In a recent thread of tweets, renowned crypto analyst Miles Deutscher reflects on the rapid rise and fall of cryptocurrencies $AVAX, $SOL, and $LUNA over the past 16 months. What started as a triumphant journey with all three coins trading above $100 eventually led to a mixed fate, with one currency plummeting to zero, another resting at $10, and the third falling behind. Deutscher, however, emphasizes that amidst the price volatility lie essential lessons for traders.
The Hidden Key to Crypto Success
Deutscher’s first lesson is to comprehend the narrative hype cycle. Dividing it into three phases—pre-, mid-, and post-cycle—he underscores the significance of entering during the initial phases to maximize profits and limit losses.
His analysis corroborates legendary investor Howard Marks’ assertion that even promising assets can become overpriced and vice versa. Deutscher’s advice: spot potential winners early.
In Phase 1, Deutscher insists on identifying the driving narrative of each cycle. For instance, during the previous cycle, the L1 narrative gained traction as Ethereum struggled with scalability, creating room for emerging projects like “SOLUNAVAX” to excel.
The key, Deutscher believes, is to recognize upcoming challenges and identify projects poised to address them. Acting swiftly when the trend gathers momentum is crucial.
In lesson 3, Deutscher advocates for calculated risk-taking. Being discerning about when to seize opportunities and when to be cautious is imperative in crypto trading. Drawing from @0xWangarian’s insights, Deutscher shares that his past regret was not betting more when he had conviction. Balancing risk and reward is a paramount aspect of successful trading.
The final lesson warns against becoming a “bag holder.” While altcoins offer lucrative gains, they lack the stability of a store of value. Deutscher underscores the importance of incremental profit-taking on the way up to alleviate pressure when timing the peak. Vigilance is also essential during a narrative’s decline, as spotting early signs of fading momentum can prevent significant losses.
Deutscher concludes by admitting he didn’t master these lessons in the previous cycle, but the insights gleaned are invaluable for the next phase. He acknowledges the rapidly evolving nature of the crypto space but affirms that human emotions of fear and greed remain constant, offering traders an exploitable edge.
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