I entered the cryptocurrency circle in 2017 and started to trade in cryptocurrencies. In this circle, I have accumulated more than six years of trading experience. I have experienced two rounds of bull and bear markets, and have made and lost money continuously. I have gradually polished a trading system that suits me. I am going to share a series of articles to review and summarize some different ways to make money. This article will first share long-term investment.

Long-term investment is the simplest way to make money, and you don’t have to spend too much time and energy watching the market, studying trends, etc. Just buy at the right time, deposit it into your wallet, keep the mnemonic phrase safe, and then wait a year, two years, or even five or ten years to look at it again, you will definitely be surprised.

Today, the price of Bitcoin is $36,000, which is at the end of the bear market and the beginning of the bull market. Ten years ago, in early 2013, Bitcoin was only a dozen dollars, and it rose to $1,000 at the end of 2013. Five years ago, in 2018, it was at a high point at the beginning of the year, about 15,000, and at the end of the year it was a low point, less than 4,000. Even at the beginning of this year, it was only more than 16,000. Although it has been in a bear market for a whole year, it has more than doubled. Of course, if you bought it at the high point of the last bull market, the price of more than 60,000, then you have lost money so far, but in the long run, the next bull market will definitely break the previous high, so in the long run, you will definitely make money.

There are several important points in long-term value investing:

Investment targets

Timing of entry

Position building plan

Exit timing

When investing, you naturally have to choose stable ones so that you can hold them for a long time. BTC and ETH are definitely the first choice. Needless to say, there is no problem holding them for more than 10 years.

In addition to BTC and ETH, if you want to allocate other digital assets, you must choose blue-chip coins, that is, those project tokens that are leading in the sub-segment, have developed ecosystems, and are still developing. The expected increase of these blue-chip coins in the next bull market is likely to be greater than that of BTC and ETH, and they are also relatively stable and safe, without the risk of returning to zero.

When choosing multiple investment targets, you must make good asset allocation. You should focus on BTC and ETH, but not other currencies. In addition, it is recommended to diversify your investments. LUNA and FTX, which were once regarded as blue-chip coins by many people, also collapsed, and many investors who heavily invested in LUNA or FTX suffered heavy losses. Therefore, when allocating these currencies, you must not hold a large position to prevent a crash.

The timing of entry will directly affect your holding cost. The best time to enter is naturally to buy at the bottom of each bear market. But in fact, most people can't do it. Those who want to buy at the bottom are more likely to buy halfway up the mountain.

To determine the entry time, I prefer to refer to an indicator, Bitcoin Ahr999 Index, which is shown in the figure below:

There are two important lines in this indicator, the red line and the green line. The red line is called the bottom line, and the indicator number is 0.45, which means that when the ahr999 indicator falls below 0.45, it is time to buy the bottom. The green line is called the fixed investment line, and the indicator number is 1.20, which means that when the ahr999 indicator falls below 1.20, it is time to make a fixed investment.

For those who are into long-term investments, this indicator is a very useful reference for judging when it is suitable to buy at the bottom and when it is suitable for regular investment. It is very intuitive.

In addition to the Bitcoin ahr999 indicator, there is another indicator that can also be used as a reference for entry timing, that is, the shutdown price of Bitcoin mining machines. The so-called shutdown price refers to the price of the currency that allows miners to reach the dividing line between revenue and cost given the total network computing power and electricity costs. When the currency price falls below the shutdown price, mining will become a loss-making behavior.

When the price of the currency falls below the shutdown price, some miners with smaller risk resistance will seek to exit and stop losses. When these miners exit, they often sell Bitcoin for cash and sell mining machines at a lower price, causing the price of Bitcoin to fall further. This phenomenon is called miner capitulation. Once miners capitulate, it can usually be considered that the market bottom is almost here. After small and medium-sized miners are eliminated, the remaining strong miners with strong risk resistance will choose to avoid selling in the low-price area, so that the price drop caused by miners' selling will stop. Because these remaining miners choose to hold the currency instead of selling at a loss, when miners are important sellers of Bitcoin, the overall supply and demand relationship in the market will be further changed, the supply will be reduced, and the currency price will rise.

