Bear market in cryptoland

Learning during the bear market is the best preparation for a bull market

Things have not exactly been going well lately: energy prices are rising, groceries are getting more expensive and we are experiencing a veritable bear market: the prices of stocks, ETFs and crypto have fallen sharply. Overall sentiment is to cry over; consumer confidence has fallen to its lowest level since measurements began in 1986, and the “fear and greed index” that reflects sentiment in financial markets is at extreme fear. We are all uncertain about what the future will bring us.

Psst: read the article with 3 pro tips on what to do during tough times in the stock market here.

Opportunities

But these circumstances can also give you great opportunities – in a bear market, you have time to make a good plan. There is little greed and FOMO, many people are taking a wait-and-see approach or even selling, having come to the conclusion that they have run too much risk in recent months. There are no youtubers slamming you with fantastic returns, and investing is suddenly no longer a trending topic. Kind of quiet! How long this period will last no one can say
(hello crystal ball, where are you?)
, but if we look at recessions in the past we see over time the prices recover and then happily continue to rise as if nothing happened.

Back in time

To talk about crypto specifically for a moment, let’s go back in time, to the prices of bitcoin (it has the longest track record of all crypto currencies) in the years 2014/2015, 2017/2018 and 2020.

Why exactly these years? In each of these years there has been a very big drop in the stock price. To be exact, 86% (from $1,150 to $155), 83% (from $19,700 to $3,150) and 61% (from $10,400 to $3,800), respectively. Every time there were newspapers and television programs declaring crypto worthless. “You see now! It’s nothing at all”.

And again, with the current drop, we see headlines like this. The price fell from the “all-time high” of $68,800 to 17,600, a 74% drop. Meanwhile, the rate hovers around $21,000.

FD: June 18, 2022

Fundamental errors

We have seen in recent weeks that there are risky products that cannot withstand a drop in crypto prices. The Terra-Luna (with the “stablecoin” UST) and Celcius projects have suffered large losses that will probably never recover.

We think these types of projects were not well put together and this is why they fell over, not because crypto is fundamentally bad. Let’s make another comparison with the usurious policies and the Icelandic bank ICESAVE (who remembers it?) of the past. Shaky financial products without proper supervision that many people put money into, lured by handsome returns. Projects like Celcius are old wine in new “digital” bags, but the taste is as sour as ever.

Good projects survive

As for Bitcoin, we have seen that during the bear market of 2018, the foundations for the lightning network were laid (the layer 2 on which fast payments are possible at low cost) and also the peer-2-peer network has continued as usual. Miners still mine the next block every 10 min, despite lower yields due to low bitcoin prices, and add the new blocks to the blockchain.

The bitcoin blockchain has never ground to a halt. Bad projects fall over but good projects get through a bear market, and keep developing so that they are better and can move on afterward. That said, even the good projects can fall sharply in value, as we have seen in bitcoin prices.

Bear market as an opportunity

Whether you had just gotten into crypto and were surprised by this sudden drop in prices and are now deep in the red; didn’t have your profit-taking strategy in place and now don’t have the funds to take advantage of this drop to buy in; or see this dip as a great opportunity to get in – this is the time to pause for a moment.

The bear market with low rates, lots of fear and the absence of FOMO is precisely the perfect opportunity to look at your own financial plans with a helicopter view. What do I have in mind? “Do I want crypto to be a part of my investment strategy, and if so, in what way will I do that?” Because that crypto-assets are volatile and risky we have long known, the main question is: How do you deal with them? How do you make sure you gather enough knowledge to make a good plan for yourself?

Clear strategy

Just this bear market is the perfect opportunity to make sure you are well prepared for the next bull market. With the necessary knowledge, a clear strategy and no sense of FOMO. So that you know why and when to enter and buy, and have a clear strategy for taking profits.