2021 was an unprecedented year for crypto investors. Bitcoin hit its all-time high, boosting the price of other digital assets that simply skyrocketed. Amid this positive trend, many people just went to buy more and more, without taking the time to think about how to exit.

However, the bear market came suddenly, which surprised many retail investors that onboarded the “crypto hype train” without having a solid strategy in place.

Ultimately, it is crucial to know when to sell, so you can preserve your hard-earned profits. Before you even think about shorting the top or buying put options on platforms like Bitlevex, focus on capital preservation. Here’s how to do it.

Exit Strategy for Your Crypto Investment- Assessing the Market’s History

To build a solid exit strategy, it is fundamental to first understand the asset you are dealing with. There is no way to understand a digital asset without assessing the whole context around it (i.e., having a full picture of the market and its circumstances).

For example, the US economy consists of multiple financial markets – housing markets, debt markets, stock markets, etc. Almost all these markets follow certain cycles that coincide with a specific period (e.g., a one-year recession followed by a two-year positive trend).

Considering the cryptocurrency market is still much younger than all other markets, it is deeply affected by volatility. Why? Because no one knows what the actual value of this innovative market is.

Nonetheless, it is still possible to identify cycles within the crypto market, based on Bitcoin’s halving periods. Every four years or so, the crypto market goes through a two or three-year period of bull markets followed by a one to a two-year bear market.

Bitcoin Halving and its Influence on the Crypto Market

Overall, the cryptocurrency market cycle is probably caused by the Bitcoin halving, which cuts the rewards for miners in half every four years. Assuming demand stays the same – or increases – this sudden decrease in supply leads to a spike in Bitcoin’s price.

Since several altcoins are correlated to Bitcoin’s performance, they usually experience a massive swing to the upside around the halving period. When the value of Bitcoin and other digital assets explode, the media (even the mainstream channels) start attracting more people and boosting cash flow within the market.

On the other hand, the other periods tend to attract seasoned investors with solid strategies. With the increase in Bitcoin’s institutional adoption, many respected financial entities (e.g., MicroStrategy) now share the same space with experienced retail investors.

Currently, the crypto market consists of more than 7,000 cryptocurrencies, a massive number that could surpass the number of stocks available in several countries’ stock markets.

How to Create a Functional Exit Strategy for Crypto Investment – What to Do In 2022

Considering many of the investors within today’s crypto market entered the scene between 2020-2021, an interesting exit strategy for 2002 would be existing by cycle. Although there is no guarantee that the four-year cycle is the ultimate thing, it still provides a good parameter to assess whether or not should someone sell crypto.

When taking a look at the previous three cycles, it is plain to see that the post-halving phase is always followed by a massive bull market. In the past two cycles, Bitcoin’s price peaked in December, which convinced many investors that it provides a specific standard to be studied and followed.

Currently, Bitcoin is trading around $64,590 with a market dominance of 43.13%, while the market’s biggest dark horse Ethereum is trading around $4,600 with a market share of 19.4%.

Another much-anticipated innovation that will certainly affect Bitcoin’s performance is the activation of the Taproot upgrade. Probably the most significant enhancement in the world’s most valuable crypto network since its block size increase in 2017, this novelty will boost Bitcoin’s functionality, increasing privacy and lowering transaction fees.

Considering it will probably coincide with another market peak, the ideal approach would be holding – and buying, if possible – more Bitcoin and other digital assets that tend to follow the halving cycle.

Following Bitcoin’s next cycle, it is possible to consider the top will be sometime around the first half of 2022, meaning investors should hold their funds through 2021, enter 2022 without selling their positions, and then exist the market in between March-April to enjoy the best exiting prices.

Is There the Perfect Time to Exit the Crypto Market? – Final Thoughts

The cryptocurrency market attracts not only suit-and-tie investors from established firms, but thousands of inexperienced lads trying to make money online, making the environment even more volatile and irrational.

Amid this profitable-but-volatile scenario, it is crucial to understand how digital assets work and what the underlying factors that contribute to their unique characteristics are.

While the exit by cycle strategy offers feasible ways to forecast the next bull or bear market cycle, investors should consider different perspectives and research the market from different angles to assess whether a strategy suits their needs.