Beginner's Bear Market Guide - Market Meditations

Beginner’s Bear Market Guide

Market Meditations | June 7, 2022

? How To Survive Thrive In a Bear Market

Everyone keeps telling you to survive the bear market. We’ve decided to make a guide on how to thrive in the bear market.

? First, Plan Your Investments

Thriving in a bear market becomes easier when you have a plan. Making a plan involves deciding your risk profile, and then considering options accordingly.

Considering these three variables sets you up for success: Beta (risk), altcoin exposure, and yield opportunities.

❗TIP: Beta refers to the measurement of a token’s volatility compared to the volatility of the overall market. BTC is a lower beta asset while lower market cap altcoins are higher beta assets.

The sample portfolios below are for educational purposes. Do not copy them.

Lower Risk Profile: 

  • Low Risk (reward potential in line with the overall market).
  • We split our crypto exposure between the safest assets (BTC, ETH) and stablecoins.
  • Stablecoins are deposited on a low-risk platform generating a low yield.

Higher Risk Profile: 

  • More risk via higher beta assets.
  • We split our altcoin exposure between layer 1s (ETH, AVAX, ATOM) and our native exchange token (FTT).
  • Smaller stablecoin exposure.
  • Willing to invest in high-risk platforms for a high yield return.

The two different approaches above yield different results. High risk can equal high reward. For most, safer portfolios will do better. Craft your plan to suit your risk tolerance.

Regardless of risk-exposure level, bear markets offer more downtime. This time is best spent investing in yourself. 

? Next, Invest in Yourself

Now that you have a plan in mind, use the downtime to learn new skills and craft your edge. Three types of skills offer a big return on investment:

1) Timeless income skills

Skills able to generate income regardless of market conditions. Technical analysis is a great example as it’s a skill that can be carried over to different markets.

2) Timeless investing skills

Skills that will help you to maintain and grow your money regardless of market conditions. The ultimate goal of these skills is to develop a useful bias. Now could be an opportune time to:

  • Study investment strategies such as Dollar Cost Averaging (DCA). Instead of purchasing a large amount of BTC when you feel like it or trying to guess when to enter, decide that you will purchase a set amount at a set interval. We have set up this scenario in the graphic below using actual BTC prices.

Consider you decide you want to buy $600 worth of BTC on 1st January.

Scenario 1: Without DCA. It’s 1st January 2022. New year, new you. You decide this is a great entry and buy $600 worth of BTC. You have purchased all in one, therefore your average purchase price is $46,230.

Scenario 2: With DCA. You decided to DCA into buying $600. That is, you decide you will purchase a set amount ($100) for a set interval (on the 1st of the month for 6 months). We have circled the exact purchase prices in the chart above. You have purchased at multiple entry points and therefore your average purchase price is $39,677.58 (refer to the table below to see how this was calculated).

Another way to visually see this is to note how the blue-dashed line is trending downwards on average. This conveys that DCA drives down the average price of BTC purchases.

❗TIP: Remember, you want to buy low and sell high. Therefore, you only stand to benefit from buying BTC at lower prices through a DCA strategy.

For more guidance, refer to our DCA tutorial.

  • Learn how to use on-chain data. Simply sign up for a Nansen account and consider the wealth of free tutorials we have for how to use Nansen to make a profit in NFTs, Defi, Yield Farming, and much more. Our tutorials are available here under the ‘Nansen’ section. Nansen also gives you the opportunity to observe Smart Money. These are the biggest crypto wallets and arguably, some of the brightest minds. They know how to thrive in a bear market. So, they are good people to monitor and track for bear market opportunities.
  • Create a process for investing in crypto projects. In a bear market, it will take more for crypto projects to perform well. It can still happen but compared to a bull market where most projects ‘moon’, you need to be able to separate the wheat from the chaff. Start learning how to identify hot projects with our ‘How to Research New Projects’ tutorial and dive deep into our ‘Tokenomics 101’ guide.

