As has happened historically, the bullish rally will end and the price of bitcoin will fall. Every investor must do their research to make responsible decisions. The price of bitcoin (BTC) entered a bullish cycle after Donald Trump's victory in the United States presidential elections. Although market euphoria can cloud any investor's judgment, it can be helpful to employ a selling strategy to minimize losses and take profits. The digital asset market is very volatile and everything that goes up can come down in the coming months. For this reason, it is essential that Each investor conducts his or her own research to make responsible decisions.
Since Trump defeated Kamala Harris in the electoral race, the price of bitcoin has not stopped setting all-time highs (ATH) and some analysts assure that it will surpass the $100,000 barrier in the short term. Bernstein, the firm specialized in research and execution of global stock transactions, updated its projections and assured that the price could reach up to $90,000 in the coming weeks. In addition, he highlights that it will go up to $200,000 in 2025. The Argentine influencer Norberto Giudice spoke with BitcoinDynamic within the framework of LABITCONF 2024 and assured: «We could talk about this super cycle where bitcoin would even go up to close to $200,000.» However, We must not lose sight of the fact that the BTC bullish rally will eventually endand its price will suffer a strong correction. Therefore, it is key to have a strategy to identify the right time to sell bitcoin (in case you want to do so to avoid suffering the fall). Below are presented 4 Approaches to Study and Determine When to Take Profits.
1.DCA reverse
As explained in Criptopedia (the educational section of BitcoinDynamic), in trading the Dollar Cost Averaging (DCA) is defined as the strategy of implementing a recurring purchase plan for an assetthe same amount and for a set period, regardless of the price. In this way, by averaging, the investor minimizes the impact of price fluctuations that the asset could suffer. Now, what would this method be like but in reverse. It's simple, As the trader makes profits, he begins to sell bitcoin in similar amounts in a given time.
For example, you can sell a small percentage of your holdings each time the price increases over a defined period. This reduces exposure, minimize possible losses and take profits. A tool that can be useful if implementing reverse DCA is the Bitcoin Halving Cycle Profit from the TradingView platform. As explained on their website, “this indicator streamlines the analysis of halving events, providing explicit signals for both profit-taking and dollar-cost averaging strategies.” On the graph, you see an orange square and dotted line representing the start of the drawdown event. In green, the beginning of the so-called optimal profit-taking zone; in red, the end of that period. Following historical patterns, this period ends 80 weeks after the halving.
According to the indicator, the bullish period would begin in January 2025. Source: TradingView.
2.On-chain metrics
On-chain metrics are widely used indicators in trading that are derived from data stored in the network of a digital asset. They offer insight into user behavior, transactions and market dynamics. Among these metrics is relative unrealized profit (RUP)which allows the user to evaluate the unrealized gains of investors' holdings, compared to the total market capitalization. Unrealized gains are defined as the difference between the purchase price and the current price of BTC. In other words, those profits that have not yet been realized because the asset has not been sold. With the RUP, the trader can buy those unrealized profits with the market capitalization of BTC, to have a broader context to analyze the potential value of those profits, relative to the size of the market. Taking previous bullish cycles as a reference, when the RUP is high, it means that a considerable percentage of investors have unrealized gains on their BTC positions. Generally, it is an indication that users could sell to realize their benefits since The price of BTC is above the price at which they bought it. On the other hand, if the indicator is low, it is a sign that traders are less likely to sell their holdings since unrealized profits are low or even negative. Continuing with historical patterns, it suggests that the market could be in an accumulation phase or waiting for prices to rebound. As seen in the ChainExposed chart below, currently the RUP (blue line) is 1.5, which indicates that it is still at moderate levels when compared to other bullish cyclesas in November 2021. On that occasion, it reached the red zone, and the peaks in that sector reflected high levels of unrealized gains.
The RUP indicates that the market has not yet reached high levels of unrealized profits. Source: ChainExposed.
3.Trend tracking
Trend following in trading is a strategy that It is used to identify and take advantage of the prevailing direction of the market in a given period. It is simply detecting whether the market is in an upward or downward trend. A classic tool to implement this strategy is to set a 200 day exponential moving average (EMA). As BitcoinDynamic has explained, EMAs are popular among traders with less experience in the market because they help them define a trend and possible entries of trading operations. In this case, when BTC falls below that metric (red line), it can be considered to be in a downtrend and therefore It is time to sell the asset.
Bitcoin price with the 200-day moving average (red line). Source: TradingView. Although it is an imprecise indicator to find the exact point of greatest profit taking, The truth is that it is very useful to minimize losses.
Another well-known trend following indicator in supertrend trading. It is a technical analysis tool based on the Average True Range (ATR) that Helps identify trends and possible reversal points in the market.
To do this, it combines trend and volatility detection, which allows The user anticipates changes in the direction of the trend and establishes stop lossesas explained on the TradingView site. The Supertrend indicator displays a line whose color changes depending on the direction of the trend: green for a bullish one and red for a bearish one.
Supertrend detects whether the trend of the asset, in this case bitcoin, is bullish or bearish. Source: TradingView. The line is overlaid on the chart and can be adjusted to different periods and settings, according to the investor's trading strategy. If the indicator changes from bullish to bearish, The trader could consider it as a signal to take profits..
4.Use of specific indicators
Specific indicators are widely used in technical analysis because they allow investors to study historical patterns of prices, volumes and other aspects of assets such as BTC. Each indicator has the ability to track trends and thus can record price volatility or the direction in which an asset moves. Regarding the latter, it can be a bullish, bearish or stable cycle, known as lateralization. One of the indicators to identify maximum points in bullish cycles is the Pi Cycle Topavailable on TradingView. As explained on the website, the Pi Cycle Top is used to detect the highest point at which a financial asset arrives with a margin of error of 3 days. To do this, it uses the 111-day moving average (111DMA) and a newly created multiple of the 350-day moving average (350DMA x 2). Historically, every time the 111DMA rises and surpasses the 350DMA x 2 line, it coincides with the peak price of BTC. Being a multiple, it creates a “barrier” that is higher and is used to capture long-term trends. The multiple is of the 350 DMA price values, not the number of days. Every time it fell below the 111DMA, it was a sign of selling pressure on the asset. As seen in the graph below, the “Pi Cycle Top” labels mark times when The 111DMA has crossed the 350DMA x 2 upwards, coinciding in the past with important spikes in the price of BTC.
The Pi Cycle indicator usually anticipates a trend change with a margin of error of 3 days. Source: TradingView. In previous cycles, This tool has proven to be effective in predicting the end of a bullish rally. However, despite the advantages it offers, the Pi Cycle Top can fail due to the appearance of unforeseeable factors. It is worth clarifying that there is no guarantee that it is 100% correct. That is why it is important for users to do in-depth research before making any decision about their investment portfolio.
Clarification: This article is written for informational purposes. It does not constitute an investment recommendation or financial advice. All strategies presented here are susceptible to failures. Each investor is responsible for conducting his or her own research.