How you survive a crypto bear market
045: I don't know much, but I know enough friend
I remember the buzz about Ethereum and Bitcoin in 2017. I was 24 or 25, just getting into a trading role, and cryptocurrencies were seeing large surges to levels that baffled everyone and excited young degenerates like me. While these were the early early days of Bitcoin and Ethereum, similar to this years large bull run, many shitcoins and alt coins were also emerging on the scene and people wanted to gamble on them aggressively.
While smaller in scale, it does strike me as the last time I noticed full blown investor mania before the Covid fueled Retail Money Printer blow off top. In 2018 everyday normal people piled into Cardano, XRP, and many others by the thousands of dollars. I remember the rush capturing the Bitcoin move from my entry of $7,000 to the $19,000 level where we eventually topped off. Then the ensuing god dump that left me bag-holding crypto for 3 years. It was my first true time watching a market in action and I was in shock that my bags had literally evaporated. To be perfectly transparent with you guys, a huge part of why I held is because the portfolio was so wrecked, I literally forget about certain wallets out of full blown anger/depression at how viciously the market chose to correct. That’s the bad news. The good news is you need to try and find a way to hold long term, that’s how you “make it” in crypto.
MARKETS & CRYPTO
Markets opened down aggressively on Monday across the board this morning with major indices down multiple percentages and BTC going below $30K intra day. Everything red. So red. Fortunately we saw a slight amount of relief today, but tech and innovation/growth names have been absolutely slaughtered since their Covid highs. Remember one of the most most important skills to effectively manage your portfolio and investments in times like this is to remain unemotional, think logically, and sell only what you need to live and access basic needs. This is easier said than done, I too am pissed and yelling out loud at my arrogance and emotional trading, make no mistake, times like this blow and you find yourself day dreaming about taking more profits at the top. It sucks for everyone except the .05% size lord asset holders.
However, when you allow yourself to get angry or depressed/ruminate in my experience you are more likely to capitulate near the bottom and sell at the worst possible time. There is one caveat to this obviously and that is if you need the cash and/or are not optimistic on duration of a downtrend/bear market, make sure you make the right choice for you. This is not financial advice, I am a 29 year old so my risk preference is more aggressive. I am also a staunch believer in certain crypto projects and assets, so I am willing to wait out shitty market conditions longer than most.
Inflation, rate hikes and Ukraine war are leaving sentiment across markets in an extremely fragile spot
Steve Cohen, the Mets’ deep-pocketed owner, has brought key employees from his $24 billion hedge fund to the Mets Staff for training and operations roles.
According to a report from Galaxy Digital Research, a New York-based financial services firm, venture capitalists (VCs) have invested more than $10 billion in crypto startups during the first quarter of 2022.
The U.S. dollar is once again trading higher as macro headwinds weigh over stocks, bonds and cryptocurrencies.
Janet Yellen on UST depegging/“bank run” in LUNA yesterday: “It Illustrates that this is a rapidly growing product and that there are risks to financial stability and we need a framework that’s appropriate” Honestly, this potentially implicates Citadel and the US Government in the crypto sell off. IYKYK.
Tiger Global’s flagship hedge fund was dealt a fresh blow in April and is now down more than 40 per cent this year (FT/Bloomberg)
Unlike other crypto gurus and "pros” I’m going to be brutally honest with you. These are difficult times to be invested in crypto, and people will get their shit blown out and be forever separated from the space. You have to realize how early we are in the timeline of eventual future adoption of Bitcoin and other major cryptocurrencies (if you have conviction/belief), Web3 projects, tokens, and structures/mechanisms (oracles, NFTs, Gaming, Ads, Metaverse). We are drastically early, no serious crypto investor expected up only to last. Doesn’t make it any less painful.
That being said, MY personal strategy, as I have iterated repeatedly over the last several years, is a long term portfolio comprised of $BTC, $ETH, and $LINK. Before you rip me for $LINK, understand most alts are down tremendously, and this isn’t a surprise. $LINK was a top performing asset in the last bear market and my conviction hasn’t faltered at all. In fact I’m adding at sub $10.00 to bring my average down. I am opportunistically adding to $BTC and $ETH as well.
For now I am steering clear of equities. You have to develop incredibly strong conviction to hold in crypto, so that’s why it’s wise to never invest more than you can afford to completely lose. THAT is easier said than done, especially when euphoria and crowd instincts kick in on a hard bull run pump in any market.
Those picks comprise 80% of my crypto holdings all together and I consistently dollar cost averaged into all three positions over almost 5 years. My FANG and Tech Portfolio has been chewed up pretty hard, and for now I will simply observe to see where the Fed chooses to steer these markets. The ONLY reason I would sell anything, would be for life necessities, some cash, or a larger life purchase (House etc.) From what I have read and listened to amongst circles and people who are doing very well, is to focus on generating more cash flow. That’s always the answer, that’s one of the reason why, despite high inflation, the dollar is king: you can exchange it for anything.
Besides that, I’m long and strong through 2030. While everyone should develop their own strategy and asset allocation depending on their goals, I think a longer term view point is extremely important during crypto bear markets. That’s why it’s important to get into quality projects and assets. When the market dumps they lead the charge, but they also tend to outperform alts more quickly, which get absolutely slaughtered in crypto bear markets as many retail traders from the last two years found out for the first time. It’s a painful lesson, as new bag-holders are minted virtually overnight with the overhyped shitcoins and projects that still can’t clearly convey what it is they actually do or spend money on.
