Long By Default
I can almost guarantee you that more than 90% of Crypto enthusiasts only think in one direction when it comes to the market. Due to logical thought processes, market participants only envision profits being generated by the price of an asset appreciating in value. Even though this is accurate and true, it’s not the only way to secure Crypto profits.
This actually gives you somewhat of an edge when it comes to shorting the market. I know that many are once again calling the bottom of this current bear market. Is this bottom number five? I have lost count. Anyway, it’s somewhere in that vicinity. Unfortunately, regardless of if we have an end-of-year pump or not, there is still further pain ahead, in my opinion. Ironically, it’s the retail investors who provide an edge for short sellers in a bear market.
Just like during every other bottom call, the whales are still offloading. They are selling into a clueless retail frenzy. The charts are providing further confluence, along with the general outlook and the stock market. It’s also extremely important to consider what’s going on in terms of the S&P, especially since Crypto is still classed as a risk-on asset.
One thing you might have noticed during the course of this bear market is the sheer force of momentum. Markets drop a lot faster and harder than they rise. Being short on these moves is incredibly profitable. Way more profitable than any pump, provided you are positioned short and ride it down to support. Your only true defensive play in a bear market is a short. Buying the dip that keeps dipping is for rookies.
If this is not your first Crypto winter then you should have been holding cash and shorting. Plain and simple. Dollar-cost averaging is reserved for closer to the bottom. Even dollar-cost averaging after a bottom is realized is way more powerful than before a bottom. These are basic practices that still evade many supposedly “seasoned” Crypto investors. It’s important to apply the appropriate strategy for the appropriate season. However, it appears as if the majority only manage to practice one single strategy.
The majority only think in terms of buying. Never trust a permabull and never trust a permabear! Accuracy is more easily attained in the absence of a directional bias. A trader who is open to going either long or short is able to identify either opportunity. Mr. Long on the other hand has a way of turning every market condition into a BUY opportunity. Absolute foolishness. He’s buying at the such and such level because it will never go lower. He is yet to identify that he is in fact biased… and will continue to force his “LONG” peg into a “SHORT” hole.
This behavior continues until eventually a bottom is reached. However, at this point, his average entry price is miles away from the current price. This is unfortunately what happens when Mr. Long enters the market. Mr. Short is the same, he just sees everything in reverse. I have spoken about destroying the bias before, and how healthy and helpful it is to gaining a more objective and accurate perspective of the market. Missing out on such tremendous shorting opportunities is almost a crime.
If you honestly evaluate your behavior over the past year and are able to identify that you are indeed like Mr. Long, seek to adjust your viewpoint and behavior for the next round. It’s important to improve and cease making repetitive costly mistakes. As I have said before, missing a bottom doesn’t cost you anything. The obvious reason why so many missed out on such tremendous shorting opportunities is the simple fact that it was never actually a consideration… let that sink in for a while. This ultimately means that an approach reserved for a bull market is also practiced in a bear market… another moment of silent processing.
Is it any wonder why so many are destroyed by bear markets? At the end of the day, we want to improve, we want to be more knowledgeable… so that we can become more profitable. The only way we grow is by realizing and addressing behavior that diminishes profitability. Now, I can pat you on the back, or myself, for that matter… but that won’t help either of us improve our game. Identifying areas of attention and addressing them in a proactive manner, now that’s moving forward.
As I look over the “valley” of this bear market, one thing is abundantly clear: The Crypto community, or a large majority, approaches a bear market inappropriately. If we can aim to do better next time, it will make a significant difference. There is no need to lose 90% of your wealth in a bear market. In actual fact, played correctly, wealth can actually increase. People always tell you not to be too hard on yourself. Tell that to a professional athlete… that’s exactly how you improve your game!