Has Crypto Winter Set in? My Bear Market Strategy!

It’s not May, it is freaking Mayhem. Okay. May not be good time to crack jokes when your portfolio is down by almost 60%. On top of that, there is no signs of recovery either. The OG BTC is expected form lower lows and your plans to the moons and lambos have taken a serious hit. While you ask yourself about what is the point of all this, let us try to figure out why it all happened and what is the best way out here. Let us get started.

Drop it Like it’s Hot?

Before you start to console yourself by thinking there’s no way you could have predicted a war and a pandemic, there were indeed a lot of cues to predict this. With that being said, of course there was no way for any one of us to time it. Had there been one, I won’t have been blogging about it.

But yes, this epic crash was on the charts for a while. Please note that I am not going to consider technical reasons for it, but the fundamentals are mentioned below:

A. Global Meltdown:

Yes. Degens aren’t the only people who are bleeding right now. Indian stock markets have tumbled by 12.5% from their 52w high in the past 5 trading sessions. S&P 500 has also slipped by a 15%.

Which means when the well established, regulated markets are under pressure, you can expect a roller coaster ride from their notorious volatile cousin, crypto.

B. The War:

Fuck Putin. Of course there’s no way to predict a war but the repercussions of the same started creeping in sooner than later. There were rumours about Rubble being pegged with Gold, USD crashing and what not. Amidst this uncertainty, we also experienced shortage of the goods and commodities which were dependent on Russia or Ukraine.

C. The Fed FUD:

40% of the total dollars in existence were printed in the last 2 years. So when inflation began to jump uncontrollably, fed had to intervene by tweaking the interest rates. And often this is not considered as a good news for the markets. If you are willing to explore the correlation between inflation and interest rates, head over to this detailed blogpost here.

D. Covid:

I just love how we can now attribute most of our problems to Covid. But this time around, China had a zero tolerance policy towards a new strain and it further led to supply chain woes.

At this point, it is an added pressure to an already delicate economy.

E. The LUNA Debacle:

This is something very specific to Crypto market. For the uninitiated, Terra ecosystem has been creating ripples in the market for a while now. So much so that their stablecoin $UST also joined the top 10 club by market cap.

People were pumping their dollars to buy $UST as it offered a yield of ~20% when staked on Anchor Protocol (another Terra ecosystem product).

Oversimplifying the fiasco, someone started to sell their UST in crazy amounts. UST, which is an algorithmically maintained stablecoin was supposed to stay at $1. However, with this mass selloff, it lost its peg and came down to $0.98. At this point LFG or Luna Foundation Guard sold off some of the assets that were backing up this ecosystem to reattain the peg.

While they were successful initially, the depeg further worsened due to an alleged attack. This led $LUNA to fall at 60 cents. Further triggering the fears of retail investors, they also got into a mass sell off which drove down the price to 24 cents at one point.

Now the way system works is that peg is maintained by burning or issuing $LUNA. Even $LUNA started crashing in this entire chaos bringing its price to less than a dollar from a mighty $80 just a week ago.

Not My Problem Right?

Now you might be wondering, what is the problem here? Protocols come and go every day. Why is this impacting the entire market. As it turns out, $LUNA and $UST pair was a super successful experiment in the direction of Algorithmic, non USD backed stablecoins. Entire industry was rooting for them.

But when stablecoins aren’t stable, people lose trust in the ecosystem completely. To make matters worse, LFG sold off BTC reserves at a loss to reattain the peg.

Okay! What’s Next?

Now that you understood a cocktail of reasons that led to where we are today, let us not give up. The first thing that you must understand is that billionaires are not made in a bull run. So chin up and think of the next steps from here on. Buy the dip? Well. No. Here’s what I am doing instead:

A. Limit Order is Your Friend:

I am no trend analyst. However, if you stick around, there are enough sources that will tell you some strong support levels. For now, I heard that for BTC it was $24.5K (because it breached $29K).

I had simply put a buy order at $29.5K. When that order got executed, BTC went up to $31K where I had another sell order already in place.

I have set similar trades for $24.5K as well. So if you are willing to take a punt, put in these limit orders (No financial advice) and just wait.

My end game is to accumulate the BTC near to bottom (hopefully) and then forget about it. If it dies, well, I am with it. But if it survives, it is going to be one hell of a story.

B. Altcoins Can Wait:

When everything is tumbling down, it may look like a lucrative bet to invest in multiple coins. But always remember that ones with strong fundamentals bounce back fastest. So for this bear run, I am sticking to BTC and ETH. Two coins that have stood against the test of time and fortune.

C. RCA:

Don’t go all in like there’s no tomorrow. Rupee cost averaging is a great technique to invest slowly while you carefully gauge the environment. One of the best ways to RCA is automate it and forget about it.

I would recommend that you explore CoinDCX’s CIP. CIP or crypto investment plan helps you to automate your investments in popular tokens. This CIP will deduct money from your CoinDCX wallet at a fixed frequency. And therefore, saving you from the hassle of timing the market.

D. Earn:

At this point, I am not planning to sell any of my holdings. Not because I have diamond hands, but it would be foolish to do so at this point. Therefore, I have locked my crypto in CoinDCX earn program that is giving me a fixed interest on the holdings. For eg. USDC, a stablecoin gives you 9.5% interest. BTC gives you 4.75%.

Logic is pretty clear. Why only hold when you can earn on top of it? These lent cryptos can be released any time as per your requirement. There is no penalty involved but you obviously would lose out on some interest.

And Finally:

I would suggest each one of you to not panic. I have been hearing some dreadful news around people committing suicide due to losing funds in LUNA fiasco. Please invest only what you can afford to lose. After all, the biggest bet you have taken is on your self.

Got questions? Hit me up

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Until next time..

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‘This blog post is part of the blog challenge ‘Blogaberry Dazzle’ hosted by Cindy D’Silva and Noor Anand Chawla.’