Dear crypto enthusiasts, have you noticed? Recently, there have been rumors that the current state of the crypto market is not just some kind of correction or stagnation. Allegedly, the bear is beginning to prevail over the bull in the eternal struggle, and it is, therefore, possible that we are witnessing a bear market (a period of market decline).
For some, it can be considered a negative phenomenon, since it may bring low profits, significant losses, impermanent losses, bleeding of projects, etc. In this article, we will focus on tips and specific examples from the Dotsama ecosystem on how to beat a bear market in order to minimize negative impacts on our portfolios. 💪💪💪
So here are a few tips on how to beat a bear in the Dotsama ecosystem and how to prepare yourself for the return of the bulls!
1. Decrease in value vs. loss
Were you unlucky enough to buy at ATHs and now your portfolio is showing -80%? Above all, do not sell!
The main rule is that if it’s only on the chart, it’s not real! A real loss occurs only when you accept the price and make a sale at a disadvantageous (lower) price for you. That is, according to our example, you decide to sell at a price 80% lower than the value at which you bought it. That’s the moment we call loss realization.
This solution is most often used within the so-called panic sell when someone decides to sell only as a result of a sharp but at the same time sustainable and justifiable price fluctuation. In a panic, the user sells impulsively and based on emotion in order to “save” at least some value.
However, in the case of a recovery market, many times not only later there will be a return to the given (purchase) value, but also to surpass it or reach the ATH level.
Gradual or sharper price declines are characteristic of the bear market period. However, after the bear market comes the bull market (a period of market growth) when projects rise in value. Panic and realization of loss are not so often necessary.
If you believe in the project and it is really a high-quality project such as Polkadot, it will most likely recover from the downturns. However, if you absolutely need money or you have stopped believing in the project, consider a gradual sale. There is a chance that investment speculators who may manage to raise the price will want to take advantage of the shallow project (we salute all traders 🙃).
The situation is different, of course, when the project has demonstrable problems. Then it is possible to “save” what you can and minimize the loss during a sharp decline. However, we believe that there will be a few mistakes as possible in the Dotsama ecosystem.
2. DCA = dollar-cost averaging
If we assume that your project is of sufficient quality, then -80% actually means a perfect discount and an invitation to purchase or accumulation. However, we never know in advance whether we are facing a bear market or a bull market. If we had a crystal ball, we’d all be crypto-billionaires 😅 . But we have a feeling that it will probably fly really well.
The price of cryptocurrencies goes up and down. A lot! One of the most effective systems for eliminating volatility in favor of the depositor is the so-called dollar-cost averaging (DCA). This approach captures the investment adage: “More than timing the market, time in the market is more important.”
Still nothing? Ok, let’s imagine this situation. You have $10,000 and want to invest it in a project. To make it safer for you, do not deposit them once, but consider sending them in several regular payments (e.g. after weeks or months). Even if the project price drops by 80%, just keep investing and wait until you get to better numbers on your portfolio, regardless of whether the project price has returned to your original purchase price or not. The trick is that when the price drops, you buy more and more tokens for your equally sent payment. So it’s just a matter of buying so many tokens in time that the current price gets you into positive numbers. It’s simple math, but it requires a quality project, sufficient liquidity, time, and patience.
187,5 pieces x 50$ of value is just -6% of your total investment. Better than -50% by a one-shot investment
3. Pick high-quality projects
What is a quality project? Hard to say. In general, we assume that Polkadot and Kusama are quality projects because they are the cornerstones of the Dotsama ecosystem.
Furthermore, we imagine a high-quality project as something that has good capitalization and the potential for its growth. At the same time, there is adoption, community, decent tokenomics, and a usable and functional technology solution provided by a quality team of developers.
However, the crypto world is in its infancy, so be alert and especially DYOR regarding your favorite project.
Also, remember that a better technology solution does not necessarily mean excellent adoption and network effect.
And avoid scams and non-transparent projects. We believe that we will find a few of them as possible in the Dotsama ecosystem.
4. Utilization of (Dotsama) DeFi
Have you heard of DeFi 😀 ? In our opinion, DeFi can support profits (and reduce losses) even in the gloomy times of the bear market. Especially if we are talking about DeFi on the Dotsama ecosystem.
As we have already announced at several events, we have decided to map the DeFi environment on the Polkadot ecosystem and for this purpose, we are establishing a platform called PolkaDeFi.
You can look forward to specialized DeFi articles, tips, tricks, interviews, Twitter tutorials, etc. Follow us on Medium and Twitter for the latest and hottest tips.
Soon we will introduce you to PolkaDeFi, go over the introductory topics and dive into the interesting things that Polkadot DeFi offers to users. We believe in building a community where we share our experiences and yours to find ways to defeat the bear together.
In the next part of the article, you will learn about the specific possibilities that we managed to access, study, or use. Of course, the numbers are constantly changing and it’s usually first-come, first-served 😉
If you like this article, follow PolkaDeFi here on Medium or on Twitter to get the latest and the best info about DeFi on Polkadot & Kusama!
