Special Issue: The Bull Market Exit Plan
Nothing lasts forever
All good things must come to an end.
Ideally, we will never sell a single penny’s worth of crypto and the market will rise naturally, organically, up and down, higher and higher forever. No FOMO, no parabolas, no market cycle peaks.
That’s a nice thought but unlikely to happen. You don’t want to sit through an 80% drop in your portfolio and wait two more years to get back to even.
Once we see the signals that the market’s getting near a market cycle peak, you need to sell to prevent this fate. I’ll let you when that time comes, and you can see it in my plan for bitcoin’s bull market.
Those moments happen rarely—only four times in twelve years, each time for a few weeks at most.
How do you prepare for the inevitable time you have to sell?
I put together a few ideas from myself and others. Nothing too specific. The details depend on your country’s laws and taxes, as well as your financial situation, personal goals, risk tolerance, investment strategy, what you plan to do with your gains, and all the other things that make your situation—and decision—unique.
At the end, I’ll briefly share my personal strategy.
Hopefully, you find the information and links useful. Leave your thoughts and comments at the bottom of this post!
We’re not near the market cycle peak but you don’t want to wait until we start to see the warning signs.
This market moves fast and a lot can go wrong on your way to the exit.
When the time comes to sell, prices will go haywire, with massive swings from day to day, hour to hour. Exchanges will fail. Wallets will go into “maintenance.” DEX fees and smart contract flaws will screw people over.
Act now to make the exit as fast and easy as possible.
Check your wallets, keys, and passwords
Do you know what sucks?
Getting locked out of your wallet or exchange account.
To avoid this, confirm your back-up phrase and private keys now. Write those down and keep them someplace safe.
Log into all of your exchanges to make sure 2FA works correctly and you have the right passwords. If you need to reset your password, do that now.
Set your email’s spam filter to catch exchange emails. On their FAQ pages, most exchanges have instructions for whitelisting their emails in your spam filter. Follow those instructions.
KYC if you need to
If you use an exchange that requires KYC to withdraw your crypto, you’ll want to complete that process now.
While the process usually takes a few minutes or less, it’s a hassle and sometimes takes days to complete.
Since you’re going to use the exchange anyway, you might as well do your KYC now. One less thing to worry about later.
Prepare to unstake
If you have staked altcoins with lock-up periods, make sure you account for the time it will take to unstake them.
For example, Aave takes 10 days to unstake. As a result, you need to start the process at least 10 days before you sell. Other altcoins have different schedules.
Some people may refer to unstaking as “powering down,” “unbonding,” or “cooling off” but it’s basically the same action.
(Also make sure you have enough ETH to cover the gas fees when applicable.)
Get your finances straight
What will you do with your proceeds? Keep them in stablecoins? Cash them out? Something else?
Do you know how much you’ll end up with? Did you account for taxes?
If you’re not tracking your portfolio, now’s a good time to start. I use the CoinGecko portfolio tracker. Tap this button and click “Portfolio” to get the tracker.
You may use another service or do it yourself.
I also use the Personal Capital dashboard to see how my crypto holdings fit into my overall financial portfolio. Once you set up your dashboard, you can see all your debts, assets, and even your crypto holdings in one view, with calculators and estimators to help you decide what to do with your windfall.
Tap this button to try it out. It’s free and you get $50 if you decide to link your accounts.
Do you know how you’ll be taxed on your crypto?
In high-tax countries, you may end up paying so much to the government that it makes more sense to HODL through the crash.
For example, if you will pay 50% tax on your gains to avoid a 50% crash in the paper value of your crypto, on top of exit fees, is it worth selling?
Probably, yes, because you will reset your basis, saving you money over the long-term after you buy back into the market. But only you can know. You’ll want to run the math for yourself. These decisions are never as simple as they seem!
If, like me, you live in a low-tax country with ample legal ways to shelter your gains from the government, did you factor in deductions, basis, tax-loss harvesting, and other strategies that can lower your taxes further?
For example, in the US, crypto gets treated as property, with capital gains and losses for every transaction except transfers to/from your own wallets. You pay taxes or take deductions based on the difference between the price when you got the crypto and the price when you sold it or sent it to somebody else.
This gives you some benefits. For example, if you hold your crypto for more than a year, you pay 20% maximum, with no tax for those who have less than $40,000 total income. If you hold your crypto for less than a year, you get taxed at the same rate as normal income, but you have lots of ways to offset that tax (e.g., contribute to an IRA, harvest losses from other assets, the list goes on).
As far as how to account for your taxes? I can’t figure that out at all. I turn my records over to a tax prep service with as much detail as possible and hope they figure out everything correctly.
(Privately, I hope the IRS audits me so I know what I actually owe!)
This year, I used Cointracker. In previous years, I used ZenLedger. Both services do ok and I assume they get the calculations right. I found Cointracker easier to use and syncing with my wallets went much smoother.
You could also try Hedgehog. It’s an early-stage business that’s still in development, but the platform has some interesting features to help you plan and account for your transactions before you do your taxes.
Know what it will cost to exit
Nothing in life is free.
For DEXs, you need to pay gas fees for the swap, even if you use Polygon or Binance Smart Chain.
For traditional exchanges, you need to pay at least three fees: one when you move your crypto to the exchange, another when you trade, and a third when you withdraw.
To help you estimate the costs of withdrawing from a centralized exchange, check WithdrawalFees.com.
Use the Etherscan gas tracker to figure out gas fees for Ethereum DEXs.
