When I first entered the stage a couple of years ago, I stumbled across a bold statement saying, “Bear Market is a blessing”. I honestly thought the person saying this was insane or so much at a loss that he was looking everywhere for a silver lining.
Now I am here, making the same claim. Is my portfolio so deep at loss, or maybe now I understand markets better than when I was a newbie?
What to Do When the Bull Market Ends?
Go on a holiday. That’s for sure. Give yourself time to think, cool your head, and distance yourself from the markets. Let your emotions and psyche rest a bit and recharge.
Okay, you have got a couple of weeks or months of free time. Now what?
Now there is a time to answer some questions.
Is there peer pressure in the crypto space to create something until the money stops flowing? Do you sense the need to attract as many new clients entering the space on social hype as possible?
I hope you see an emerging pattern here.
Bear markets give you the time to build decent projects, establish true friendships in the space, and create a long-lasting strategy for the next bull run.
Time to Take a Look Back
Without the knowledge of the past markets, you will not be ready for the future.
Now that we have some time to think and look back at our behavior in the bull market, we should use it to go through our investment or trading journal and analyze the contents.
If you haven’t kept a journal so far, I highly encourage you to write down the following questions. It is crucial to write them down physically on paper or in a notebook. Writing helps us to ponder on answers to the questions we are writing.
- What have you learned from the recent bull market?
- What mistakes have you made?
- What would you do differently this time?
- How did you feel during your greatest wins and losses, and what did you do afterwards?
- How well did you handle your emotions?
- What were the examples of you following the hype instead of making conscious decisions?
The Real *you*
After you have gone through the questions, we can distil all the knowledge and experience stemming from your answers.
It is a child’s play to read the chart from right to left — the price goes up, and the price goes down all the time. Okay, but what does it prove?
It shows the real *you*.
You can throw away all the false images of yourself when you look at how you behaved at the given moments in the recent bull market. How well did you stick to your strategy, assuming you have had one?
After this brutal revelation, some of you might have already quit reading the article. The truth is not always pleasant, and one key thing to remember about the markets is the following.
If you are not true to yourself about your feelings and emotions playing an alpha male, your losses will be devastating. Who are you in comparison to the multimillion Venture Capitals? Who has better knowledge and understanding of the markets?
- How well do you understand Bitcoin?
- How well do you understand Ethereum?
- What are the risks of those projects?
Can you give well-researched answers to those questions?
If not, when are you going to build solid foundations of understanding the projects that are the core of the whole crypto space?
Okay. So now I hope we have clarified some things. Let us go now and use the bear market to our advantage.
Time to Build a Strategy
“Tactics is knowing what to do when there is something to do. Strategy is knowing what to do when there is nothing to do.”
~Garri Kasparow
I cannot think of a better quote to show the difference between being a master Tactician (quick plays during the Bull) and the grand Strategist (creating a long-term plan working despite dire market conditions).
All the answers to the aforementioned questions will create a base for writing down your strategy. Does it have to be a complex 10-pages-long draft, or can it be simplified into a couple of sentences? It does not matter as long as it will be profitable and you will be able to stick to it even in dire conditions.
It is not about the length. It is about encapsulating the basic rules.
The Art of War by Sun Tzu is not a lengthy volume, yet it became one of the greatest sources for creating a strategy in many fields.
- What should your strategy include? The most significant points are as follows:
- Rules for picking up the projects
- Levels to enter and exit positions
- Portfolio management — expressed in percentages (%)
- Where to look for high-quality information
- Emotions management — both wins and loses
- How to get back if you got carried away by hype or negative emotions
Alright, so you know how to build a strategy for the next bull market, but what about the time of the bear? For the rest of the time, you should focus on honing your skills and knowledge to create skill leverage instead of using the financial one, which you should not touch if you are not an expert investor.
Time to Learn How to Use the Hype
The recent bull run gave us hyped trends people got obsessed over. Two trends which gathered the most people were NFTs and dog-themed coins.
