The Bear Market Appears To Be On The Way
Avoiding calamity in a bear market requires risk management, emotional discipline, intelligence, and well-structured strategies. A Crypto bear market can be one of the most rewarding experiences for strategic long-term investors. However, it all comes down to how you choose to play the game. Bear markets are not an anomaly; they are a guaranteed part of a healthy market structure.
Some may say the bear market is already in full swing, and I would tend to agree now that the $38K level has been breached. This has been the level that I have been discussing in my recent writings regarding Bitcoin and the levels to watch. I had hoped that, if it broke, we would see a scam wick that would later bounce back to the $38K level.
However, the dump appears to be too far, with the window of a reversal closing fast. Apart from a sudden pump out of nowhere, this appears to be a bearish trend gathering momentum. This signals the beginning of winter, and one needs to be ready. Mindset, approach, and strategy are imperative regarding bear markets. They can oftentimes be way more brutal than expected.
Buying The Dip: How To Invest In Bitcoin And Crypto During Market Pullbacks
Looking back to the last Crypto winter, there are a few lessons that we can take away. One of them is that markets can always drop further. It is better to miss out on a few percent than to keep buying the dip in a bearish trend. Buying the dip when markets are bullish is an entirely different scenario. You cannot compare the two.
In a bearish trend, you want to wait for a confirmed bottom instead. Even in doing this, it can be extremely difficult to definitively call the bottom. However, it is better to attempt to analyze a bottom than to continue buying blindly. You will have a much better chance of not getting rekt this way. If you miss out on a move, you have not really lost anything. However, being premature can cost you quite dearly.
What Does A Shift To Quality Mean In Crypto Investing?
I know many readers are new to the Crypto space and may not have been present during the previous bear market. One thing that became quite clear in the final months of the 2018/19 bear market was the mortality rate. It is the survival of the fittest during a bear market, and there are a few important pointers that help to identify the survivors. These all point towards a quality project, which can be broken down into a few key elements.
A Project With Actual Demand & Use Case: How To Identify Real Crypto Value
We need to understand that, in surviving, we are not only looking for the project to “survive” but also to maintain a position as an “investment grade” asset. A project that continues to serve the community’s needs throughout a bear market stands a much stronger chance of survival than its counterparts.
Continued demand for an active community and user base is a very good indication that the project has what it takes. Bear markets have a way of testing resolve and ultimately sifting and sorting through the market.
Why Already Established Entities Matter In Crypto And Blockchain Projects
Perhaps during the last bear market, some wondered whether Binance could weather the storm. For those unaware, Binance only launched in 2017, leaving little time to establish itself before the crash. Years later, there is no doubt regarding the future of Binance. The company has firmly established itself and continues to muscle through any and all market conditions.
Similar projects such as Cardano, Polkadot, and others are also fairly well established now and have relevance in the Crypto world. This helps tremendously, as the world has already seen the impact. A project yet to deliver, for obvious reasons, will be much lower on the list of those willing to risk exposure in a bear market.
Bear Markets Expose The Fragile & The Weak
On the other hand, there are projects with committed communities that use their services continuously. However, the project is small, as is the community. As volume and interest dwindle in a bear market, margins narrow. There were a number of smaller exchanges that were quite popular amongst certain Crypto enthusiasts in 2018 and 2019 that are sadly no more.
The service was great, the product was good, and yet they were just too small to survive the cold. TradeSatoshi and Virwox come to mind. In later bear markets, exchanges such as Hotbit also collapsed, and they were destination exchanges for altcoin and micro-cap investors.
Low Capital Reserves Could Destroy A Crypto Project In A Bear Market
When activity across blockchains and Crypto-based projects drops, the show still needs to go on. Team members and developers still need to get paid. Marketing and other overheads don’t simply disappear. They are very much still present and not in hibernation, unlike much of the market. There were quite a number of ICOs in 2017, where projects amassed enormous amounts of funding and kept it in ETH. This move cost them dearly and, in many instances, was largely responsible for projects actually dying.
Vinny Lingham of Civic (CVC) ensured conversion to USD shortly after their ICO concluded, securing a cash reserve to support the project throughout the bear market. This needs to be a priority, as bear markets often catch the market by surprise. Preparation for a bear market is a non-negotiable for Crypto projects. It’s not an option.
Conclusion
These are just a few pointers to keep in mind when analyzing your personal portfolio and decisions. This is not investment advice, but rather traits that I have personally seen be quite helpful in identifying the survivors. Check out this post regarding protecting yourself in a market crash. Have a great week, despite the blood. Who knows, we could bounce sooner than expected!