How to survive a bear market?
The current state of the market
While there are a handful of projects building the future of the Internet and Finance, the majority of crypto projects are still utter bullshit and their founders, scammers.
People are tired of these musical chair’s games.
Since LUNA and UST collapsed in a very short and spectacular fashion, crypto markets have been even more in turmoil. People got REKT big and lost confidence. Rightfully.
Crypto is the jungle, there is no regulation, everybody does almost what he wants and is not to be worried about it.
Some example: last week, we heard that Fabric cofounder gambled the Fabric treasury doing some leverage trading and lost it all resulting in an almost collapse of Fabric when the news spread. In TradFi markets, the guy would be in prison really soon. We are not even sure he will be in trouble any time soon despite losing around 500K USD.
But the crypto jungle is about to change. Regulators took notice of the LUNA/UST collapse because of its size and want answers now.
Then people are also scared about the global macro environment where the Federal Reserve has adopted a change in its monetary policy as they increase interest rates to lower inflation. Cheap money is gone for a couple of years probably.
Lost of confidence, upcoming regulation and negative global macro environment are affecting crypto. That’s for sure. Now we don’t know if there is going to be a bear market or not but here are some tips on how you could survive it anyway.
How to survive a bear market?
1. Have a Long Term Approach
A bear market can go on for 1-2 years but it does not mean crypto will go away.
Indeed, crypto / web3 / DeFi / NFTs are here to stay and have already revolutionized the world. It just won’t disappear as everybody will embrace it in 5 to 10 years. The tech is simply superior.
So make sure that you have a long term approach in mind.
2. Dollar Cost Averaging (DCA)
Never buy your full stake in one go. Invest gradually, little by little. If prices continue to go down you can still buy lower. Your entry price will be better.
3. Cash (Stablecoin) is King
You need to have a significant amount of stablecoins in your portfolio. Otherwise you won’t be able to buy the dip and won’t profit from other people panicking and selling at absurd levels.
4. Save Money but Not Too Much
Saving money allows you to invest more so you will have more once the bear market is over..
.. But not too much because inflation is eating your savings account anyway at around 10% per year.
5. Invest in Strong Projects Only
Only invest in projects that have significant fundamentals such a live product generating money for token holders (lending and borrowing dApps, DEXes, etc.) or with recurring users or a strong and dedicated community.
Don’t invest in ideas or projects which are far from going live on mainnet whether DeFi, NFTs or Games. Bear markets make everything harder. If they are not live yet, the go live date might be further delayed or they simply won’t make it and give up.
6. Ask about Run Rate and Treasury
Don’t be afraid to ask founders what is the current run rate and how long can they continue to build without revenues coming in.
Also ask whether their treasury is in stablecoins, BTC, ETH and so on. There is no need for a detailed breakdown as this is sensitive information for competitors etc but if they refuse to answer you, something might be fishy. Avoid these projects.
7. The Lower the Coin/Token Inflation, the Better
Projects with lower inflation rate will do better as people won’t have big staking rewards to dump on the market to make a small return out of their positions.
8. The Lower the Difference between Market Cap and FDV, the Better
If the difference between market cap and FDV is small, it means that the majority of the supply is already in the market, meaning there is no additional selling pressure coming in (no additional tokens to be sold on the market from private investors with vesting schedules for example).
Also check whether a high percentage of the supply is staked or locked. The higher the better as it removes selling pressure from existing coin/token holders.
9. The Bitcoin Safe Haven
It is well known. In bear markets, BTC falls less compared to other cryptocurrencies. It is the crypto safe haven. Always has been. And no it is not ETH.
10. Continue to test everything and be curious
In a bear, markets are much more calm. Take the time to test new products and interacts with projects which don’t have a token yet.
For example, if you were curious enough to use Optimism or Hop bridge you now have two potentially juicy airdrops waiting for you.
Just assume everything will get a token rather sooner than later.
Conclusion
We are probably not going to all make it but we are confident that crypto continues to have the best risk/reward ratio of any markets for the next 5 to 10 years so plan accordingly. The strongest will survive.
Thanks for reading
Secret Salsa
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