NFTs are still a thing and are here to stay, not in the form of PFPs but as a technology — you might read about it in my post about the future of NFTs. On the other hand, dog-themed coins like Shiba Inu served only one purpose, to monetize the hype.
So the moment we spot a growing hype, we should switch to being cautious and leave the space or at least the hyped areas? Not necessarily.
Yearn Finance decided to profit from the hype by creating a Woofy coin. So, if projects like YFI are profiting from hyped trends, why shouldn’t you?
What if we spot the growing hype, knowing it is another pump and dump scenario? Cannot we use it to our advantage and profit from it? Indeed we can, but it requires a lot of experience to play it well.
Bear markets give us time to look back at recent trends without the bias of emotion and information. We can conduct a ‘post-mortem’ analysis to look for common traits and mechanisms. The subject of our analysis should not be only the project or trend, but also the psychology of ‘investors’ and their market behaviours.
Along with Shiba Inu, various dog-themed coins emerged, Dogelon Mars, BitShiba or Shiba’s Wife, to name a few. If you haven’t become alerted seeing those projects growing in price and gaining social hype, what would convince you to realize the bull market entered the last phase? How does Jesus coin from 2018 differ from 2021 Shiba’s Wife?
Learn to see the patterns and evaluate the state of the market.
Projects and trends change, but the emotions always stay the same.
*This quote is the best lesson you will ever learn in the financial world. But it takes time and experience to truly understand it.
Humans are creatures of emotions, not logic.
Time to Stay Active
The bull run came to an end, and so did the emotions. The space became calmer and quieter. The music grew so silent that it meant the party was over for some market participants.
But is the party over for everyone?
Is there a better time to research and analyze projects than times of boredom and cooled emotions? The number of “breaking” news heating up the space and disrupting common sense is close to zero. Even when some positive news does hit the space, it is taken with a pinch of salt.
The time of bear is the time to build and look for future investment opportunities. It is also the time to stay active and look for potential big players in the next bull run. The projects with the highest ROI, like Solana or Terra Luna, have been created during the recent bear market, so let’s dig a little bit and look for future gems.
Time to Network
How many people are going to leave crypto space during the bear market? It’s hard to tell, but any number you give will not be enough.
Who stays active in the space?
The ones with a long-term vision.
Those are the people you should reach if you want to grow and become a better investor. People who are going to stay active, even the new ones, have an incredible opportunity to reach individuals, ask questions or offer their help in building projects. The space is full of wonderful people who are happy to help or point you in the right direction. Particularly during bear markets when all the people who got here on hype are gone.
The markets are not zero-sum games if you are building friendships along the way.
Time to Rest Emotionally
Finally, after all the emotional struggles of the bull market, give yourself time to emotionally withdraw from the markets. Focus on your family, friends, or your animal companion. Take care of the bonds with the ones you care about, and devote your time to those people. Money is not the most important goal in life, especially if you have no one to cherish little moments of happiness with.
Okay, okay, but we have to work after some peaceful moments, don’t we?
Indeed, we do. When we rest a while and cool off our heads, we may get back to learning and experiment with the tools at our disposal. Maybe working with some Layer 2 testnets like StarkNet or zkSync? *ekhem*
Conclusions
The next bull market will come sooner or later. Don’t doubt that.
It is not the first time I see claims “Bitcoin is dead, and so is the whole crypto”, and it is definitely not the last time.
In the meantime, devote yourself to double down on your knowledge and experience gained in the previous bull market. If you are new to the space, take your time to learn the basics and build solid foundations of knowledge. Bear Markets give you the opportunity to learn without all the information biases and “missed chances” on investments.
One more thing for all the new investors here, if you haven’t experienced a bull run before, take into account that you cannot be sure about your emotions and how well you will handle them in extreme situations, both wins and losses. Consider this while creating your long-term strategy.
There is time for planting the seeds, and there is time for harvest.
Stay safe!
Stay active!
Till next time!
~M.E.
Photo by Hans-Jurgen Mager on Unsplash
Also published here