There is also an indicator for miner capitulation, the Hash Ribbons Indicator, whose data is shown in the following figure:

The Bitcoin Hash Ribbon indicator analyzes the hash rate of the Bitcoin network and constructs a shifted moving average (DMA), which is derived from financial markets and their mathematical analysis. In short, the DMA shows the trend or change in price, or in this case, the hash rate on the Bitcoin network. The indicator mainly involves two lines, the 30-day moving average (30DMA) and the 60-day moving average (60DMA). When the 30DMA falls below the 60DMA, it indicates that the hash rate is decreasing, miners’ capitulation has begun, and the market is bearish. When the 30DMA returns above the 60DMA, it indicates that miners’ capitulation has ended and the market is bullish.

According to the theory, when the Hash Ribbons cross, it is time to buy.

After determining the entry timing, the next step is to consider a position building plan. There are many position building plans to choose from.

The simplest and most brutal solution is that as long as the ahr999 indicator falls below 0.45, you can use all the money you want to invest to build a position at once, and then save it directly in your wallet without having to worry about it. The advantage is that it is simple and crude, requiring the least time and energy, and is very suitable for lazy people to operate. The disadvantage is that the price may fall further and you will not get a better buying price.

If you want to get a lower buying price, you can optimize it a little bit and wait for the indicator to fall below 0.40 before opening a position. Historical data shows that at the bottom of each bear market, the indicator will appear below 0.40 or even below 0.30. However, the lower the indicator, the lower the probability of occurrence. If you don’t check the market frequently, you may not be able to seize the opportunity of ultra-low indicators.

You can also try another optimization plan, which is to divide the funds for position building into several times. For example, you can divide it into three funds. The first fund is used to build a position when the ahr999 indicator drops to 0.40, the second fund is used to enter when the indicator drops to 0.35, and the third fund is used to enter when the indicator drops to 0.30. If you can't wait for the opportunity to reach 0.30, you can open a position when the indicator returns to 0.35. Similarly, if you don't wait for the opportunity to reach 0.35, you can also open a position when it returns to 0.40.

In addition to the step-by-step position building based on indicators, you can also build positions based on prices. For example, when the indicator falls to 0.40, the price of Bitcoin is 25,000, then you can build a position at 25,000 for the first time, and then you can place orders downward in steps of 1,000, and you can place orders at 24,000, 23,000, 22,000, 21,000, and 20,000. If you can get all of them, that would be the best. If you can't get the ones below, then you can build a position when the price rises to the previous level.

In addition, for many working people, the funds used to build positions are not invested all at once. As monthly income accumulates, they can continue to invest in building positions. For such people, I think the best solution is to start a long-term fixed investment plan after the opportunity to copy the bottom line appears. Even if the index rises above the copy bottom line, as long as it is still below the fixed investment line, you can continue to implement the fixed investment. It is recommended to make fixed investments on a daily basis. If conditions permit, you can even make fixed investments on an hourly basis. I have a friend who wrote a fixed investment program specifically to automatically make fixed investments on an hourly basis.

The last thing to consider is the timing of exit. The ideal time to exit is at the peak of the bull market, but successfully escaping the top is more difficult than bottoming out in a bear market, and most people can't do it.

So, are there any corresponding reference indicators that can roughly determine the top of the bull market? In fact, there are. The following mainly introduces two indicators: MVRV Ratio and Bitcoin Rainbow Chart.

MVRV stands for Market Value to Realized Value, which is used to compare the relationship between the market value and the realized value of a token, reflect the supply and demand relationship of a token in the market, and monitor the degree to which the current market price of the token is undervalued or overvalued. The following figure shows the data of this indicator:

When MVRV exceeds 3.5, it is generally considered that the market has reached a top, which is the red area in the figure, while when it is below 1.0, it is considered that the market has fallen to a bottom, which is the green area in the figure.

Bitcoin Rainbow Chart is the Bitcoin Rainbow Chart, as shown below:

When the price falls to the cold color system, it means that the market sentiment is depressed, which is a better investment point and buying point. On the contrary, when it rises to the red area, it is a selling point.

In addition, there are actually two versions of the Bitcoin rainbow chart, and the one above is the latest V2 version.

However, it should be noted that whether it is ahr999, hash ribbons, MVRV or rainbow charts, they can only be used as reference indicators, and they are not 100% correct, especially when used to predict the future. However, you can combine multiple indicators to make judgments, which may improve the accuracy of buying and selling points.

The execution plan for selling can be the same as when buying. If you don’t want to waste too much time, you can be simple and rough and sell all at once, or you can sell them successively according to a step-by-step price plan.

The long-term investment plan is actually about making money in the big market cycle. It is also the most stable way to make money. The longer you hold it, the more you earn.