The market may be going through some tough times. But that doesn’t have to stop you from finding ways to succeed. The economy faces a bleaker outlook than the Wales forecast. Few people are in a hurry to invest in risky assets. Crypto expert Nathan Thompson offers some tips for surviving adverse market conditions.
Option 1: Save cash to invest
There’s no shame in sitting on the sidelines hoarding cash or stablecoins. When the bullish momentum returns, you’ll have plenty of dry dust to make big allocations. Meanwhile, there are many opportunities to earn returns in the crypto markets as long as you trust the protocol you are using.
But isn’t it the timing of the market that’s impossible? Probably. But it’s all about spotting momentum and general market trends, as opposed to more focused price targeting or reversal calls. Bigger trends are easier to spot. However, if that’s a bit risky, there is another option.
Option 2: Dollar cost average (DCA)
Have you ever been to a physiotherapist with a wrist or back complaint? You’re hoping for a quick and easy cure, right? However, instead it gives you a series of trivial, boring exercises to do every day for three months. The dollar-cost average is its investment equivalent. Not sexy or even very interesting. However, given a long enough time horizon, the chances of it working out in your favor are very high. And these days, there are automated bots that do this for you. So this also helps.
These first two options can be combined to form a strategy. For example, setting aside 50% on stablecoins waiting for the bullish momentum to return and putting 50% on the market regardless of price. This tactic allows for some investment in the market, which can help resist FOMO when the market rises, even if your overall thesis is bearish.
Option 3: Find better performing assets
Decentralized perpetual exchanges have been the darlings of the bear market. cryptocoin.comAfter the FTX scandal you followed on ‘where are my shorts?’ she cried, flocking to decentralized options. Many have gone to protocols like GMX and ApeX, which are up around 70% and 50% respectively this year.
There will always be better performing assets in bear markets. However, finding them takes a lot of effort. Also, going long during a downtrend is risky. Therefore, this strategy needs to be approached with caution. It is used by investors with the knowledge and experience to identify the best project and implement sound risk management.
Option 4: Use derivatives to invest
There are many strategies that use derivatives and contract combinations to profit in bearish and sideways markets. For example, you can use options to create a ‘bear put spread’ that allows you to make money by locking in a good sell price at a discounted rate when an asset falls.
There are also so-called delta-neutral strategies that advanced yield farmers use to long and short both sides of a liquidity pool. This reduces their exposure to the volatility of the assets they hold. Thus, it reduces the negative effects of collecting pool fees.
The hard part is not implementing these strategies. Because there are instructions that are easily found online. The challenge is to manage them and adjust your position. It is possible for management and position sizes to make or break such trades. They are likely to be profitable in a bear market. However, it should be used with caution.
Option 5: Keep your head while others are losing
Unless you’re a free climber like Alex Honnald, you wouldn’t be attempting to climb any cliff without good safety equipment. The same goes for crypto investing. What safety equipment? A cash-held emergency fund is a good starting point. This fund should cover approximately six months of basic living expenses and should not be used for returns. Additionally, this should never be borrowed or wagered on.
You should also have a fund held in similar terms to pay for any major expenses that may arise. This fund will give you an extra buffer of support so you can keep your emergency fund intact and only use it for real emergencies.
Finally, recessions are difficult. So remember to take care of your mental health. If you’re worrying about your portfolio or constantly checking prices, then you’re making yourself less healthy and less likely to make good decisions when the time comes. So go out, turn off the computer and play. Improve your life outside of your investing and trading activities. If you don’t do this, where will you go when you finally succeed?
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