If you’re down bad let me say I know this sucks. I know it sucks and I have been in this situation before in 2018, you quite frankly feel just downright dejected. The recent market dumps span other sectors and assets, including a recent slaughter of equities. But, unlike equities, crypto is a pioneer technology that has established itself in the last two years. To be completely candid I am actually impressed with how pricing has held up relative to other assets considering the way many large traders and institutions look at Bitcoin right now, chiefly as a risk on asset. In my opinion that will eventually change. Still, its emerging technology and right now it is being traded like a high risk on asset/aggressive tech stock. To effectively navigate this market it is important in to get ahold of:
Your personal strategy/preference for crypto investing
Your risk tolerance
If you have these two things clearly established, it becomes easier to make smart long term decisions rather than emotional impulsive moves. That way you aren’t at your kid’s birthday party watching 90% of your net worth evaporate because you longed Cumcoin at the top. Don’t bust your load king. In my limited experience, when you make impulsive emotional trades in a volatile market you will always lose on a long enough timeframe if you keep doing it. Very few can actively and effectively trade crypto. So first establish what your goal is. Are you trying to earn 20% a day trading? Because that’s very different from Dollar Cost Averaging on red days and building a strong longer term position of core holdings that you’re willing to hold down to -80% if need me in certain situations.
The good news is you will identify these trends and opportunities more clearly the longer you hold a position. Kind of a blessing in disguise really.
Sentiment is incredibly bearish on Crypto Twitter, where a mixture of traders, institutional investors, and retail degenerates all interact, which is why I love it as an input into how I think about overall sentiment at any given time.
There were some absolutely historical events and commentary yesterday with Do Kwon of the Luna foundation fighting to keep his stablecoin pegged 1:1 to the US Dollar. Terra’s UST token sank below 70 cents late Monday afternoon, as holders continued to dump the controversial “stablecoin”. Traders and investors are looking to assess if the project might have sold, or will sell, a large clip of its bitcoin holdings to help prop up UST.
Programmable blockchain Terra's UST, the world's biggest decentralized stablecoin, lost its 1:1 dollar peg over the weekend after multi-million dollar UST sales on Curve and Binance and a series of significant withdrawals from Anchor Protocol, a lending market offering high yields to UST depositors.
The de-pegging perhaps added to the downward pressure on bitcoin and the wider crypto market. "People become afraid that the Luna Foundation Guard [LFG] would have to sell its BTC to support the UST peg, so BTC sells off," Ilan Solot, a partner at the Tagus Capital Multi-Strategy Fund, said in an email.
Secondly, the dollar index's (DXY) technical chart shows the 50-week moving average is on track to move above the 200-week MA, confirming the so-called bullish crossover (Editor's note: The newsletter mistakenly said "monthly" moving averages).
If you’re truly hurting in crypto or equity/other investments, re-assess your risk tolerance on a local bounce/level, sell what you need to for basic life requirements but focus on simply making more cash during down periods (side hustle, odd jobs, second job, trap, idc just find a way to make more. That way you can hold your assets and add to them on these down periods. That’s why the rich ball the fuck out during inflation, their assets are at no risk of being sold for the most part, and they choose to accumulate while retail and inexperienced traders panic sell or try to trade the chop.
Don’t get cute at times like this. Rule is to survive and preserve capital for greener days.
"The overwhelming focus continues to be on inflation, rising interest rates, and the war in Ukraine, the combining factors of tight supply chains resulting from China's zero Covid policy, and rising oil and food prices due to the war in Ukraine, are causing inflationary fears that are triggering a move out of risk assets."
Brian Price, head of Investment Management at Commonwealth Financial Network
Not to be dark, but the world has descended into madness on several fronts as the prospects of a global slowdown or recession seem to be increasing day by day. An undefined war continues to drag on in Ukraine with open actions by the current administration to escalate and tie the US to the conflict. Inflation levels soar in European countries, and whispers of new Covid complications emerge from China. At home in the United States, almost as if by design, hot button issues like Roe V Wade and crime/law continue to be highly politicized, stoking division ahead of midterm elections. Most Americans know what inflation is at this point.
We’ve seen physical protests in front of Supreme Court Justices homes. threats on their lives, and aggressive rhetoric from demonstrators. Andy predicts another summer of riots/protests over this, but surely also over food shortages, inflation, and lay offs. Baby formula is in incredibly short supply. If history tells us one thing any developed nation is only two square meals away from demonstrations in the streets and unrest. We’ve seen violent protests over less in the US.
Dozens of demonstrators on Saturday gathered in the rain in DC and marched towards the homes of conservative Justices Roberts and Brett Kavanaugh in response to the leaked Supreme Court draft decision to overturn Roe v. Wade.
Elon Musk took to Twitter with a bizzare John Mcafee esque tweet about his potential death
Russian troops pounded the vital port of Odesa, Ukrainian officials said Tuesday, an apparent effort to disrupt the supply lines and Western weapons shipments critical to Kyiv’s defense (AP News)
Fighting in Ukraine has intensified in the East as Putin re-concentrates his forces and still seems to be running consistent helicopter and fighter jet operations within Ukraine. The video below shows a Ukrainian drone strike on a Russian helicopter deploying troops on Snake Island last night.
The US House of Representatives will consider an additional $40 billion in supplemental funding for Ukraine Tuesday as US President Joe Biden warned existing aid will run out in "approximately 10 days." (CNN).
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