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BEHOLD THE POWER OF THE BEAR

April 21, 2024
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FinMeUp
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FinMeUp

Bear markets are powerful things

 

Now. Before you read. There is one thing that we must agree on: We are in a bear market. We are not in a bull market. The reason I want to make this clear is to ensure that we instigate a collective mental shift. Perspective is everything if you are an investor - It dictates your strategy and ability to stay level-headed, but most of all, it impacts your level of wealth in the long term. So, can we all agree that we are in a bear market? Good, keep reading.

What happened in 2020 and 2021? We saw thousands of people, mostly young, not-so-financially-savvy men, make lots and lots of money in crypto. As more investors jumped on the bandwagon to share in these magnificent returns, the price kept increasing, and as the price kept increasing, more people bought at higher and higher levels. Did anyone take profit? Very few did. Were all in the same boat here. We lost money. A LOT of money. And that hurts.

The upside of losing money (upside havent used that word in a while) is that it teaches you valuable lessons. Losing money is perhaps the best teacher of all because the pain associated with it is very real.  So, my best advice to you is to answer the following question: what did you learn from losing so much money? 

You need to realize that youre still young and being young will inevitably lead to making many mistakes. Its OKAY. You still have a long time left to live. The experience youre having right now is tough, but if you stick to your guns and learn from your mistakes, its going to make you so much richer in the future. 

In my opinion, this is the easiest, risk-free opportunity to dramatically increase your wealth over the long term. Working from the perspective of a bear market, we need to answer three basic questions: WHEN to buy, WHAT to buy, and for HOW LONG to buy.

 

WHEN to buy

Buy in a bear market, sell in a bull market. The riskiest move you can make in a bull run is to buy, even if you buy the dip, because every time you buy the dip in a bull run it might just be the last dip. Money is made when you buy and buying at the right times is crucial to any investors success. 

Refer to figure 1. Do you see the peak at the end of 2021? Do you know what happened there? People were buying JPEGs and doggy coins for millions of dollars. Literal millions. Does that make sense? No, no it doesnt. Yet, at that time, everyone and their mother were into crypto. (Got my mom into crypto too. W for the boys)

In a bear market, your chances of buying the top are basically zero. Sure, you might buy whilst prices keep dropping, but buying at these levels in the grander scheme of things is much smarter than buying when digital rocks are being sold for millions of dollars. We are a lot closer to the bottom at $21K than at $68K.

So, when do you buy? When people are calling bitcoin a pyramid scheme when recession fears are at all-time highs when everyone is panicking and selling that is when you start to buy. Remember, were not trying to avoid losing money in a bear market we are trying to buy lows relative to future valuations.

 

WHAT to buy

What to buy mostly depends on cyclicality: Buy blue chips in times of turbulence, buy small caps in times of exuberance. You dont want to catch Bitcoin in the middle of a bull run. You might see 2x/3x from those levels, but when crypto is running, its Usain Bolting. In a bull run, you want to buy small caps that can 5x/10x/20x in a matter of months. Im talking early 2021 Solana, Matic, Sandbox, Mana, Enjin, etc. I made so much money from these projects over just a few months its ridiculous.

When I find myself in times of trouble, Mother Mary comes to me, speaking words of wisdom: Buy Bitcoin, and let it be. In bad times, you want to buy solid, boring projects that will make you rich in the long term.  When its bad, its really, REALLY bad for alts. Let me demonstrate: my bottom five holdings (from the time of purchase): Injective -88.49%, Illuvium -73.2%, 1Inch -89.2%, The Graph -90.53%, Moonriver -96.5%. I wish I was joking, but Im not. This is the harsh reality.

 

HOW LONG to buy 

Managing expectations is key in any relationship. So let me manage yours: we might be here for a while. As I said, were not trying to avoid losing money in a bear market we are trying to buy lows relative to future valuations. 

No one can see the future. What we do know is that markets are cyclical. Good times will inevitably be followed by bad times and bad times will inevitably be followed by good times. Where is the bottom? Was it 40K, 35K, or 25K? No. What about at current levels of around 20K? Maybe. Its hard to say. 

Word of the day: DCA. (It rhymes - easy to remember). DCA stands for Dollar-Cost-Average, which entails buying on a regular basis instead of going all-in at a specific time or level. Time in the market almost always beats timing the market. We do time the market in terms of cyclicality (bear market), but within the bear cycle we employ our DCA strategy

 

Summary:

  1. Dont follow your instinct. This is not the time to sell, its the time to buy.
  2. In a bear market, buy solid, blue-chip assets. Prepare to weather the storm.
  3. Word of the day: DCA.

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