The Beauty Of Hindsight
Looking back in hindsight can be one of the most powerful and teachable moments for a trader or investor. However, decisions made in the present need to be accurate, in order for the future to validate them. This is obviously a lot easier said than done. Another important aspect to remember is that “good moves” are often labeled as “stupid” and “clueless” by the majority, in the moment of execution. However, that’s how it always seems to play out. I remember many said I was “out of touch” when I shorted ETH just below the $2k level. This was around the time of the Merge and everyone and his brother, including Jim Cramer, were bullish on ETH.
Technicals are often ignored by Crypto investors. This is a mistake. Many are unable to identify this critical error, as they adopt the “hodl” mindsight. This strategy rejects every single aspect of reason outside of its objective. The objective is, to accumulate, at any price, and never sell. Is it any wonder that extremely “influential self-invested” Bitcoiners push this strategy? Hodling (more on this later) is a great long-term play. However, it should only account for a portion of any serious Cryptoneur’s portfolio. There also needs to be trades, including short trades. Yes, short positions.
If you don’t trade short, you missed out on three of the greatest shorting events in Crypto history! LUNA kicked off the party, and was followed by Celsius, and most recently FTT. Solana was also a great shorting opportunity, but nothing like the “Big 3”. If you lost massive amounts of money during this bear market, that simultaneously implies that someone else made a lot of money. How did they achieve this? Simple, by going short!
Ignore The Noise
Focusing on data, and technicals, and staying abreast of the happenings within the Crypto market, as well as the macro environment, are key. This also includes the filtering of all this information and data, as much of it is often noise. Ultimately, noise is inaccurate, and adhering to it will result in loss. If you are currently sitting with heavy losses across your portfolio, there is yet another difficult reality that you need to accept: You were part of the noise…
Once again, the only thing that matters is being right, nothing else. Following a sense, or some type of hope is not applicable behavior when dealing with financial markets. Many bring their dreams to the threshold of financial markets, expecting to make bank and go on to live a “beach life”. The market only respects an accurate thesis based on credible data and information. Dreams are spewed out of the mouth of financial markets every day, leaving dreamers broken and disillusioned.
This has been the year of unparalleled opportunity when it comes to short selling. Opening shorts at the offset of the bear market would have also seen you hedge your portfolio. I know short sellers will be aware of this, but I am sure many readers are unfamiliar with shorting. If I hold $10K of ADA or any asset for that matter, and I open an equivalent short position, I lock my profit and loss. In other words, say my initial holdings have lost 30%, my short has simultaneously gained 30%, effectively making my loss zero.
Once you understand this and become efficient in utilizing it as a strategy, you can begin “constructing trades”. The markets are binary, but that doesn’t mean that your strategies have to be. Understanding this and learning to incorporate it into your trades is where you begin to move into a higher level of efficiency. The amount of knowledge that goes into the construction of a great trading idea is underrated, and often not appreciated by even relatively successful traders.
The Power Of A Short
I did a fair amount of shorting during this bear market, but not enough. I am aiming to be more aggressively short in the next bear market, that’s if we ever get out of this one 😉 I have addressed how many apply the same behavior in a bear market as they do in a bull market. Just stop reading and think about that logically for a moment. There has been a lot of intensified carnage during this bear market. However, intensification also implies opportunity. You have to learn to make money in a bear market and not merely survive. You can make money in any market, as long as you are in sync.
Market direction means nothing to a trader who has both long and short tools in his arsenal. Hodlers unfortunately, keep buying the dip that keeps dipping. As I mentioned earlier, let’s address hodling. Some readers might be aware of this as I mentioned it in a previous article. There are smarter ways to hodl. Instead of allocating capital into your hodl portfolio, it makes more sense to allocate it to a cash or stablecoin reserve.
Once the bear market matures, you can begin dollar cost averaging. This is way more efficient than buying a dip that keeps dipping. You don’t have to predict the exact bottom. Let’s use this bear market as an example. If you begin accumulating in cash above $30K and begin dollar cost averaging from $18K, your portfolio would look a lot better. Not only that, but it will also grow a lot more once the tide turns.
Optimization and effective risk management are imperative if you want to take your trading to the next level. See you next time!