Hello Crypto Bear Market
Well… This has been a crazy week. I hope you are doing ok out there! In today’s issue I wanted to start by talking about how to keep making money in a down market. A topic which is probably on all of your minds! Until we see a decisive trend change then we can assume that the bears are still in charge of the market. And I know, believe me I know, how much it sucks when a coin you bought is down 90%. This is however an all too common reality of the crypto market. While today has seen some green come into the market we are still quite far away from key moving averages. Bitcoin is $10,000 away from the 200 day moving average.
So here is how I intend to keep making money in the crypto bear market regardless of market conditions.
Crypto Bear Market Strategy #1: Yield farming
Would you believe that you can still easily get rates at over 100% on stablecoins right now? And probably can have dozens of options with rates at 40, 50 or even 60%??? What about triple digit yields on new coins? Yep, still happening. Although I am not in many of these higher yield farms for stablecoins, they are definitely out there. My stablecoin plays are mostly in farms like Convex Finance on Ethereum. BUT if you take the time to bridge over to other chains like Fantom then even OG defi platforms like Yearn Finance can give you HUGE rates on stablecoins! I will also continue to farm in ETH parity pools for coins like Illuvium, High Street, and Wilder World. These pools are riskier due to impermanent loss, but the potential for gains is very real too if you are willing to be in a farm for a longer period of time.
What will happen to yield farming during an extended bearish period? Well, to an extent no one really knows. Yield farming truly only began in 2020. The best reference we have is the bearish period of 2021. On the one hand people may exit farms and cash out and leave the market meaning that there could be less competition for yield. On the other hand, falling asset prices will likely lead to a big reduction in APYs that are often calculated on a dollar basis.
***Note: Staking APYs will stay the same as they come from a set release of coins on the network. One of the biggest risks with yield farming IF we get an extended bearish period is that the coins you are farming could totally collapse and those high APYs now could result in basically nothing later and you could be exposed to crushing impermanent loss.
For a list of some of the best returns on your stables check out our article: Getting The Best Return on Stablecoins
Crypto Bear Market Strategy #2: Lending
Lending Is a “safer” place to park your money in crypto. Popular platforms like Celsius, Blockfi, and Nexo give decent rates of return. Nothing compared to defi rates mind you, but the risk profile is also a lot different. That is not to say that centralized lenders have no risk, they certainly do, but it is lower compared to many of the defi platforms people are using.
We can have a similar conversation here to farming. Many of the big lenders have never really been through a long bear period, although most did start during such a period. Not all lenders may make it long term.
Crypto Bear Market Strategy #3: Gem Hunting
This is a well established route to crypto riches and an area that has helped me get some of my biggest gains. Many coins are down between 60 and 90% as of writing. Which to be honest is intense! And also very tempting. Can these coins drop another 60 to 90%? Of course. BUT when coins are down so far is the time to start paying attention. That doesn’t mean you need to ape in your life savings all at once. But perhaps you can start averaging into some low cap coins that you have had your eye on! Accumulate and wait. That is the game. Or do you prefer buying the tops? Dollar cost averaging
One caveat to consider here is that IF we do enter an extended bearish period then some of these altcoins will straight up go down 99.99% and the liquidity will go to near zero. Keep this in mind, and of course NEVER invest more than you can afford to lose because “The market can remain irrational longer than you can remain solvent”
The reality is that when coins are down substantially in price is when we as investors should be paying attention!
Crypto Bear Market Strategy #4: Trading
Trading is a tough skill to master, and to be honest for most of you just focusing on investing will be more profitable in the long run. I rarely spend time trading these days, and don’t plan on changing that any time soon. BUT if you can trade, or want to wake the time to really learn how then there is always a trade to be made in the market. A good trader will long or short and make money emotionlessly depending on the direction of the market. Just remember that 90% of traders lose 90% of their trading account in the first 90 days.
Crypto Bear Market Strategy #5: Diversify
Ok, captain obvious… No, but really, crypto is awesome. I am a big fan in case you can’t tell, but I am not a crypto only investor. I also invest in stocks, which are slightly less rekt than crypto right now. I also own metals, which never seem to do much of anything lol. One of these days I still plan on getting some rental properties.
Crypto Bear Market Strategy #6: Cash
Wait, WTF Lark? Yes, cash. I wanted to take a moment to really underline this. I know I already mentioned stablecoins above, but having a decent cash position I feel is incredibly important for any market conditions, but especially for a down market. Remember that a big part of the crypto game comes down to merely being able to survive long enough. Which is why going all in may sound like a good idea but it really isn’t. Ideally you will have enough cash sitting on the sidelines to allow you to make it through any crunch times. Think about this, what if you lost your job or main source of income tomorrow? Would you have enough money on stand by to get you through without having to sell your investments? If the answer is no or maybe then figure out what this number is and work on building towards it and then always aim to have that much cash on the sidelines. Good news is that thanks to defi you can earn actual yield on that money instead of the 0.01% offered by banks.
Crypto Bear Market Strategy #7: Tax Loss Harvest
Yep, I said it. Sometimes you just need to cut that shitcoin bag and set it free. We all have coins that we are not so hot on anymore. Well, in some countries (please talk to an accountant first), you can sell your coins and offset your losses against your tax burden. So you are not technically making money, but you are not giving the tax man more than necessary. This works well if you already made nice gains in the market, and now have a couple of bags that you want to dump. Unload those bags, and use the loss to reduce your tax burden. It isn’t pretty, but it can save you a lot of money. I have just done this on a coin.
You might think that my approach to bearish times in the market is not drastically different from my approach during bullish times and you would be correct. The big difference is that except for some strategic tax harvestings I am not selling my coins here. I am holding onto much of my portfolio, in fact I have added to it with some Bitcoin purchases. When the market pumps again I will carve out some profits into stablecoins again. Until then I will just keeping, farming, lending, hunting, and trying to keep my overall portfolio well rounded. I truly believe that time in the market beats trying to time the market for investors. If you are a trader, then that is a different topic, but this is after all an investor newsletter, and I consider myself an investor not a trader.
Now with all of that being said. Bitcoin and Ethereum at this point have both actually put in higher lows. Which may sound crazy considering how dramatic the market has been, but it is true. IF that holds and we do not experience much more down side then we could enter an accumulation phase before the next big move up. Those are my two satoshis anyway.