setup a stable coin farming operation. An operation that earn me enough annual income to live on for life. So, I made a plan with very specific sales targets, of $50k, 100k, 150k, 200k and 250k! And I sold a bunch of bitcoin at $50k.
If I hadn’t done that, I would have failed my plan. But I didn’t fail. I pulled the trigger. The fact that we didn’t keep blasting into six figure territory is ok, thats something I have no control over. What I did have control over was that the price reached my target so I sold.
However the amount I sold wasn’t enough to accomplish my overall goal, but what could I do? When the price tanked 50% back to $30k and then miraculously ran back to a new all time high - honestly, I couldn’t believe it!
Cycles end in a blow-off top I told myself. We didn’t get a blow off top! Maybe we still will!
And here in lies the lesson - cycles come in all shapes and sizes. All we know is that it’s coming, but what happens next is too complicated for to predict.
That being said, once we breached $60k the second time, we lost momentum big time. As we started to drop back to $50k I played an audible and sold a second big chunk of bitcoin, enough to lock in my goal for my stable coin farming bucket.
Having a goal, having a plan, trading the plan while still remaining flexible - that was the right call. I wouldn’t do any of it differently. Setting goals and accomplishing those goals is what life’s all about.
It’s progress. It’s momentum. It’s evolution. It gives you energy. It’s what fuels you and gives you the conviction to know that you’re even capable of succeeding. And it’s the best feeling there is. Which is why it’s so so so so hard, when it all comes crashing down before you have the chance to lock in your goal.
It literally invokes a trauma response. And trauma can take years to recover from. Oddly for some of us, it takes about as long as the crypto market cycle… Coincidence? Probably not... For others, they never recover. These are the people who leave crypto and never come back. Honestly, I get it. It’s hard.
So setting a goal, making a plan, trading that plan - sticking to this regardless of the magical price predictions we read on Twitter - that’s the first lesson.
The only reason I was able to accomplish it this cycle was because I learned it last cycle. In the 2017 cycle, my goal was to buy a house. And when the amount of bitcoin I wanted to sell reached the amount I needed to buy the house I pulled the trigger.
It was one of the scariest things I’ve ever done. I sold A LOT of bitcoin. More bitcoin than I ever imagined I’d ever have. Gone. Poof. Now it’s a house. But I’ve lived in that house ever since. I’m recording this podcast from that house right now. And when bitcoin ran to $60k last year, I thought I might regret selling so much at $20k. But I didn’t. And someday when bitcoin reaches $1m now I know that I won’t look back with regret then either - not for a second.
So that was my bitcoin plan. The first thing I did right this cycle.
Enter High Growth Opportunities Early
The second thing I did right was plan ahead and get into some HIGH growth opportunities early. Things that could 10 to 100x with the possibility of allowing me to skip a few chapters ahead.
It started with a foundational thesis - and that thesis was around the inevitable growth of stable coins. So I researched opportunities and landed on buying LUNA and farming Curve and Convex.
Obviously we know how LUNA ended, but the real lesson for me isn’t in how spectacularly it melted down, or how to avoid it, but in how it grew into my largest holding. At one point, my LUNA was worth more than my bitcoin! That’s a flippening I never could have imagined. I mean, the goal was for that to happen. But wow.
I remember saying to someone that LUNA flipped my BTC stack so hard that I don’t think it will ever flip back. Even as I say that, I realize my goal was busted from the start. My goal was something I had no control over. Do you see the difference?
The goal for my BTC was for me to do something, the goal for my LUNA was for LUNA to do something. Just another vanity metric.
Now, when LUNA reached this point I did set a goal, and I did outline a plan, and I was following that plan. But the plan didn’t get a chance to play out.
Which leads to my third lesson learned, and easily my biggest mistake.
The Quicker They Rise, The Quicker They Fall
I forgot how fast it can all come tumbling down. Especially I should remember that the faster they rise, the faster they can fall.
The lesson surprisingly has nothing to do with avoiding these scenarios. It’s more about recognizing my strategy for bitcoin isn’t and shouldn’t have been anything like my strategy for LUNA.
In less than 1 year, I rode LUNA from $5 to $120 down to a fraction of a penny without ever taking any profits.
Which leads to my fourth lesson. And this one actually really surprises me because it wasn’t a misstep at all - it was a strategic decision which I put A LOT of thought into.
Taxes Aren't Everything
I planned on selling half my LUNA on the 366th day so that I could capture long term capital gains vs short term capital gains.
When LUNA was at $120, I calculated that selling now at short term cap gains would result in the same after tax profit as selling at $90 long term capital gains. So I made the decision to wait for 2 more months. And whaadooyou know ~ on week 51, it all came crashing down.
I was a wreck for those 2 months too. I should have listened to my gut, but my brain was running the show.
The lesson is not to let tax consequences dictate my my strategy.
Or that’s sort of the lesson, I mean… It’s hard to say that because I also think you’re an idiot if you don’t take taxes into account when trading. Taxes are too high to NOT consider.
But maybe the lesson is that IF you have a goal for that money, and you’ve accomplished it irregardless of the tax implications - you should lock in that goal.
Make it real. Pay the piper. And move on.
Avoid Lock Ups - Maintain Liquidity
The fifth lesson and third mistake, is to not time lock your assets in DeFi smart contracts.
My LUNA was staked and would have taken 21 days to unlock. So even if I wanted to I couldn’t have sold that half.
I’ve heard horror stories from other people on other protocols as well who have gotten wrecked doing this. It relates to lesson three which was how fast it can all come tumbling down. Don’t put yourself in a position to let this happen.
Maintain liquidity at all costs.
Stay Diversified
The last mistake is an easy one, its just to remember to keep my stable coin bucket diversified.
The funny thing about diversification is that NOT diversifying is the secret to gaining massive wealth quickly. But diversifying is the secret to maintaining wealth for the long haul.
And in crypto there are different types of diversification. There’s sectors, blockchains and assets. For example, I had UST staked in Curve on Ethereum and UST parked in Anchor. Two very different dApps, two very different blockchains, one all too similar stable coin.
Conclusion
So that’s it. If I had to guess, I hope I’m re-reading this somewhere around April 2025 one year after the bitcoin halving coming in April 2024.
I’ve got that euphoric "Selling Feeling" and I’m sitting on some big stacks and big goals and listening to my past self will give some much needed advice from the trenches.
In fact, I’m going to set a calendar event to remind myself to listen to this episode Jan 1, 2024.
Until then, we’ll just keep learning, keep tinkering, keep planning, predicting, pivoting, buidling - and of course keep stack’n.
Written by: @gerbz Gerbz is the founder of BitLift and has been journeying down the crypto rabbit hole since 2013.