Today we’re talking about using crypto’s four year cycle to accomplish your short term goals while also dollar cost averaging to build and preserve long term wealth.
I started The BitLift podcast a year ago, we were already well into the bull market. I was getting txts from family and friends asking what they should do!? So I figured recording my answers and releasing a podcast would make it easier. And it has. But the hard part was around what advice to give. Because honestly, I was done buying at that point. People in The BitLift discord know that I’ve executed very few trades in the past year. That’s because I was in selling mode, not buying mode. And if I’m being honest, most of what I bought over the past year didn’t go so well. But 95% of my crypto I already had going into this cycle.
So my advice to people was to dollar cost average, slowly, and to learn and pay attention, so they could be prepared and experienced going into the next cycle.
Well that time is now.
Understanding the Cycle
Almost a year ago, in Aug 2021 I dropped the 3rd episode of The BitLift podcast titled, Timing & Understanding Crypto’s Four Year Market Cycle. I broke down one of the most fundamental things that EVERY crypto investor needs to know, which is that crypto markets are cyclical. Meaning it goes through these boom and bust cycles or sometimes called phases of expansion and contraction. If nothing else, you’ve heard that we’re now in crypto winter. This is the contraction phase…
In the recent bull market the crypto market cap grew from 200B to 3T! And now we’re down to 1T. This is nothing new. All markets go through cycles. The entire economy goes through 10 year and hundred year cycles. Roughly. For the BEST explanation of market cycles check out Ray Dalio’s video titled How The Economic Machine Works. It’s got 30 million views, and half of them are probably me rewatching it over and over. It’s 30 minutes of pure gold. Digital gold.
Economic cycles without a doubt impact the crypto markets. When rates are low and lending is cheap and easy, people are flush and asset prices soar. That’s not even accounting for the trillions of dollars of inflation we just had airdropped to us cause of the pandemic. Did you feel that the last year? That everyone was flush? If not, you need to tune into that better. To me it was pretty obvious.
Bitcoin and crypto markets appear to move even faster than the economy though. In fact, if you look at the charts, bitcoin hits a new all time high every 4 years. 2013 → $1,200, 2017 → $20k, 2021 → $69k. And each of those all time highs hit about 6 months after the bitcoin halving event. Bitcoiners, myself included, have theorized that the halving event kicks off the crypto bull market. This has become a more controversial topic since PlanB’s now debunked stock-to-flow model took the halving theory to the next level but still, you should really understand how the halving kicks off the cycle.
I don’t want to make this episode all about the halving. Go back and listen to episode 3 for that. But in simple terms here’s how the cycle works:
- The Bitcoin halving creates a supply shock which causes prices to rise
- Rising prices kicks off a media frenzy, which drives even more retail buying
- The frenzy kicks off shitcoin mania tons tons of confusing new products launch with huge promises and big money backing them
- People get rich. Paper rich, because most don’t sell.
- Seeing people get rich, even more people pile in at the top. This causes the insanity we’ve been seeing for the past year.
- An inevitable Implosions like we saw with Terra, and over leverage like we’ve seen with Celcius and 3 Arrows capital causes a crash. The entire market suffers, but shitcoins get hit the worst.
- Now this is the important part, this is where we are now… The legit builders take everything they learned from the previous cycle and they build. They have until the next halving to improve the security, usability and value props of their products. And they’ll start tinkering on new projects which may or may not be the biggest winners next cycle. The build cycle takes years. These aren’t sketchy projects with fake teams. This is serious engineering, serious R&D, serious scalable innovation. These are the things we’re going to be playing with and stacking in the L2, dApp and yolo” buckets of our portfolio. If you haven’t listened to Episode 7 of the podcast, Constructing Your Crypto Portfolio, go check it out.
This is the cycle. And while some “investment professionals” will tell you to not try and “time the market”, I call bull shit.
Separate Your Buckets
You’re investing for two reasons: to create wealth, and to preserve wealth. If you have all the money you’ll ever need to live out the rest of your life then fine, buy and hold and never sell. But if you’re like everyone I’ve ever met, and you have goals and hopes and dreams and reasons to spend that money – on something important to improve your life and the life of your family – then at some point you need to sell. And the best time to sell is at the top. During the frenzy. During all that mania.
Obviously this is easier said than done. But now you’ve seen a cycle. You’ve experienced the chaos. You’ve felt those euphoric highs and those gut wrenching lows. That was the first step to crushing it in crypto. You HAD to feel that to create the muscle memory, so next time you feel it – you’ll notice and you can act. You can SELL. There’s nothing wrong with that. Having experienced three cycles now. And selling three times. I can tell you for a fact it’s possible. Here’s how I do it: I trade the cycle, and I dollar cost average for life. What this means is that I have a portion of my stack specifically noted for buying low and selling when I reach a specific goal. And I have a separate portion of my stack that I buy, hold, and will grow forever. Let’s call it the fast stack and the slow stack.
The fast stack I invest in the hot new shit. These are the avalanche’s, solanas, polygons, fantoms, cosmos, dApps and NFT infrastructure. These are the fads. They rise fast and fall even faster. This is where I make my money. I average out of them just like I average into them. And I have specific cash targets. For example, something like 200k cash in the bank to use as a 20% down payment on a $1m home. Boom! 10Xing a 20k investment during the bull market!? That’s a concrete goal I know I can hit and accomplish trading the 4 year cycle. LOCK IT IN.
Then I have my slow stack. This is my wealth building stack. This I think of in terms of quantity of Bitcoin and ETH, not in terms of dollar value. This I’ll just continue to dollar cost average into forever. This number only goes up. It never goes down. 1 bitcoin becomes 2, becomes 5, becomes 10. If I need to borrow against them or sell some in case of an emergency, that’s ok. Maybe I’ll diversify some of them into a long term investment outside of crypto. Maybe I’ll die with them. All of that’s ok. This stack grows through simple dollar cost averaging. Weekly buys. Monthly buys. If I’m being totally honest, I slowed down adding to this stack during the bull market. I haven’t added to it in over a year. Everything was too frothy. But I’m going to start adding to it now, during the winter, while things are cheap again. For every “angel investment” “high risk” allocation I make during the winter in preparation for the next bull market, I’ll buy the same amount of bitcoin. And I already snowball farm and harvest my yields weekly to stack more ETH.
Use Winter to Prepare
I tell people, “I live my life by the four year crypto cycle”. And honestly it’s true. We don’t have control over the cycles, all we can do is position ourselves to benefit from them when they hit. But let’s be honest, there are no GUARANTEES crypto will boom again. But now that you’ve experienced a cycle, maybe even two, do you truly think it will NEVER happen again? Do you think it’s over forever? Crypto is dead? Money and financial infrastructure run on decentralized protocols and not controlled by governments is a bad idea thats going away? Hell no.
It’s going to all happen again. And now you know what to look for. So think about how you’re going to prepare for it!