It’s A Bit Late Now
There are many who have been taken by surprise by this bear market and are now trying to put together a strategy for survival. Anyone who knows anything about financial markets will tell you that you have to front-run market trends. There are often jokes made about new retail investors who chase the market as it reaches euphoric highs. They buy the peak and bleed all the way down, finally to capitulate at the bottom. However, not preparing for a bear market is exactly the same mindset. Trying to muster up a strategy at this point is also chasing the market. On the other hand, someone who prepares for a bear market is frontrunning the market.
Buying The Dip In A Bear Market Is Pure Foolishness
As mentioned in a recent post, buying the dip is a bull market strategy. In a bear market, you short the pumps. It’s that simple! Timing exact bottoms is difficult but timing approximate levels is not impossible, provided you have an understanding of technical analysis and markets in general. As mentioned in my post from May, I expect BTC to bottom in the $18K to $19K region. However, as a whole, the entire zone of $22K to $19K would be considered “acceptable”. In other words, you may not be able to discern a bottom but you can definitely avoid buying at $32, $29K, and so on. I am actually quite surprised at how many have actually been buying at these levels. When ETH was above $2200 I offloaded more because I was expecting a lot more downside.
My First & Foremost Preparation Measure
I have been building passive income models over the years and although they produce continuously, I set out with the intention to maximize bear markets. You need to consider that 2022 and 2023 are not going to be great years for Crypto. We may bottom soon but a bear market and a market bottom are two different things. Some tend to think that once the bottom is in we simply shift bullish. The bottom simply reveals that the worst is over. Having these models in place is like having access to free money to buy Crypto.
Many of these mechanisms are dollar-based, making them even more effective in a bear market. So, while prices are in the dust I will have the capital to accumulate throughout this period and beyond. This strategy is extremely beneficial, especially if we see ETH at like $900 and a $20 Solana.
My Second Measure
I chose to rebalance my portfolio in May of 2021, which has turned out to be a great move. Some probably considered my move premature but hindsight has validated it. It was at this point that I shifted almost half of my portfolio into stablecoins. I am still holding cash and stables and choose to only deploy this capital once extreme lows are reached. Not all will be deployed as I have a standing rule of maintaining a stablecoin allocation. What appears to be a great move now, seemed quite foolish when it was initially executed. However, it was merely the discipline of having a plan and staying with it. Most people in Crypto have no experience in markets or trading prior to Crypto. They don’t know anything about risk management, profit-taking, and exit points. This is ultimately the reason for “casualties” in a bear market. Even the knowledgeable and skilled trader will have his work cut out for him, so you can imagine what fate befalls the newcomer.
My third measure is more of a response, unlike the first two measures which are more preparatory in nature. Once metrics and analysis confirm beyond a shadow of a doubt that there is still significant downside ahead I cease accumulation and begin shorting the market. This is what I am busy with currently. Aggressive bearish price action might help to create a small relief rally but I would still be looking to short. I will most likely short a relief rally at this point as it remains in line with my own thesis. At the end of the day, I have put in the time to do my own research. I am not going to be making decisions based on a random view or comment that I may encounter somewhere online.
Planning your approach and strategy is actually imperative to success. It doesn’t have to be perfect but it definitely has to be in place. You need to have a “protocol” in place. You need a reference point and reaction measures already in place. Without this, you are like a leaf in the market’s wind.