Erik Weijers, 6 months ago
Investing in crypto is never boring. Each period of the cycle comes with its own challenges. The hype and boasting friends during the bull market. The boredom during the sideways moves. And then the depression of the bear market. How do you deal with the latter? We looked at the advice of a pair of crypto OG's who have survived multiple bear markets. The gist of their advice: survive.
In the Unchained podcast How to navigate a bear market, Cobie (real name Jordan Fish) talks about his mistakes as a novice trader. Every successful crypto investor has made mistakes, confirms other guest Chris Burniske, who is now a professional investor. Those of their "generation" who have made it have one thing in common: they have managed to survive the multiple bear markets as well as their own mistakes.
"The amount of people that kept life altering fortunes is significantly smaller than the amount of people that had them at any moment in time. [...] If you see it as a game of survival then you have to figure out what can kill you and what can be the things that knock you out of the game. And the idea is you don't get knocked out of the game because crypto has a lot of promises left to fulfill."
According to Cobie, the key is to maintain, or preferably increase, a position in crypto through bear markets. The one thing you should avoid is to exit or be knocked out. What, according to Cobie, is the way to prevent it from being game over?
1 Spread your risks
Don't put all your crypto eggs in one basket. Don't put everything on one exchange or on a MetaMask wallet whose security you don't exactly understand. If you get hacked or lose that one mnemonic phrase that gives access to your entire crypto assets, you're finished.
The same principle of spreading out goes for the investments themselves. If you had put everything into the Terra ecosystem - and you thought you had a diverse portfolio - that would have been a miscalculation. Spread your investments across multiple coins and don't put large percentages into more new speculative projects.
2 Get a life
Cobie says he has known people who were very stable personalities but gradually became over-stressed over the years.
'Make sure you take care of yourself all the time. Don't get too hung up on how much your portfolio was worth at the top and how it could have been if.... Just try to enjoy life. Make sure you have hobbies, a way to really step away from crypto. It's not the be all end all.'
Punk6529 is the anonymous twitterer who has thought and written a lot about NFTs. What many people don't know is that he has been active in crypto since 2013 and called himself 'almost a Bitcoin maxi'. Anyway: he experienced nine years of peaks and valleys of the markets.
In long, well-thought-out Twitter threads, he advises newbies. Should I start investing in crypto? If so, how much? How to deal with a bear market?
When asked about how much to invest in crypto, he gives the general answer that will apply to most people:
"not so much that your life is impacted if crypto nukes, but enough so that it improves your portfolio performance if it does not."
Think in scenarios to avoid future panic moves
As nobody knows where markets will go, you want to think in scenarios. For example, the market could go sideways for years. Or there could be a catastrophic crash. Or crypto could go up only after Central Banks will put Bitcoin on their balance sheets
“A complete set of life decisions that give you OK outcomes in each of those scenarios is a very good life plan. Not each outcome might be equally "good", just make sure you can survive each outcome. If so, you can sleep at night, not make panic moves.”
For example, honestly confront yourself with the following thought experiment. "Whatever you invest, write it off to zero the next day on your balance sheet and don't look at it for 10 years."
The test is a thought experiment for a reason. Indeed, a large part of your success in the crypto market, also according to Punk6529, is about survival in the psychological sense.
"The biggest risk to the average person's long-term returns in crypto is "crypto nukes for years, they freak out and sell the bottom."
Punk tells of his friends from 2013 who invested in crypto: almost none of them still have crypto in their portfolio. They bought Bitcoin at $300, felt all great when the price soared to $1,000. Panicked when it crashed and sold when the price dropped to 300. The most successful investors bought a lot once or in small batches over the years, not worrying about the price.
This is much harder than it seems. Everyone is George Soros or Cobie in theory. Very few people are this in practice. When the dip comes, the usual answer is not "let me do a detailed analysis of my future options" but more "oh shit".
In other words, your psychology is the key factor when it comes to survival.
"In other words, your psychology is the KEY factor to survival. You have to know thyself.
You have to know how much risk you can handle and you need to keep sizing down your position until it is at a point where you can be long through dips. When you can look at yourself/your wife/your parents/your kids/your banker/your landlord and say:
"BTC/ETH/SOL/BAYC is down 80% and I am cool"
...then you are in an OK place for long-term survival."
Sep 12, 2022
Maximal Extractable Value (MEV) is the (potential) profits for miners or validators producing blocks on a blockchain. They do this by picking and re-ordering transactions within blocks. You can view MEV as a tax on users of the blockchain.
Aug 29, 2022
Is most of the value in the crypto world going to be in the base layer? In other words, the blockchains like Ethereum and Bitcoin? Or will the applications built on them be the winners? Think Uniswap or Aave. This is the main question many followers of crypto are asking.
Jul 20, 2022
Cardano and Ethereum are two very different blockchains but they still get compared to each other. One reason for this is the fact that Cardano’s founder, Charles Hoskinson, also played a vital role in the birth of Ethereum. Another reason is that both blockchains are thriving because of their smart contract capabilities and a dApp ecosystem that is creating an enormous digital market of financial products and services that are built on blockchain technology.