Oh no.. the market.. it’s broken

Right, here we go again. Markets are down, sentiment is bad and projects are going quiet. Check price, bad price. Fear not, anon. Bear markets, while being tough and frankly annoying, present huge opportunities for those who have the will and stamina to stick around. 

I should probably mention that no one knows how long this will last (could be months, could be longer) or how far we’ll drop. If someone claims they know it, they’re bluffing.

What is a bear market?

We call it a bear market when the market is in a state of prolonged price declines. Nowadays the cool kids also call it ‘Goblin town’. Prices keep falling, sentiment is negative and there’s a lot of fear and uncertainty among investors. I probably don’t have to tell you this, but crypto bear markets are in a class of their own.

What caused the crypto bear market in 2022?

Quite a few different factors. First, you’ve got inflation that is running rampant and the war in Ukraine, amongst others. We currently live in uncertain times. A lot of things are going on. And if there is one thing that the market doesn’t like, it is uncertainty.

An example I always use to demonstrate this is when Alibaba was hit with a huge fine (2.8 billion USD). The stock price soared after the news broke. That might seem counterintuitive, but to investors it gave clarity. The uncertainty of “will they be fined or not and for what amount?” was taken away. Thus, people felt more comfortable and started buying back in.

It’s not just crypto that is taking a beating. All asset classes are taking a beating right now. There is even a lot of scarcity for certain products or resources. For example, India just announced that they are no longer exporting wheat in an effort to control the hiking prices in their own country. Globally gas prices have been soaring for a while and the Russia-Ukraine situation – no pun intended – only put more fuel on the fire.

The stock market has been suffering as well. The S&P 500 index is down over 20% from its all-time high. Netflix stock is down over 90% from its all-time high. Tech stocks have taken the biggest beating: the tech-heavy ended April 2022 with its worst monthly performance since the 2008 financial crisis.

The whole situation around Do Kwon, the big de-pegging of $UST, and the collapse of $LUNA was a big catalyst as well. Aside from Bitconnect, which was a blatant ponzi, I’ve never seen a top 10 project go -100% this quick before. It’s not 100% certain what happened exactly, but you can watch this Coffeezilla video about it,

Well, what do we do now?

Ok, so the market is down. What do we do now? Let me start by saying this: don’t panic. Investing/trading is a mind game. One where you will need to master your emotions. Mastering your emotions is one of the first steps to long-term success. Here are 5 things to focus on:

1. Long term mindset vs short term profits

Adopt a long-term strategy/mindset. I truly believe that crypto is here to stay and make a real change in the world. As a new asset class, as a new financial system, as a way to optimize certain processes, all that good stuff. I’m especially intrigued by how crypto tackles the problems with transparency in the current financial system and its gatekeepers.

If you’re in crypto, ask yourself this: are you a true believer in crypto and think that it is here to stay? Then you have nothing to worry about. You’re still early and there will be plenty of opportunities before we reach a state of mass adoption. If you find yourself in this category, then market downturns actually present huge opportunities. If you’re here just for short-term profits, you’ll just have to take a break from crypto.

2. Buying strategy and dollar cost averaging

My personal strategy during market downturns is to buy as much as I can afford. Key point: “as much as you can afford”. It is very important to only put in what you can afford to miss. Money that you won’t need in the short term. You don’t want to run into liquidity issues and be forced to sell early or at a loss because you need the funds. Also, don’t forget to live life as well. Don’t live like a hobo and have your entire net worth in crypto.

An essential aspect of succeeding in the long haul is the method we call dollar-cost-averaging (DCA). DCA is the process of periodically putting funds into the market or a specific asset. That could be weekly, monthly, etc. The key point is that you do it periodically. When you do this, you have to make sure that you can sustain the amounts you use and that you can keep doing it in the specified interval. Don’t burn through your funds in one day, and have nothing left for the coming weeks/months.

This article by Binance Research explains it very well.

3. Bear market stamina

Bear markets are tough. They really are. You’re gonna have to make sure you have the stamina to survive a bear market. Prolonged downturns will get boring very quickly. It can also be very demotivating. Trust me, I’ve been there and went through it. I was DCA’ing in 2018, but got bored with it and left crypto. I came back in 2020 just in time for the bull run.

So, set some rules for yourself. Make a plan and stick to it. Persevere.

4. Focus on research

No better time to focus on expanding your knowledge. Bull markets bring in new capital and with that, new people. Having a solid foundation and understanding of the market will set you up to have a big advantage over others. Like it or not, crypto is a zero sum game. When you sell the top, someone else is buying it.

5. Networking

This is a good time to put some effort into networking. Get to know people in the space; builders, investors, project owners, artists, developers, team members of projects, etc. Build that foundation now, while the space is quiet. You never know what opportunities it will bring you. Besides, if you think crypto is here to take over, why not help shape the future of it by contributing to the development of this space.

