Cryptocurrency prices have nosedived, some crypto projects have failed, many businesses are struggling and have stopped hiring, and the usual "crypto is dead" headlines are making the rounds in the mainstream media. Things aren't going well.
Those who have been in the crypto space for a long, on the other hand, have seen it all before. Cryptocurrency is very cyclical, with bear and bull markets. Prices can climb by double digits on a daily basis in bull markets, such as the one that began in late 2020 and finished in late 2021. During those moments, it appears like the market is only going higher. In a bear market, however, prices may collapse by 90%, then another 90%, and so on.
Although prior crypto bear markets corresponded with positive stocks sentiment, crypto is now intimately tied to a macro climate with a probable recession on the horizon.
When profit is made, take it.
The dilemma is whether to HODL or not to HODL.
Resistance to selling - keeping or HODLing - despite a bleak outlook is a common occurrence in cryptocurrency. Don't put your lifestyle at jeopardy because of a HODL meme. Nobody went bankrupt by making a profit. Taking a profit entails selling a portion of your earnings. It does not necessary imply exiting the market entirely.
For your own sanity, you might want to set a portfolio-wide stop loss where you indicate you'll sell everything if it falls below a specific amount. Most centralized cryptocurrency exchanges allow users to set a stop-loss order in terms of either a percentage decline (sell bitcoin (BTC) when it drops by X percent) or a particular price (sell BTC at $X).
Set loose sale targets/take profit levels in advance and adhere to them. Your objective previous self is a better guidance than your ecstatic future self.
Avoid panic selling while simultaneously avoiding greed.
Taking a profit and maybe having a plan to leave the market totally does not imply panic selling.
Unless you are in desperate need of money, avoid panic selling. In retrospect, being hungry and fearful of missing out on the top was a mistake I made in 2018. Make your sales decisions based on evidence, not emotion or social media recommendations.
Continue to be solvent.
The majority of those who invested in cryptocurrency in late 2020 saw their portfolios reach all-time highs in April or November 2021. But the fireworks are over.
Don't trade or buy with the intention of recouping what you lost in the bull market; it's an intrinsically inaccurate comparison.
Although it may be tempting to try to recoup your losses in a single trade by engaging in high-risk deals, vengeance trading can quickly backfire. In a bad market, being solvent is critical, and it helps if one does not use leverage.
Leverage is a frequent tactic in cryptocurrency markets, however using leverage to acquire coins in a falling market has a significantly higher risk of failure and will deplete your mental capital. Even if you have a decent entry, the chances of you having the mental fortitude to maintain a massive position like that are slim.
Projects for research
Crypto is a platform for exploration and creativity. Many initiatives emerge, perish, reinvent, flourish, or fade from memory. Tokens are frequently connected with crypto projects, and the tokens are frequently (but not always) linked to the success of the projects, particularly in the early days.
As ventures pivot from their original idea and find a far better product-market fit, such as Aave, you will need to continuously re-investigating.
Nobody knows what the storylines will be for the next bull cycle. However, I believe the person who discovers it and bets on protocols that use it will do extremely well the following cycle.
Participate in projects.
Passively exploring ideas isn't the only option for crypto enthusiasts.
Many cryptocurrency initiatives, particularly those focused on decentralized finance (DeFi), are organized as decentralized autonomous organizations, or DAOs. Anyone may join and contribute, and as a bonus, it can be a fantastic method to acquire a decent career.
Instead than focusing on what's hot that day, focus on developing and contributing, and understanding the fundamental underpinnings of the ecosystem. Building and contributing advance the sector, and having an influence on the ecosystem is highly valued. It improves your understanding of cryptocurrency while also assisting you in the development of connections.
Create an ape fund.
"Aping" is a popular crypto activity. It refers to investing in project tokens without conducting extensive due diligence merely because the tokens are fresh and flashy and may climb in value quickly.
However, aping is a tactic that is more likely to succeed in a bull market than in a bad market. Instead than aimlessly aping things, start looking at data and reading up on projects.
Aping doesn't have to spend money on anything is trendy and promoted by your favorite YouTube influencer. Perhaps a project that resonates with your long-term convictions will begin or come on your radar, and you will want to be there from the start.
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| 2022 Crypto bear is the worst in recent history. |
Keep vesting timelines in mind.
If a project has been around for a while, it's probable that its investors will be able to sell their tokens shortly, if not already. Unlocks, as they are referred to, can occur at any moment, including during a bad market. The price tends to fall as a result of sell pressure.
Keep vesting timelines in mind to avoid being dumped.
Create connections.
Protocols, smart contracts, front-running bots... It's easy to forget that crypto has a human component, and it's a close-knit community that thrives on crypto Twitter and often gathers at conferences across the world.
Jason Choi, a crypto investor, entered the business in the midst of the 2018 crypto bear market, and he claims he spent nearly "all of the time cultivating contacts, researching, and generating content, which paid tremendous rewards down the line." During a downturn, he says, "there's a lot of self-selection in who chooses to double down on their efforts in the sector, so it's frequently the perfect moment to create enduring, meaningful partnerships."
NFTs gained to prominence in crypto during the last bull market because to their emphasis on community, and it is a new industry that did not exist during the last bad market. Make the most of the downturn by networking. Particularly now. Hanging around in a JPEG-based community is still more enjoyable than it was in 2018-19, when tokens were essentially worthless.
Maintain your current position.
Think twice about quitting your career to follow your passion in cryptocurrency. If you have debts to pay, you might be better off remaining with a stable career and treating crypto as a side hustle.
Keep your employment until you're 100% confident you'd be better off doing crypto full time. Most people who think they need to work full-time, especially if they want to be traders, don't and end up overtrading.
Get a career in cryptography.
Perhaps the goal is to retain a job, but not necessarily the same position. Consider acquiring a crypto job to help you expedite your crypto journey while also earning money in the meanwhile.
Have a life outside of cryptocurrency.
Crypto is a market that operates around the clock. The industry frequently feels like a fast-paced Netflix show, and it's all too easy to get carried away and lose sight of what's important in life.
Have interests outside of crypto and finance, make relationships outside of crypto and finance, and read books and articles outside of crypto and finance.
But the same may be said for your investing portfolio.
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All Images culled from Google search.
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