How to Win in the Crypto Bear Market
Or “How I learned to stop worrying and love that Bitcoin”
Disclaimer:The below references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
Hash Wars Vs SEC — which punch hurt more?
Ever since the Hash Wars began, we’ve seen the entire crypto market shed more than 30 billion USD. People are speculating about the possible reasons, trying to make sense of it all. Did Craig Wright make good on his threat to crash the price of BTC, selling his holdings to fuel his side of the Hash War? Could it be that this was the bear market we were all expecting as the shiny veneer of quick digital fortunes wore off? Or was is the SEC’s recent ruling on Paragon and the danger it poses to other ICOs?
My bet is that the damage is a result of the SEC opening the door to retail investors suing all of the ICOs of the last 2 years. And why not? You got a chance to gamble and if it didnt turn out well, you can sue for the full amount back! In anticipation of this inevitable onslaught of litigation against 100’s of ICOs, the market is selling everything before risking any more losses. Most projects will be unloading the funds they raised, mostly held in BTC and ETH. According to a report by theBlock, “In April, the treasuries held 4.65 million ETH (4.5% of the supply) indicating that they likely liquidated (or moved) about 23% since then. In April, the ICO treasuries were holding $1.76 billion, while today, they hold a fraction at $475 million.” Its especially telling that Ripple (XRP) has remained unscathed in comparison, as it was not held by these ICO projects.
Whats the best strategy in a crypto bear market
Buy the dip or sell it all
This strategy is pretty simple, keep buying at lower and lower levels, getting your average purchase price per coin to go lower and lower. Despite being simple and working in random moments, its actually a pretty horrible strategy. You can’t time the bottom, and we all honestly don’t know what will happen in the next few weeks.
Same thing goes for selling it all. This isnt the first time there has been a major decline in the crypto market. If you look at the spreadsheet above, you’ll see that this is just 1 of 12 previous declines, and ranks 4th in the severity percentage wise. Volatility isnt a new thing in Bitcoin, and a decade later, the fundamentals are stronger than ever. Bitcoin’s mining network in particular has shown extreme resiliency amid the chaos of the BCH fork and subsequent Hash Wars. With new developments in the form of Blockstream’s Liquid, the expansion of the Lightening network, and the potential evolution that comes with BIP 156 and the Dandelion++ protocol, Bitcoin is strengthening its value proposition as a store of value.
My advice to existing holders is to wait until the hash wars have cleared up a bit and we see what the SEC does next. They have been pretty active lately with back to back announcements (first Etherdelta and then Paragon) so I expect we will hear more pretty soon. Consider buying now if you’ve been sitting on the sidelines, but only Bitcoin. Consider that this is not like the internet, where being nimble and quick is helpful. Security is the most important asset when it comes to finances, and Bitcoin has this covered in magnitudes over the rest. If you really want to go shopping for the riskier altcoins, its probably best to save dry powder for when the bottom is clearly in.
Build it and they will come
The one area im very bullish on is skill building and the blockchain jobs market. Every major financial institution has deployed some sort of investment or partnership concentrated on crypto assets. VC funds continue to look for projects and the jobs market in blockchain continues to remain strong. Even mining is going to be an option once again, as the supply glut of GPUs means Black Friday prices on hardware.
Work on your skills and network. You’ll find that the crypto community constantly sheds the stragglers and now is when those who will be superstars next year first start their careers. A few things you can do today
- Get involved in meetups
- Study development with free tools and videos
- Join bounty programs on BitcoinTalk
- Work as a community manager on Telegram
Invest the time now so you’ll be better informed and positioned to capitalize on the inevitable bull run. Its been a decade of these wild dips. Yes, emotionally it hurts, but this shouldn’t change your views on the fundamentals.
Altcoin projects that survive will be the real winners. Now that the “ICO party” is over, there will be higher expectations investors will have for projects moving forward. There will be a requirement for strong and relevant teams, not just random Nobel prize winners or celebrities. Whitepapers alone will no longer be sufficient in raising millions in capital.
All the new crypto funds and VCs are still looking for investments to make. In fact, they seem to be more keen than ever, with the new “equity mix” pitch becoming the popular choice. This is when investors purchase equity as well as tokens, which is the better option for all participants. It offers more value to the investor in the form of more control and assurances, while also protecting coin economies from toxic pump/dump funds by giving equity as an incentive to care about the long-term health of the project.
A summary
- This volatility isnt new and the fundamentals havent changed
- Bitcoin is a stronger network now than it was last year
- Investing in your skills today will yield huge results tomorrow
- There are plenty of jobs available in blockchain, signifying that this industry is not going away anytime soon
