To build a bulletproof exit strategy it is crucial to first understand the asset we’re dealing with, this understanding starts with putting everything into context, the world economiy consists of multiple financial markets housing markets foreign exchange markets stock markets and thousands of others, almost all these markets follow some kind of visible cycle it can be a one year cycle a four year cycle or even a 12 year cycle, in some cases these longer cycles contain even smaller cycles that last a few months or even a few weeks, these cycles can also change over time usually becoming longer as a given market matures.
The cryptocurrency market is very young and that makes it very volatile this is simply because nobody knows for sure what the actual value of the market is, older and more established investors like warren buffett hold much of the wealth in financial markets worlwide, these investors are generally more conservative and less prone to taking risks with their invesrments especially when it comes to new markets which consist of technologies they don’t understand, this was actually the reason why mastercard pulled out of facebook’s libra projet. Ceo aj bangor said quote when you don’t understand how money gets made it gets made in ways you don’t like in contrast younger investors like us and you are a bit more tech savvy wa know how bitcoin works as well as many of the promising altcoins in the space we’re also more prone to taking risks and many of us have serious hopium addictions when it comes to our favorite altcoins not only that but cryptocurrency markets are not restricted to suit and tie traders all you need to participate is an internet connection and that means a lot of inexperienced investors this makes the cryptocurrency market even more volatile and irrational on a day to day basis.
Now while technical indicators can be very useful their utility declines in the absence of other critical factors such as the ones we’ve outlined in this video so far what’s more is that technical analysis can suggest different trends depending on the time frames you’re using and the way you decide to draw your trend lines that said there are two technical indicators you need to pay attention to when it comes to deciding when to pull out, the first is bitcoin dominance, bitcoin dominance is how much of a cryptocurrency’s total market cap is accounted for by bitcoin right now it’s around 60% and seems to have been declining steadily since septembre 2019 when it was just over 70% during the last crypto bull run in 2017 and 2018 bitcoin dominance fell to just 37% this is important because the large amount of money moving into altcoins is part of why many alts saw their all time highs during that period assuming this downward trend in bitcoin dominance continues we may just see another sudden drop in bitcoin dominance in the next year or two if this happens i twill once again bring a flood of money into the altcoin space and take many alts to new all time highs.
Historically big drops in bitcoin dominance have lasted around one to two weeks meaning you would have plenty of time to exit during that window it that’s part of your ultimate altcoin exit strategy, the second technical indicator to keep in mind is your altcoins value against bitcoin most of us are focused on the dollar value of our favorite altcoin and prefer to trade against a stable coin like usdt while this may make it easier to keep track of our portfolios it is the value of your altcoins in satoshi’s that gives you the best indication of whether your cryptocurrency is rising in value relative to other assets in the crypto space.