And consider switching to Binance Smart Chain or Polygon for swaps. They’re just as complicated and difficult as Ethereum and limited in their tokens and functions, but they both can reduce your costs a lot.
Plan your exit route
How will you get your money out of the market? What path will you take?
With a little planning, you can reduce time, fees, and effort. For example, you can move your altcoins to one or a few exchanges, trade into a single currency, then withdraw in that single currency one time, rather than pulling it out of the market in bits and pieces. You can also consolidate your selling through DEXs and aggregators.
Going through a traditional exchange will probably save you money, but that’s a more complicated path. Map it out now. You could even draw out the path so you can “see” the movement, e.g., wallet > exchange > BTC > stablecoin. Seems silly, but I’ve done it, it can help.
Feel free to use this template spreadsheet to plot your course. I filled in some dummy rows as examples, you should delete those or write over them.
Not the most user-friendly, I know. It’s just a spreadsheet. Follow these steps to make the best of it:
Enter your coin’s name.
Enter its location (e.g., wallet address, name of the exchange, etc).
Enter the currency you want to cash out with.
Check the CoinGecko Exchanges list, select the exchanges you want to use, then see all their trading pairs. Or, check each coin’s page for a list of trading pairs and exchanges that carry it. With a little effort, you can probably consolidate your list into a few exchanges that support all of your altcoins and their trading pairs.
Enter the exchange name into the cell for “send to.” Try to narrow your total list of exchanges to a few as possible.
Fill out the cell for “where to store the proceeds.” Back to the bank? Savings platform? Somewhere else?
Use the filter to group your list by currency, exchange, destination, and any other category. Once you do that, you’ll see the connections and overlap to help you coordinate your actions. The filter button looks like an upside-down triangle near the top of each column.
With this approach, I simplified my actions to just a few exchanges and consolidated my exit currencies to USDC, USDT, UST, BTC, and ETH. In other words, I only need a few exchanges to trade my altcoins for at least one of those currencies.
As the last step, I convert my BTC and ETH into stablecoins.
Whatever system you use, you probably want to get as close as you can to one address, one withdrawal, and one destination. You may already have done that!
If not, make sure you can answer these questions:
Where are your altcoins located?
What exchanges support your altcoins?
What currency do you want to cash out with?
Where do you want to keep your proceeds?
Expect delays and problems
You can’t know what problems might crop up, but you can anticipate something will go wrong at some point. Account for problems beyond your control.
Bugs in smart contracts? Customer service delays? Exchange SNAFUs? Wallets under maintenance?
What about insufficient gas fees for DEX exchanges? Steep withdrawal fees for traditional exchanges? Transaction fees to move the crypto around?
Are you prepared for exchanges to crash and transactions to get blocked? Withdrawal limits? Whitelisting rules that prevent you from moving your crypto for 1-7 days? Compliance checks or holds on your accounts?
Wait until the time’s right
Once we see the signals of bitcoin’s market cycle peak, we will sell bitcoin, then altcoins shortly thereafter.
(You may even want to start selling earlier than that, just in case altcoins don’t lag bitcoin and instead crash when bitcoin does.)
Until then, no worries.
This advice makes the process easier. It doesn’t cover everything you need to know. Start now and don’t rush, just prepare.
That way, you can act decisively when the time comes. You will know what to do with your crypto, roughly how much it will cost, and how everything should turn out. You will have already spent the time to organize your affairs.
After you sell, you can enjoy the fruits of the harvest and prepare for what comes next: a chance to re-accumulate your crypto at a massive discount.
My exit plan
I plan to cash out everything into stablecoins. Yes, everything. 100% exit.
I will sell into cash, USDC, USDT, or UST as much as possible. I have figured out the exchanges that can batch all of my sells into those currencies and withdraw as one transaction for each.
When not possible to sell into cash, USDC, USDT, or UST, I will sell into ETH or BTC. Ideally, all at once. Then, I’ll move the ETH and BTC into my BlockFi savings account and convert them to GUSD as soon as possible.
As a result, I will end up with cash, GUSD, USDC, USDT, and UST.
I’ll use the cash to pay off the lines of credit I drew from to buy my crypto.
(Once the market turns around, I’ll draw against those lines of credit to buy crypto again.)
What will I do with those stablecoins?
Keep half the GUSD on BlockFi.
Move half the GUSD to Gemini Earn.
Move the USDT to BitOffer and open a 3x leveraged short position on bitcoin. Once bitcoin’s price falls into the “buy” zone of my plan, I’ll cash out the short position and buy bitcoin with the proceeds.
Deposit UST into the Anchor protocol.
Why do I spread my stablecoins around this way?
Assuming bitcoin’s price falls a lot in the weeks and months after we sell, I can boost my USDT with the leveraged short position, albeit with some not-insignificant risk. It’s a fairly small position so it’s worth gambling a little.
For the GUSD, USDC, and UST, I just want to get amazing yields without too much risk. I don’t expect anything bad will happen, but what if one of those savings platforms fails? Goes out of business? Gets hacked? I could lose all my money.
For a small cost and a little effort, I can split my assets across several platforms to lessen the damage of an unlikely tragedy. Even if one fails, the others will probably stick around.
How quickly will I sell?
It depends on how quickly we see the specific triggers in my plan for bitcoin’s bull market.
Once the market cools off, I’ll buy back in fairly aggressively—but that’s a story for another day.
Feel free to share this post with anybody who might find it useful or interesting. You don’t need this information now, but you will eventually—maybe sooner than you expect.
Relax and enjoy the ride!