What am i doing with my funds?

I’d like to go over my personal plan for allocating my funds. By no means am I telling you to do the same. NFA, DYOR, etc. 

To start off, I’m trying to focus on the points I mentioned above. Networking, researching, dollar cost averaging, building my bear market stamina. In term of allocating my funds, I’m looking into these five things:

1. Anything with a tier or threshold system based on the amount of tokens held

A lot of projects have tiered systems or a certain amount of tokens you need to hold. For example, you need 32 eth to set up a validator node. But there are other projects where you need x amount of tokens to become a validator, to unlock certain staking tiers, to unlock certain benefits, etc. Normally they are quite expensive, but now..

2. Infrastructure: Layer 1 and Layer 2’s

I want to invest in Blockchain infrastructures. Entire ecosystems will be built on top of them. Being able to buy them cheap provides tremendous value. A Blockchain’s value can be determined by the ecosystem built on top of it and the usage of the chain.

• Ethereum. Ethereum has the most vibrant ecosystem built on top of it. It’s unmatched in terms of adoption. NFTs have been blowing up as well, mostly on eth and solana. NFTs are priced in eth and eth is needed to pay for gas on all the Dapps built on eth. 
  
• Solana. I’ll admit that Solana has its flaws. It’s centralized and the chain doesn’t work perfectly, it’s slow at times and transactions have been paused on the entire network multiple times. Pausing the chains kind of goes against the crypto fundamentals. But, NFTs have also been blowing up on Solana. GameFi and metaverse projects are also opting for Solana over Bsc more and more.
  
• Elrond. Elrond is a blockchain with strong fundamentals. The ecosystem built on top of it is just now picking up, so you’re still early for that.
   
• Metis. I don’t have a position in this one yet, but their ecosystem is quickly growing. I want some exposure to Layer 2’s as well.

3. NFTs

NFTs have been blowing up for the past year. In the past months, Solana NFTs have been growing as well. I’ve been collecting NFTs for a while and plan to invest more in this space. Some people still have doubts about NFTs (which I addressed in this article I wrote), so if this is not for you then don’t invest in them. But NFTs have been quite profitable despite the market downturn.

• Sappy seals. This is one of the strongest NFT communities. Their community is always active, no matter the floor price, the market, or other factors. Seals can be staked to earn $pixl tokens, the main token of the Pixlverse. A big metaverse built in collaboration with other big NFT projects. I highly recommend you read through the Pixlverse Gitbook.
• Other than Sappy Seals I’m not comfortable naming specific NFT projects, because the space just moves so quickly. I’ve held projects I was bullish on to zero (selling not worth the gas fees) and I’ve held projects that I gave up on only to see them go through a big resurrection. I do recommend you join tehmoonwalker’s #NFT Hub, I’m a founding member in there and we share alpha and interesting projects regularly: https://discord.gg/UdPDbQSF

4. GameFi and metaverse

GameFi and metaverse really popped off in 2021/2022. We’ve seen some really interesting projects enter the market, and with that came cheap copy-paste projects. Sadly, the quality of new projects became increasingly worse and the tokenomics became even more terrible. But, I do believe in GameFi and metaverse projects despite this. I will be accumulating some projects in this category.

• Myria. Myria is a decentralised Ethereum Layer 2, built to empower digital assets, NFT and blockchain gaming. With their blockchain gaming platform they combine a gaming platform with applications, tools and scaling infrastructure needed to bring blockchain gaming to life. Myria is not listed yet but the Myria node and token sale is coming soon.
• Dark Frontiers. Pros: Solid updates on the game. Not just trailers but working products and live environments. Con: a large percentage of supply is still locked.
  Star Atlas. Pros: They have amazing trailers and are building a big game in Unreal Engine 5. Yes, it’s a trailer and not a working product yet. Cons: We’re pretty far out from an actual working game and there are still token releases.
• GameFi ($gafi). Gafi is a gaming launchpad that launched amazing projects in the past. They launched over 50 projects with an average ATH ROI of 61x.

5. Launchpads

9/10 times projects enter the market through launchpads. It’s your chance to get early allocations. But, they are very expensive to buy if you want a good tier. I will be accumulating Dao Maker as they seem to be one of the top launchpads in this space. They launched projects like $gafi (352x), Victoria VR (200x) and Step app (149x).

Bear markets are a blessing in disguise

Yes, bear markets suck. They’re boring. Things aren’t pumping anymore. But, if you can stay in this space, keep building, learning and investing, then a bear market is truly a blessing in disguise. It’s not for nothing that they say millionaires are made during bear markets. Take the time to find those true bargains, buy in and then let time do the work. Stay calm and stay in control of your emotions.