#28 Lessons Learned
What can we learn from a crypto bear market?
1 Take 🌶️
Crypto bear markets are rough. We went from laser eyes, the inevitability of the metaverse, and influencers predicting $200K BTC / $10K ETH to stunned silence — in what feels like a flash. And the bottom might not be in yet.
Having lived through a crypto bear market in 2018-2019, I remember how painful it was in the moment. But, I also learned first-hand how true the adage of “fortunes are made in bear markets” is. Why? Because bear markets allow for reflection and growth.
So what have I learned from crypto bear markets?
1. Bear markets offer a HUGE advantage
When everything is constantly pumping, it’s hard not to feel like you’re just spinning in a FOMO-induced blender. Bear markets turn that blender off, causing many people to go elsewhere to get their fix — which is a HUGE advantage for crypto believers. Instead of spending your time trying to find alpha, here’s your opportunity to become more involved and contribute to the space. Invest your time and money into the projects that you believe have staying power. If you think about the most popular crypto influencers, many of them got their starts grinding away and contributing to various projects in 2018-2019. Go do the work now and get rewarded later.
2. Above average in bull markets, superior in bear markets
If you’re a long-term crypto investor, it’s important that the majority of your portfolio is placed in assets that fit this quality. It’s easy to get distracted by the shiny new token or NFT that has gone up 10X in a month, but as you’ve probably seen, those are also the assets that are most likely to go down 90+% during a bear market. You want your portfolio to have assets that are going to steadily grow and not dip as hard during bad times. In crypto, that’s primarily BTC and ETH for now, with potentially some L1 protocols and NFT projects joining the party as we come out of this bear market.
3. Must Own vs. Should Own
It’s important to bucket all your investments as either “must owns” or “should owns”. Must-owns are your hold forevers. Should-owns are investments that you have a clear exit strategy to capture profit / protect downside. Unfortunately in bull markets, it’s easy to blur the lines (I was definitely guilty of this) and confuse your “should owns” as must-owns because hey, price only goes up, right? As a result, you end up taking on large losses because you’re holding assets longer than you should be. It’s a lesson I’m learning for next time — you should too.
4. Unless you have reason to believe you’re early, assume you’re late
When you see your friends or people you follow on Twitter making money hand over fist, it’s really hard not to blindly join them. But ask yourself first: what is my competitive advantage? In other words, why do you believe you’re early to this that other’s aren’t seeing yet. If you have a strong answer, go for it. But if your answer is “This has gone up and will keep going up, or so and so person bought this”, that’s probably an indication that you’re later than you think. It doesn’t mean you won’t make money — but you’re depending on luck.
5. There’s no such thing as free money
In a bull market, every project, whether it’s Olympus, LUNA, or LooksRare, is offering exorbitant staking yields. It feels insane to not take advantage (again, I’m guilty as charged). But bear markets make you realize there is no such thing as free money. As the old saying in poker goes, if you can’t see the sucker at the table, you’re probably it.
If you’re reading this, you’re in a great position. You’re still insanely early to crypto and have the tools to survive this bear market to come out stronger on the other side. Keep calm and carry on.
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2 Things To Check Out 🤔
1. Great thread on how to think about crypto bear markets.
2. Who needs fancy economic indicators when we can get true signal? 😂
Always be learning,