There’s no denying it — the market is suffering. Last month we published an article highlighting the possible return of a crypto bull market, confident that a period of large growth was on its way… hindsight is a wonderful thing eh?This small episode illustrates how volatile the cryptocurrency market can be. While certain technologies like the Baanx Price Lock feature and insurance against no-fault loss can offer protection from price fluctuations, ups and downs in the market are just a fact of life.
The current market downturn has some people convinced that crypto is dead, and that the wisest course of action is to just cut their losses and sell. In this article, we’ll make the case for why we’ve been here before, and offer some practical tips for surviving and even thriving in a bear market.
Put the Bear Market in Perspective
Despite all the ‘sky-is-falling’ rhetoric, the fact is that this has happened before. The first insane crypto bull market was back in 2013, when the price of BTC shot up to over $1160. Just like last year, it seemed like there was no stopping it until a correction set in. Between then and January 2015 the price of BTC dropped 86%, down to a mere $152. Many people would understandably think that the cryptocurrency was dead at that point.
But as we all know now, those who kept the faith were richly rewarded. BTC rose back up to nearly $20,000, and those who bought at $152 would see a stunning return of over 13000% growth on their investment. Right now, even after this second massive correction, they’d still be way up.
But what about those who didn’t time things right? There are millions of investors who perhaps never heard of cryptocurrency until last year, and got caught up in the euphoria of one of the largest bull runs in history. Many of them chose to “HODL”, thinking that the sky (or the moon, rather) was the limit for crypto growth.
It’s counterintuitive — “hodling” is a form of delayed gratification, something that requires discipline and can lead to positive outcomes in many aspects of life. But whether it was BTC or altcoins, many of those who bought high and delayed too long in selling got badly burned.
If you bought at the top, or you’re in the red right now, don’t beat yourself up. The fact is that we are still very, VERY early in the game as far as cryptocurrency adoption goes. Most of the public is spooked, but when they start to feel confident that the market is going back in the right direction, the money WILL come pouring back in — and that’s not even taking into account the influx of institutional investment.
The long term trend of the crypto market speaks for itself:
As a general rule of thumb, you should never invest more than you can afford to lose. But in terms of what you do invest, how should it be allocated so you can reduce risk? While this is not financial advice, there are some good general principles most successful crypto investors advocate.
As you’ve probably noticed by now, during a bear market Bitcoin’s market dominance increases. This is because many people view altcoin projects as higher risk, and thus seek to go with the “sure thing” by putting money into BTC. As people begin to feel more confidence in the market, they start to feel more comfortable investing in altcoins as well, and as BTC goes up, the alts begin to rise as well. On most exchanges, BTC and ETH are used as the main trading pair currencies. It may be a good idea to keep some of your portfolio in these to reduce risk and so you’ll have it ready to go when a good buying opportunity presents itself.
But of course, BTC and ETH are subject to price fluctuations as well. Luckily, stablecoins like Tether (USDT) or TrueUSD (TUSD) are linked to the value of fiat currencies (the US Dollar, in both cases). Stablecoins allow you to lock in your gains with cryptocurrency when prices are high, and preserve them through bear market like this one. If you want to have funds ready to go when prices are high AND you want to protect against rapid shifts in price, stablecoins are an choice.
Pick Projects Wisely
Finally, you want to make sure than when you do invest, you pick the right projects. During an insane bull market like in December 2017, you could afford to be a sloppy investor. You just couldn’t lose. During a bear market however, the margin for error is much lower, and you really need to do your research.
You’ve got to make sure you’re picking SOLID projects with real goals and that solve real problems.
You’ve got to look at the team and their professional backgrounds. What technical and financial experience are they bringing to the table? Do they have track record of success in their respective fields?
Answer these questions, and then remember the following principle: In the crypto world — things change FAST.
The crypto market moves much faster than the stock market, and if you prepare, you can position yourself for success no matter what’s happening. If you have liquid cash, bear markets are BUYER’s markets. A perfect opportunity to invest in high quality at discount prices.
Baanx brings a combined 100+ years of banking and high tech experience to the table to build the most ambitious crypto banking project to date. As laid out in the roadmap, Baanx will be a true, full-service banking ecosystem which will provide traders, long-term investors, businesses and nonprofits alike the most powerful tools they need to thrive in ANY market, even a prolonged bear market.