3) Timeless discipline skills

Techniques and practices that will prime you for growth and consistency. Check out KoroushAK’s ‘6 Most Important Habits’ for actionable advice on how to optimise your daily routine.

Serious wealth can be created in bear markets. You just need to know where to start.

Now you do. 

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🧘‍♂️Beginner’s Bear Market Guide

Market Meditations | June 7, 2022

Dear Meditators

Everyone keeps telling you to survive the bear market.

We’ve decided to make a guide on how to thrive in the bear market.

Today’s Meditations: 

  • Beginner’s Bear Market Guide
  • Reuters Binance Rumours
  • The Decline of Axie Infinity

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? How To Survive Thrive In a Bear Market

Everyone keeps telling you to survive the bear market. We’ve decided to make a guide on how to thrive in the bear market.

? First, Plan Your Investments

Thriving in a bear market becomes easier when you have a plan. Making a plan involves deciding your risk profile, and then considering options accordingly.

Considering these three variables sets you up for success: Beta (risk), altcoin exposure, and yield opportunities.

❗TIP: Beta refers to the measurement of a token’s volatility compared to the volatility of the overall market. BTC is a lower beta asset while lower market cap altcoins are higher beta assets.

The sample portfolios below are for educational purposes. Do not copy them.

Lower Risk Profile: 

  • Low Risk (reward potential in line with the overall market).
  • We split our crypto exposure between the safest assets (BTC, ETH) and stablecoins.
  • Stablecoins are deposited on a low-risk platform generating a low yield.

Higher Risk Profile: 

  • More risk via higher beta assets.
  • We split our altcoin exposure between layer 1s (ETH, AVAX, ATOM) and our native exchange token (FTT).
  • Smaller stablecoin exposure.
  • Willing to invest in high-risk platforms for a high yield return.

The two different approaches above yield different results. High risk can equal high reward. For most, safer portfolios will do better. Craft your plan to suit your risk tolerance.

Regardless of risk-exposure level, bear markets offer more downtime. This time is best spent investing in yourself. 

? Next, Invest in Yourself

Now that you have a plan in mind, use the downtime to learn new skills and craft your edge. Three types of skills offer a big return on investment:

1) Timeless income skills

Skills able to generate income regardless of market conditions. Technical analysis is a great example as it’s a skill that can be carried over to different markets.

2) Timeless investing skills

Skills that will help you to maintain and grow your money regardless of market conditions. The ultimate goal of these skills is to develop a useful bias. Now could be an opportune time to:

  • Study investment strategies such as Dollar Cost Averaging (DCA). Instead of purchasing a large amount of BTC when you feel like it or trying to guess when to enter, decide that you will purchase a set amount at a set interval. We have set up this scenario in the graphic below using actual BTC prices.

Consider you decide you want to buy $600 worth of BTC on 1st January.

Scenario 1: Without DCA. It’s 1st January 2022. New year, new you. You decide this is a great entry and buy $600 worth of BTC. You have purchased all in one, therefore your average purchase price is $46,230.

Scenario 2: With DCA. You decided to DCA into buying $600. That is, you decide you will purchase a set amount ($100) for a set interval (on the 1st of the month for 6 months). We have circled the exact purchase prices in the chart above. You have purchased at multiple entry points and therefore your average purchase price is $39,677.58 (refer to the table below to see how this was calculated).

Another way to visually see this is to note how the blue-dashed line is trending downwards on average. This conveys that DCA drives down the average price of BTC purchases.

❗TIP: Remember, you want to buy low and sell high. Therefore, you only stand to benefit from buying BTC at lower prices through a DCA strategy.

For more guidance, refer to our DCA tutorial.

