Bear Market Buying Strategy
Bear Market Buying Strategy
- July 9, 2022
- Posted by: Indyk
There are multiple ways this can be approached depending on your current exposure to crypto, we shall cover a few scenarios…
If you are exposed to crypto and brought in near ATH of bull cycle, there is little point in selling positions now for pennies on the dollar, a sound strategy could be to hold and DCA in at lower prices to bring overall cost down so when prices once again rally you can look to hold for greater profits or exit earlier at breakeven and rotate into other assets.
Lets take Solana as an example ATH was circa $260, current price is approx 90% down around $25 and is a great entry to DCA, a possible route could be to allocate a set percentage of your pot to Solana, lets for argument sake take a figure of $1000, you could look to invest 20-25% at current price, then another 20-25% if another 50% drop occurs, this way you are DCA’ing at price points which will make a tangible difference to your overall investment entry.
You want to make your first DCA investment a minimum of 50% discount from your current entry positions
Pros – You are exposing yourself into assets cautiously & if the market reverses you are “In” and you can then look to DCA on the way up on pull-backs.
Not Holding Crypto
This may well be one of the most gruesome bear markets to date where many projects will be annihilated as we have seen with Luna/UST recently, the safest option if there is such a thing in the speculative market that is crypto is to DCA into Bluechip projects that have survived multiple bear markets and have been here for several years, these are the likes of BTC,LTC,XRP,ETH you do not necessarily have to like these projects, think of them as an ISA to secure and hold onto your money whilst the rollercoaster of the bear market plays out. The most dangerous option is to invest into ALTS at this stage, many will die, many will not fulfil their roadmaps, many will lose Venture Capital investment. You do not want to be buying a alt(s) over the next several months only to find that the project has been abandoned before the run of the next bull cycle.
Decide your risk tolerance & invest accordingly!!
You may want to diversify into the bluechips or go all in one one, the ones listed above all have their pro’s & cons, pros we have covered, the cons we shall recap now
BTC – Market leader, heavily correlated with USDT price manipulation, if for any reason USDT gets audited again and is found to not be dollar pegged 1:1 it is likely BTC will wipe out very hard,
ETH – Changing over from POW – POS, this has been lingering for a few years with delays but we are at the final stages now, if for any reason a fault occurs in the swap over a cascade of errors will like commence, which could cripple the blockchain and the price, there are many layer 1 blockchains ready to skip over and take ETH’s place in the food chain, there is an added risk factor that ETH could also be considered a security with the switch over to POS.
XRP – It is no big secret the issues that XRP is facing with the SEC court case, if XRP is deemed a security there is a real risk that the crypto could get abandoned by Ripple labs and a new crypto can be created to be deployed on the XRPLedger, the value lies in the Ripple company not the XRP product until a positive outcome occurs in the lawsuit outcome for Ripple labs.
LTC – Probably the riskiest of bluechips, Litecoin the silver to Bitcoins gold, this asset has been quietly plugging away in the background, using the same programming as the Bitcoin network its seen by many as the test-net for BTC with cheaper transaction fee’s, many tout that LTC is the the project to fulfil Bitcoins original ambitions of being a payment processing crypto, whilst Bitcoin transforms into the ‘store of wealth’ narrative. Many rival payment blockchains have emerged in recent years that surpass Litecoin in terms of TPS & fee’s
I currently have exposure to some very high risk altcoins which i aim to sell at the first opportunity at breakeven, i have doubts if they will survive – i am aiming to DCA in at extreme lows so i can reduce my breakeven cost on these assets and exit, if the market reverses now i am happy to hold and sell at breakeven at first opportunity, then recycle into other assets. In a nutshell i do not want to invest anymore capital unless it will make a significant difference to my overall entry cost.
I will be allocating my investment in approx a 70/30 ratio, between ALTS/BLUECHIPS this will be decided on what discount price entry i can get into the alts, but my hedge is to cycle into Bluechips as i know they have a high probability of being here during the next bull cycle as discussed, im still deliberating whether i will go into 1 bluechip or diversify amongst them all
The areas i want to see them drop into are the following before analysing in further detail at the time
Bitcoin – $13700 level as entry, $10000 – 10750 secondary,
(We have covered the significance of current level, if i had zero exposure i would likely have a 10% allocation entry around $18000 level)
Ethereum – $1200-1000 level as entry,
XRP – $0.32-0.25c level as entry,
Litecoin – $50-40 level as entry,
The cons of waiting for absolute rock bottoms prices are that price may never reach there and you get left out as the market reverses, in most cases the capitulation spikes are very short lived and markets can reverse leaving orders unfulfilled lingering in order books.
You have made it this far congratulations, you have rode out 90% of the market crash, now is the time to start changing the mindset to long term investment, mentally be prepared to invest and hold for 3-5 years before you reap the rewards of the labour you are about to undertake. It will be life changing if you can apply patience and stay vigilant pivoting when you need too if the market conditions state the need.
Key Recommendations when DCA’ing
Its wise to split your investment allocation into fifths or quarters
Eg 20% or 25% pots
DCA in at key levels, leaving 20/25% available just incase of catastrophe capitulations
Closing Rule – Never invest anything you cannot afford to lose
Disclaimer: None of this is financial advice