Crypto bear markets are brutal, and understandably but unfortunately knock out investors that are new to the game: ‘I’m done with this shit!’ Experienced investors, however, love bear markets. They see them as a great time to accumulate coins and generate future wealth. But to thrive, you first need to learn how to survive.
The Crypto Bear Market of 2022
In the way that Tolstoy stated that each unhappy family is miserable in its own peculiar way, every bear market is painful in its own unique fashion. The 2022 crypto bear market unfolded as a perfect storm of external forces exposing self-inflicted damage.
The American Central Bank started raising interest rates and slowing down the money printer. This was bad for stocks and crypto – bad, really, for everything that wasn’t called the dollar. As crypto prices kept slumping, it became clear which projects and companies had taken on too much risk. When the Terra ecosystem collapsed, we saw hedge funds and lending platforms being exposed to leveraged positions. This caused forced selling left and right: a brutal capitulation event that tanked prices by more than 50% in a few weeks.
Dealing Psychologically with your Bear Markets Losses
Let’s retrace a bit and linger on how you are feeling in this bear market. Unless you magically sold the top, you might be looking at pretty steep losses in your portfolio app – at least compared to the top. As it sinks in that these are not just numbers on a screen, but losses that might impact the way you live your life in the coming years, it is no wonder that you feel bad. It’s ok to mourn these losses. Grief comes in five stages, and, as the guys from Bankless point out, these can apply to financial losses as well:
- denial
- anger
- bargaining
- depression
- acceptance
It’s to be expected that you go back and forth a bit between these stages until you reach the stage of acceptance. This is crucial. To learn from what happened, you’ll have to face some hard truths. And that’s when you can get productive again and build your wealth. So let’s do it.
Should you Invest in the Crypto Bear Market?
After having picked yourself up, you can proceed with asking yourself a key question. Is crypto here to stay? Have the events that led to the 2022 bear market (monetary tightening and irresponsible behavior by crypto companies) led you to believe crypto is dead? You can answer that question for yourself, but in the meantime look at this adoption curve. In the end, adoption is what drives prices.
The Key Question
Do I believe that crypto is here to stay? That it will be bigger than it is now in let’s say 5 or 10 years?
If you answer this question with ‘probably yes’, then it’s worth staying around and investing. And what better time to do that than during a bear market? If you are very unsure about this answer, educate yourself and answer the question again.
Rules for Making Money in a Crypto Bear Market
#1 Psychological Survival is Key
So you’ve decided to keep investing during the bear market. How much? Not so much that in case the market tanks, you will lose sleep over it, freak out and sell the bottom. So we’re talking psychology here. Most investors will tell you survival is a game of psychology. This is also the opinion of crypto veteran and NFT philosopher Punk6529. Know yourself, he says.
Why?…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
