Thread by @TraderL1z

Riding the Crypto Wave: Navigating Speculative Bubbles & Market Runs for Optimal ROI 💲🌊 #Crypto #markets

If you want to truly understand the world of #crypto, it is essential to study speculation and speculative bubbles. These phenomena occasionally, although less and less frequently, lead to #market-wide runs.

These runs are triggered by a large influx of people and money into the #crypto market, often driven by mainstream FOMO surrounding news of #bitcoin reaching new all-time highs or other major crypto developments.

This influx of #money often knows even less about the underlying technology than those already invested in the #crypto market, making them more susceptible to being easily swayed by shilling.

This influx cascades through the #market and causes a speculative bubble to form across the entire market. These runs are not sustainable and require an ever-increasing amount of money from retail and institutional investors to keep them going, while also covering...

...the gains of those who are taking profits. The run ends when the market becomes massively overinflated and unsustainable, and some kind of FUD or event sufficiently knocks the momentum out of the retail/institutional interest.

Sometimes, the situation is rescued by some catalyst that rekindles interest and allows the market to continue on its exponential climb. However, the higher it goes, the more difficult it becomes to sustain and the bigger the catalyst needed, leading to an inevitable crash.

When new money stops coming in, we are left with people holding massively overinflated market capitalizations without the momentum, greed, or cash input to keep them going up at those levels.

This is followed by a big crash, which sometimes happens in stages over several weeks, with high levels of fear in the market, low levels of greed, and a long correction period.

Prior to two years ago, the crypto market was very one-dimensional, consisting of only #Bitcoin, #Ethereum, and a few utility tokens.

This changed with the advent of #DeFi, #DEXs, and #NFTs, as well as the emergence of the #metaverse and gaming in the crypto world. As a result, the crypto market has become more diverse and dynamic, with money beginning to move with trends more than market-wide movements.

These trends are speculative bubbles in particular areas and are similar to #market-wide runs on a smaller scale. It is crucial to understand these trends and their underlying dynamics.

They typically follow a pattern:

A new trend or season begins with some aspect of that trend gaining traction. This could be a new type of DeFi project, a #metaverse play, or some other concept.

As people see the trend forming and the potential for profit, they copy it by creating new #crypto projects, which are then shilled as the next big thing. This leads to more people jumping on the trend and increased degeneracy in the #market.

Existing projects may even pivot to try and capture some of the attention. A speculative #bubble forms as huge gains are made from people throwing money at anything related to the trend.

While there may be real progress happening within the trend, it becomes over-speculated and increasingly dominated by junk projects. Eventually, the market crashes or experiences a downturn due to the sheer amount of junk projects.

If the trend is large enough, its crash may even impact the entire #crypto #market temporarily.After the crash and correction, things may recover, but they are never the same.

There is not the same level of speculative cash flowing into the trend or sector, and the money becomes smarter. It understands the degeneracy of the sector and the true value within it.

After this crash or correction, things recover but are not the same. There isn't the same level of speculative cash being thrown at that trend or sector. On the whole, money becomes smarter. It knows the degeneracy of the sector; it understands the value of the sector more.

It's looking for more solid opportunities. Things don't move like they did before the crash. The issue is that some people are unaware of this shift. They see an opportunity: "Wow, $XYZ is now only $ MC." It's as if $ABC was even better. This is a bargain'.

They buy, and it doesn't perform well, or worse, they lose money and are confused why. This happened because they only looked at the project and didn't factor in the changing market. You can see examples of this over the last two years.

in the #DeFi summer of 2020, which culminated in total degeneracy and the #market imploding. When it returned, DeFi's degen plays were no longer as effective. Many got wrecked. This then happened with launchpads, NFTS, and so on.

You can never be sure when the "season" is over, as sometimes something causes it to go again.

However, you must exercise extreme caution. If it is over, then the plays will still be there, but the quality and fundamentals of what it takes for them to get gains will increase, and there'll be less degeneracy and less easy money.

You need to be smarter.

You need to learn to identify these trends forming to know what to best invest in and to be on the lookout for when the trend is about to end or has ended. People lose money because they often buy "the next X" after the trend has ended.

Be watching how they're performing and how people are talking about them to maintain a sense of whether there are still gains to be had. The market will alternate between eras where it's awash in cash and greed and eras where there’s less money and more fear.

Use this current factor of greed or fear when determining whether something is a good investment. When the market is #bullish, you can take bigger risks by investing in projects that could be terrible (i.e., #dogecoins).

When the market is in a bear market, you should rely on fundamentals and be more cautious with your money. You need to get good at identifying current market sentiment by spending a lot of time on Twitter and Telegram.

Also important to mention: Be wary of anyone telling you that "X season" is coming soon. They are doing this because it corresponds to what they HOLD or want to be in the coming season.

You need to check yourself and see whether that is the case; don't just take someone's shill as fact. Adapt with the market or you will get left behind or miss out on opportunities. Play the optimal strategy for the current market.

Don’t play a strategy that would be great for a #market that has already passed. You'll often see people predicting the future based on some historical chart. #Cryptocurrency is almost always in the unknown because of how quickly the space changes.

✨You can't compare 2017 with 2021 or 2023 because the markets are so different.✨