Fear Discourages Many
Market corrections continue to come and go and yet so many behave as if a heavy correction was unexpected, or even worse, that it should never have happened. Many suggested that Crypto is now a more mature market and that heavy corrections were a thing of the past. That’s unrealistic, nothing goes up forever, and corrections are healthy. Eventually, you will learn to love bear markets once you have survived a few. Survival makes you smarter, it ensures that you understand how to avoid the pitfalls the next time around.
The Worst Phase For Many
We are now entering into the worst phase of a bear market, where the price action generally tends to become seriously annoying. This will likely be preceded by one final heavy capitulation. However, I love this phase of a bear market as it is great for trading. Capitalizing on market moves can be quite rewarding as bullish moves are generally rejected on multiple occasions during this phase. This just creates ongoing trading “setups”, which is perfect for traders. This is also a great time to begin accumulation. There is no need to feel pressured, as the market will provide a decent window of opportunity.
It’s Never Straight Up
Firstly, March of 2020 was not a bear market and should not be considered as such. This was a perfect example of a swan event that can take place in both a bull and a bear market. Obviously, a swan event in the midst of an already bearish phase would be so much more catastrophic. I bring this up as the surging V-shaped recovery seen in 2020 should not be confused with typical bear market recoveries. This is usually a slow and drawn-out process and often causes many to lose hope. The constant rally/fail dynamic usually programs the majority into a “cry wolf” state of mind. A place where they no longer believe that the market will recover.
The Perfect Opportunity
Outside of buying the absolute bottom this phase is also a very lucrative time to begin accumulation. I mentioned a number of times that it would be better to cease accumulation at $32K and wait for more confirmation. Those dollar-cost averaging from $30K would have experienced a better performance by simply sitting on their hands for a while. If you know a bit about charts you would have realized that prices are definitely going lower. The traditional dollar-cost averaging strategy is for the average retail investor who doesn’t know too much about markets. Knowledgeable participants have not been buying during the last 2 months. Sure, a little nibble here and there but the majority of dry powder remains unused.
If you have been doing what the majority of market participants have been doing then your portfolio will be reflecting the overall state of the market, which is pretty bleak. Following the crowd when it comes to investing is counterintuitive. Effective investment and trading strategies always have this one particular element in common and that’s front running. You need to see further down the road than the crowd and then begin preparing for what you see.
The best buying opportunities are yet to come and they will be followed by an extended period of sideways chop which will be great to begin dollar-cost averaging for the bull run of 2025. Remain vigilant, as these are extremely challenging times for all financial markets. As always this is not investment advice. Enjoy the ride!