  • Learn how to use on-chain data. Simply sign up for a Nansen account and consider the wealth of free tutorials we have for how to use Nansen to make a profit in NFTs, Defi, Yield Farming, and much more. Our tutorials are available here under the ‘Nansen’ section. Nansen also gives you the opportunity to observe Smart Money. These are the biggest crypto wallets and arguably, some of the brightest minds. They know how to thrive in a bear market. So, they are good people to monitor and track for bear market opportunities.
  • Create a process for investing in crypto projects. In a bear market, it will take more for crypto projects to perform well. It can still happen but compared to a bull market where most projects ‘moon’, you need to be able to separate the wheat from the chaff. Start learning how to identify hot projects with our ‘How to Research New Projects’ tutorial and dive deep into our ‘Tokenomics 101’ guide.

3) Timeless discipline skills

Techniques and practices that will prime you for growth and consistency. Check out KoroushAK’s ‘6 Most Important Habits’ for actionable advice on how to optimise your daily routine.

Serious wealth can be created in bear markets. You just need to know where to start.

Now you do. 

For more insights and information that can help you build wealth in bull, bear, and crab markets, sign up for our free daily newsletter. 

? Laundry Day

Reuters released a report yesterday claiming that Binance had allowed at least $2.35 billion of illicit funds to be laundered via their services over a five year period. Potentially tipped off to the publication of this report, Binance uploaded a blog post last week highlighting how they are actually fighting organized crime and protecting users.

  • The Reuters’ report accused Binance of:
    • Allowing anonymous account creation, where an encrypted email was sufficient to move funds through the platform.
    • Having weak Anti-Money Laundering (AML) checks, despite concerns flagged by senior staff.
    • Being uncooperative with law enforcement, initially declining to share information with Slovakian police after the Eterbase hack.
  • Other specific activities highlighted in the report included Binance-facilitated transactions for the darknet marketplace Hydra and the North Korean hacking group Lazarus.
  • Conversion of funds to Monero, a privacy coin that anonymises the sender, was a popular approach for launderers.
  • Two blockchain investigation companies, Chainalysis and Crystal Blockchain, were involved in tracking the transactions and building an estimate of illegal activity.

Binance dismissed the estimate as overblown, pointing the finger back at traditional bank money laundering and saying that blockchain actually helps with traceability. They also said that they were building “the most sophisticated cyber forensics team on the planet” and were seeking to “further improve our ability to detect illegal crypto activity on our platform”.

For more information on privacy coins, check out our article on Monero here.

? The Decline of Axie Infinity 

Axie Infinity was the poster child for last year’s blockchain gaming boom. In October 2021, Sky Mavis, the creator of Axie, raised $152 million in a Series B funding round led by Andreessen Horowitz (a16z), valuing the project near $3 billion.

However, it is looking gloomy for the once darling of the P2E world as Axie has been on a steady decline since November 2021.

  • According to Dune Analytics, new monthly users have fallen from 48,000 unique users to around 5,000 per month, approximately a 90% decrease between August 2021 and May 2022.
  • Understandably, the daily sales volume has followed the same trajectory as new users. According to CryptoSlam, total sales volume in US dollars ($) peaked at $754 million in November 2021 compared to $7.09 million in May 2022.
  • This has meant that Axie Infinity’s revenue generation has begun to slow down. For the first time since February 2021, Axie Infinity has generated less than $1 million in revenue.

Axie Infinity generates most of its revenue from trading and breeding fees. So naturally, as user traction has slowed down, these actions have reduced.

Why has Axie struggled to continue its growth trajectory? 

  • Flawed tokenomics of both Axies in-game tokens AXS and SLP have made it near impossible for Sky Marvin to continue the game’s rapid growth.
  • In particular, the infinite supply of the SLP utility token caused high inflation levels, causing the token to lose almost 99% of its value since July 2021.

This reduced the economic incentive for players to continue using the game, which was the main driver to users due to the simple gameplay mechanics.

? Watch

? Explore 

  • Nansen to make a profit in NFTs, Defi, Yield Farming, and much more

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??‍♂️✍️ Stories in this newsletter were written by Isambard FA, Kai.A, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Ellen B.

Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.

Disclosure. Some of the links we’ve included are affiliate, they give you rewards and discounts and earn us a commission. Additionally, the Market Meditator writers hold crypto assets. See our investment disclosures here.

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