We are living in the modern world which is complex, and fast and everything is business, and finance is business. People in the finance business make money either way. Believe me, it’s very complex. Whether you are in crypto investment or a stock market investor or an investor in any assets, often there are times we need to realize there are things that are not under our control.
The last few months have been crazy and people were optimistic that the market will recover. An experienced investor has always been saying that the market is expensive and it will go down slowly and many of them have booked profit when the market was at its peak. The slow correction in the market has caused panic among the retail investors and the panic intensified with a lot of uncertainty in the world. S&P 500 has alone crashed around 16.5% and Nasdaq has been smashed to 26% in this year alone. Not only that many growth stocks are more than 50% down from their highs. Even large companies’ stocks like Microsoft, Apple, Google are getting crushed. People fear losing their hard-earned money, so they panic, and sell, and eventually, this fear spreads, and more and more people start selling, and this ripple effect is causing more drops in the market. I feel the panic has spread, the free fall of every asset has already started. One event is fueling the other event and it goes on till things calm down and the turnaround will happen once a real wealthy buyer steps in(not the short-term trader for creating a dead cat bounce).
So the crypto market is not alone. The crypto crash is caused by other factors in the financial market and caused by many factors like Ukraine war, inflation, Fed policy, etc. Of course, the volatility in the crypto market is very high and this is mainly because we don’t have any central authority to monitor and control and this is a cost we need to pay in a decentralized market. But often the long-term benefits outweigh the short-term issues.
Hopefully, we are in the final phase and not many are affected by this hard sell. I would say if you had trusted the project and the fundamentals have not changed, add to the dip once the market stabilizes or do a dollar-cost averaging. Remember the biggest wealth transfer happens in the bear market. So eventually, when the market turns around, you will make more profit.
I am not giving any financial advice. I am just writing this article out on my experience. Do your own research.
So where do we invest during a bear market?
The entire financial market including crypto is in a bear market, I wouldn’t worry much about the downtrend. In fact, I am identifying good projects which will fetch me good returns in the future. I take this as an opportunity to invest. Typically I would invest in a good business that has got strong fundamental values, assets, cash flow, etc. Treat any crypto investment the same. The structure of the crypto entities and the terminologies might differ, but they should be also considered businesses. Treat them just like how you invest in companies. I think the biggest bull run of the crypto is yet to come. We are still in the early stage and this industry will evolve itself and will grow multifold.
When you want to invest in a project always do your homework and never trust a financial advisor. Before investing in any project ask yourself if the project solves any problems? Does it have a good team? Do they have any revenue source now or in the future? Are they well capitalized? Do they have future plan? Are they implementing the plans which they have already committed? Does the project have long-term growth? Do they have real users?
In the world of crypto, there are more Ponzi schemes than real projects. Never invest in any project if it doesn’t follow a set of criteria. Do not invest in a project if you do not understand.
Investment in the crypto space is more about technology understanding and validation. Seek advice on those fronts.
Diversify your investment
Allocate at least 5% of your funds for crypto investments and diversify the investment to a different project. Besides bitcoin and Ethereum shortlist the project from the top 50 projects. It’s easy to over diversify and miss out on the substantial gains from the good bull run. If you have limited funds to invest, keep strong criteria for investment.
NFT’s and Metaverse
Metaverse games are going to consume the internet generation and NFT which will be introduced in the gaming is going to eventually find a utility and add more value. A tremendous amount of value is going to be created in this sector. A project like Decentraland, Sandbox, and Engine has an early mover advantage and many new projects are also popping up. Never invest in NFT which doesn’t have any utility or is not associated with any good projects.
Conclusion
Keep your cash equivalents to invest in the bear market. Invest little by little and do not invest in FOMO(Fear of missing out) Your riskier investments will definitely get crushed. Do not make the situation worse by selling good projects under loss. Do your homework and wait for opportunities to knock on your door.
