Bitcoin’s price goes up and down like crazy. How do you know whether an upswing marks the top of the market? When we get a downswing, how do you know whether it’s a dip or the start of a cycle-ending crash?

Nobody knows, but if you have the right data, you can get a pretty good idea.

Fortunately, smart people have gathered lots of data on Bitcoin. More specifically, how Bitcoin acts in different circumstances.

Thanks to the transparency of Bitcoin’s blockchain, we can see changes in HODLing behaviors, money entering and leaving exchanges, gains and losses among Bitcoin wallets, and lots of other information about long-term price movements.

We can use that data to get a good idea of what to expect in certain situations. With that data, I designed a plan for myself and other long-term investors to spot market tops and bottoms with a fair amount of confidence.

The goal is to build wealth with crypto without a lot of effort, stress, or trying to time the market. Sell only as a last resort.

While the price action can get quite extreme—up 50% or more after seeing signs of a peak, down 50% or more after seeing signs of a bottom—this is an extreme market. You have to give some margin for error. Close enough is good enough.

More on that below.

Backtesting the Plan

If you had followed my plan this year, you would have sold some of your Bitcoin at about $68,000 (give or take a few thousand dollars).

If you had followed my plan in 2017, you would have sold half of your Bitcoin at about $16,000 and the rest over several weeks, catching the market cycle peak of $20,000.

If you had followed my plan in November 2013, you would have sold half of your Bitcoin at about $760 and the rest over several weeks, catching the market cycle peak of $1,150.

If you had followed my plan in March 2013, you would have sold half of your Bitcoin at about $133 and the rest over several weeks, catching the market cycle peak of $260.

You wouldn’t have enough data to follow my plan in 2011, but if you’d just followed the “sell” signals, you’d have sold just before and after the peak.

In other words, you would have sold only when the price was in the circles:

In addition, you would’ve caught every market bottom, though you would have bought most of your Bitcoin at a price that was higher than the ultimate bottom.

You would not have sold in 2021, but you would not have bought most of the time. For the entirety of that year, your average price would have been about $37,000, assuming you bought the same amount each day that Bitcoin’s price was in my buying zone.

(Dollar-cost averaging would have given you an average price of $47,000. Following my plan, you got 30% more Bitcoin for the same amount of money.)

Occasionally, you'll have the option to take a trade. It's not a trading plan, but when simple opportunities come up, I'll tell you about them.

All told, you would’ve taken these actions, plus a few trades along the way:

What my plan can and can’t do

My plan simply limits my downside financial risks. It uses dollar-cost averaging as its benchmark. Don’t trade based on this plan—if all goes well, you won’t ever sell.

I expect the price of Bitcoin will go up over time, with multiyear cycles driving prices upward and downward to extremes.

Once we get to those extremes, Bitcoin shows some specific behaviors that only occur at the top and bottom of the markets.

While this can’t tell you anything about movements in between those tops and bottoms, you shouldn’t need to worry about that. As long as you understand where we’re at in the market cycle, you can make informed decisions about what to expect. Then, you act accordingly.

This plan represents the actions I will take once we get to the tops and bottoms.

For the most part, I will HODL and use Bitcoin all other times. I don’t trade or dollar cost average, but I will sometimes rebalance money into Bitcoin from other assets within my investment portfolio, which includes mostly non-crypto assets, cash equivalents, and debt instruments.

In other words, it’s my plan, not yours. Don’t use this as financial advice.

Breaking Down the Plan

Subscribe to Crypto Is Easy Premium to read the rest.