Buy when others are selling; sell when others are buying. This is a difficult thing to do because you never know if a selloff is real or some market maker's fakeout. There is another way to think of this.
You MUST be expanding your portfolio when others are contracting theirs. The secret to coming out ahead in crypto is accumulating larger percentages of projects, not larger USD valuations. Consider this.
You have a respectable portfolio — 1 BTC, 5 ETH and a smattering of random coins worth like USD $5k. Whole thing is worth like $60k on Day X, with a total crypto market cap of USD $2 trillion. On Day X+1, crypto market tanks 30% against USD because of news, bullshit, and FUD. What do most people do?
Scenario 1: The average Joe gets exasperated or defeated and chooses to forget about the crypto until the fiat value of said crypto returns to his buying levels. He goes and does other stuff. Eventually, the value does return. 6 months, give or take, the total crypto market cap returns to USD $2 trillion. But the 1 BTC, 5 ETH, and other crap Joe had doesn't return to $60k. Instead, when Joe goes back to check expecting sick returns, he finds that his portfolio is only worth about USD $55k. Joe wonders why he can't catch a break
Scenario 2: Smart Guy Sam doesn't give a phuck that his portfolio now has a USD value of $42k instead of $60k. He forgets about the fiat value of the portfolio, not the crypto value like Joe. Sam goes to work finding the projects that will give him the fastest yield on his 1 BTC and 5 ETH. He cuts the losses on his shitcoins, which are now down 80%, and buys into a blue chip that is down 40%. Eventually, liquidity comes back into crypto and TVL goes back to $2T — 6 months, give or take. Joe finds his 1 BTC has expanded into 1.05 BTC, his 5 ETH is now 7, and his new blue chip investment has returned the value of his shitcoins 1.5X plus he has a free NFT airdrop that he can sell for 0.2 ETH. All in all, his portfolio is worth $80k instead of $60k with little to no more work than Joe (who put in none).
What's the difference between Joe and Sam?
Joe is worried about the fiat value of his crypto. If his crypto buys less dollars, he gets upset. This attitude creates more problems for Joe than he knows, but he gets the tip of the iceberg when he realizes that his personal portfolio is worth less after 6 months even though crypto is "worth the same."
Sam is more worried (he's not really worried, honestly) about the crypto value of his crypto. He knows that even if he doesn't have new cash ready to "buy the dip," he can achieve the same effect by repurposing his crypto — which has lost 0 crypto value — into yield farms and lending protocols to EXPAND his portfolio while Joe chooses to CONTRACT his.
Now wait a minute. Joe just chose to sit still. Is he contracting his portfolio?
Absolutely. Yep. When you sit still in crypto, that's a conscious choice to limit your portfolio. Crypto's the same as any other profession. It moves. You don't move with it, you get left behind.
$2T in crypto today and $2T in crypto tomorrow isn't the same $2T. Tomorrow's $2T is split among more projects, because there are hundreds that pop up every day. Some of them are good; most are not. But all of them draw money away from previous centers of investment.
Another thing — a lot of that valuation is complete hot air. Most people don't realize that "price" doesn't correspond to value. The only thing price tells you is the price of the last trade that took place between that coin and USD in some random liquidity pool. That's right — the price of a coin doesn't represent the value of all your coins. It represents the value of ONE TRADE. The equation
USD price of coin x no. of coins in my wallet = that wallet's value
is a great way to get very disappointed in crypto.
A more correct equation is to compare the rate of expansion of your portfolio to the rate of expansion of crypto as a whole. If you consistently expand your portfolio at a higher percentage than crypto as a whole, you will always achieve a higher fiat value over time. Guaranteed.
(I can guarantee this barring the capitulation of crypto's core value set to the current financial and political structure. For instance, if bitcoin's core developers and big miners give in to this ESG bullshit, none of my analysis means anything. If the IMF co-opts the Ethereum Foundation, well, shit's fucked. Crypto's core value is that it provides a more efficient system of trade and currency completely outside of legacy finance and politics (whether or not certain users choose to move between the two), and that crypto can survive state-level attacks.)
Let’s take a look at an example of “expansion theory” in an example with Osmosis.
Osmosis is the core DEX on the Cosmos ecosystem. When a project launches, getting traded and providing a liq pool to Osmosis is just part of the process. As a result, the Cosmos ecosystem has experienced a huge amount of growth over the past 12 months. If you are on Osmosis, you can see each of those projects as they are given their own IBC chain and linked into the system of other chains Cosmos currently supports.
If you would have simply stayed in Osmosis yield farms for the past 12 months as it expanded, your portfolio would have done between a 2X-3X in fiat terms, even as the “price” of the ATOM token is currently below its previous 12 month ATH.
Why does “price” fall? It falls because people sell more of a token than they buy. But even though the ATOM token was selling off, its ecosystem was expanding. That’s a net value increase to the system even as speculators move out. Actually, speculators divesting from the system even as new value is added further increases the value of the overall system, because there are less paperhand suckers to sell away gains as more utility is created. It’s the perfect fintech investment storm, and this is why Osmosis has been able to provide daily returns corresponding with 50-200% APR (not APY, APR) over the past year without diluting away the value of its OSMO liquidity token.
Put another way, the crypto value in the ATOM ecosystem was expanding faster than fiat-based speculators could leave. If you expanded with it, you gained a great deal in crypto and fiat terms. If you sold, you experienced a fiat loss for sure in opportunity costs and more than likely in real terms.
Perhaps most interestingly, if you stayed still, you experienced a crypto stagnation, which equated to a fiat loss. Expanding with good systems is a vastly more effective strategy than trading unless you’re a wick god.
Plus, you now have a position in more projects, which means more people working for you. It's a lot easier to lose value in one coin than to lose value in UMEE, GRAV, BTSG, CMDX, STARS, EVMOS, and the many other projects currently building in Cosmos. That's also an exponential increase in the mindshare your holdings represent. And make no mistake: Crypto is 100% about the devs, not any of your retarded Twitter terds telling you to time your stupid ass trades. Shit don't work, plus they're lying to you.
Moral of the story: Look to expand your portfolio faster than the percentage expansion of the market. When the market contracts, this is when you look to expand most fervently. Expand not in fiat terms, but in crypto. Gather a larger percentage of your preferred projects. Then, when the entire market readjusts itself more favorably in fiat terms, you will be rewarded handsomely.
We'll write some more on this. I haven't even scratched the surface of this philosophy.