Over the time, we have seen multiple economic crisis, where market encountered with crazy volatility with lots of ups and down. In each crisis cycle, lots of people get REKT, lots of companies and startup get completely wiped out or at least never get back to its previous market valuation.
In crypto, the effect of market volatility is way more adverse since market cap of crypto is way small (At least 50x smaller) compared to traditional assets. As a result, volatility during crisis is way more compared to Stock, real estate or some other traditional assets. Definitely, we will see Blockchain technology gets more mature over time, its products getting adoption more and more, market cap of crypto will rise and volatility will reduce. But that will take years to decade to get mass adoption level. In the meantime, how can retail and institution can beat the Bears and survive in each cycle? This article will briefly discuss some of the key items which can help to beat the multi year bears and be winner in long term.
1. During bear cycle, Sales will be everywhere at discounted price. No need to wait for absolute bottom as no one knows where the bottom will be. DCA (Dollar cost average) is a great method to accumulate during bear cycle. The key and most important here is predicting which one will survive the bear and reach new ATH when market recover. If it is super hard for you, then just stick with BTC as it’s the safer one to stay with in Bear. Your goal should be to Out perform BTC/ETH as an Investor. So measure your portfolio in those rather than USD or stable coin. If you think it’s hard for you to find such projects, then just stick with BTC and stay stress free. But ensure you just don’t hold the BTC but try to create passive income based on your holding by providing liquidity using Top notch Defi protocols.
2. You probably heard that Time in the market is more important then timing the market. Don’t try to time the market. No one in this world perfectly time in with the Peak or with the Bottom. The best approach is keep learning the space in the same pace whether bear or Bull. This will eventually help you to gather more experience in different type of situation. If you go out of the market completely hoping you will time the market with bottom, you will miss lots of learning those are absolutely necessary to be successful in the space. Be in touch with the community and developers to keep learning about innovations happening in the space.
3. Don’t do Leverage trading or shorting or day trading. Those will make you exhausted. Get rid of any Leverage or debt while using Defi (Decentralized Finance) Protocols in market downturn. Those will make you ultimate REKT. Defi and AMM DEX’s (Automated market Maker) are a growing space and still a long way to grow. DEX’es (Decentralized Exchange i.e UniSwap, TraderJoe, Osmosis etc) are still having less than 10% volume and Liquidity of CEX (Centralized Exchange i.e. Coinbase, Binance etc) and way more volume to capture in coming days pulled away from CEX. But while using Defi, we lots of time use Leverage as borrow from lending protocols. Try to get rid of all those Leverage during market long term downturn and set yourself in a way where your assets can create passive income while market still in downturn and you are holding your assets. Best way to do, by choosing super strong projects and guaranteed to have less IL ( impermanent loss). Make trading pair in Pool and provide Liquidity, which will create passive income while you are holding assets. In DEX’es your liquidity get use by the trader/arbitrageur and when they trade, you get the trading fee based on how much liquidity you have provided in the pool. Try to take advantage by using such AMM DEX’es. Definitely you need to do due diligence to choose best quality AMM DEX’s in terms of security of those protocols where you are providing liquidity.
4. Most of the projects from each cycle will not hit ATH again or will be dead by next cycle due to lack of funds or out of new ideas or resources needed to develop further the projects, founders/community left the project. Also, due to super aggressive innovation pace, we have seen new projects or ideas comes and take the shine away from existing projects. So, when market showing upcoming Financial crisis or longer time frame bear cycle, ensure to concise the portfolio to projects those will have most chances to survive the market. Best way to do by paying attention to the Builders or who’s still delivering and iterating the products, who are still very engaging with the community. Check the Twitter, telegram and discord, Github feed to learn how team is engaging with the community.
5. Try to grow some skillsets either by learning some coding those are useful in developing Blockchain infrastructures such as Rust , Java, Haskell etc. If learning coding is too much, then try to be become a block producer aka Validator of your favorite blockchain you have invested in. The best way to know if your investments is good or not by testing out their products. One of the key product for a blockchain infrastructures is the Validation of the network. Try to learn how can you contribute to the network by becoming a validator. This will greatly help to improve your understanding on the technology and you will also find pros and cons of the projects you have invested in. In last bear bear I was validator of multiple blockchain such as Cardano Stake pool operator, Wanchain Bridge validator, Algorand Participation Node, Validator for Avalanche Blockchain. While I was running all those Node, I have figure out which one will be my ultimate blockchain ecosystem I would like to move since I have actively tested out their Network Decentralization design. Guess which one I eventually ended up? It was Avalanche. Feel free to test out such way to learn how good your investment is in terms of Technology development and innovation.
6. Try to create additional passive income. It can be part time or free-lancing or anything you are good with. For instance in last bear from 2018–2020, I started doing photoshoot for some events like Birthday party, maternity, kids photoshoot etc to get some extra bucks, so that I can keep building my crypto portfolio. If you already have some assets or Business that is generating passive income, then that’s a plus for you. Take some passive income from there and continuously build your portfolio with the project you intended to grow. Consistency is a key in the space. Be unstoppable on your consistency!!!!
7. Lower and cut all your expenses as much as you can. For instance in last bear from 2018, I stop quit smoking to save some extra bucks so that I can accumulate some good projects in the bear. Try to find a way to reduce such extra expense around you and increase cash flow to accumulate during the bear as much as you can. Stop travelling too much if you doing a lot or you are a fan of visiting nice places. Sure, you can visit those places with more fun if you just wait 1–2 years after beating the bears
8. Ignore the market price of a good projects during bear and keep doing Doller cost average. Stop buying projects those are not building aggressively and not meeting their commitments of the roadmap . More than 95% will go dead when market completely capitulate by end of the bear cycle. Try to find out which are the projects solve real and challenging problem in the space such as L1 smart contract which can have super fast finality without compromising Decentralization or security, Cross-chain bridges or interoperability, Oracles, Defi etc. Adjust your thesis to ensure having good projects and get rid of the projects you have doubt will survive
9. Observe the Fed and actions taking by Government on economic decision making especially from USA. Seems right now crypto and all other assets tied to Federal reserve monetary policy as world is fighting to control the Inflation. If you see money Printer goes brrrrr meaning Bull and Printer goes off it’s the turn for Bear. Pay attention to how the Feds are fighting the inflation and controlling the money supply. Just go with that flow to judge the upcoming market
10. If you are very confident that market is completely capitulated or huge disaster is done like 2020 March 18th (Covid lock down) where we have seen Crypto market was absolutely bleeded over 50% loss in 24 hours, go ahead to take your shot with all you have side money’s. But you have to ensure the projects you are investing on that time, need to be rock solid. Because those are the investment will make you fortune. Its ok to borrow some from your credit card or from your 401K , if you see such type of disaster in your life time.
Usually disruptive technologies grow in multiple waves of bear-bull cycle and throughout these cycle, lots of projects dies as other projects provide better solution or project dies due to lack of fund or improper execution. So, during market downturn set yourself while your are holding your assets and its continuously generating passive income by using proper smart contract protocols and those will survive the bear period. That’s the secret sauce to kill the bears !!!!
Published @ https://jon-buet.medium.com/beating-the-bears-in-crypto-space-8cfe9d2d03f8
