Key Takeaways
Should HODLers sell or HODL?
While selling at or near the market tops, or even a couple of months after a top, can be profitable, there is no convincing sign that this crypto market cycle has indeed run its course.
Is leverage a big problem in crypto?
Leverage is a tool, and like fire, it can help or hurt. HODLers must resist the greed of making huge returns in a bull run and remember that survival is their goal; profits will follow.
A $19 billion liquidation event on the 10th-11th of October saw the total crypto market cap dip from $4.12 trillion to reach $3.3 trillion, a 20% drop in 8 hours. The value later recovered to $3.87 trillion, but the shock unsettled traders across all portfolio sizes.
Trump’s tariff warning to China sparked the market panic.
Long-term investors face a sizeable drawdown, and HODLer conviction has taken a big hit. How should HODLers navigate this market crash and the inevitable market crashes that would follow in the coming years?
You can not HODL on margin
Reading through some of the comments on X (formerly Twitter) revealed that some people held their coins on low leverage instead of spot. This might work in a trending market, but it is hazardous even then.
The trader is paying funding to keep the position open, and leaving themselves vulnerable to such black swan events.
They would be much better served holding a spot and leaving leverage trading to more experienced folks. Staying long, even on a 2x margin, over a period of weeks or months, is a highly risky approach.
Margin trading is a tool, and it is pretty useful in protecting against counterparty risk, for example.
Stop-losses alone wouldn’t have rescued margin traders on Friday- the swiftness of the cascade meant the liquidations were triggered before the stop-loss orders were executed.
The survivors must decide their next course of action. Sell, or wait, or even buy? That depends on the chances of recovery.
Have Bitcoin and Ethereum topped?
The most important question for long-term investors is whether the market has topped or if this is a local bottom.
This Alphractal chart, which has accurately called every Bitcoin [BTC] ATH in the past, according to the platform’s founder and CEO Joao Wedson, has not yet signaled a top.
Source: Alphractal
The same data analysis platform showed that Ethereum [ETH] might not have topped either. Whales were buying the dip as ETH prices climbed back above the $4.1k level, giving a good start to the week.
With some evidence that neither Bitcoin nor Ethereum has made their market tops yet, HODLers need to remain calm. Panic selling will not serve them well right now.
Source: Axel Adler Jr Insights
The market is precariously poised right now.
As crypto analyst Axel Adler Jr pointed out, the average short-term holder sat at a slight loss. Further price drops could easily swing them into “PnL protection mode”, spurring selling and driving a deeper price drop.
The market is extremely sensitive to news right now.
How do HODLers prepare for a market nuke?
The average investor must also understand and appreciate just how precarious most altcoins, even the relatively bigger ones, are.
For example, Sui [SUI] fell 83.9% in 8 hours on the 10th of October, from $3.47 to $0.56.
This meant there were practically no bidders once the price fell below the $3.2-$3 mark. With a market cap of $12.8 billion on the 9th of October, it would be considered a relatively large-cap crypto asset.
Yet, it was not immune to such a dramatic wipeout.
HODLers should be wary of the fact that most altcoins tend to bleed value to Bitcoin over the higher timeframes, and DYOR to select tokens that can survive and thrive over multiple market cycles.