Upamanyu Acharya
Cryptocurrencies just got exhumed from the frantic grip of the 2014-2017 bear market last year. The trajectory for blockchain and distributed ledger technologies has only been upwards since then, but every once in a while we see a huge dip in this market. It’s not unheard of for the market to crash by 30-40% in the unregulated, volatile and comparatively low volume paradigm of cryptocurrencies. It’s hard not to do something when you see your portfolio dip by 60% in the course of a week, or lose thousands of dollars when you wake up from bed. So here’s five things that you should be doing!
5. Go outside, live your life, and forget that crypto exists
The biggest mistake people do is get consumed by the incessant candles of day trading. Doing trend analysis, taking part in pump and dumps or simply riding a wave for a few percent profit before exchanging it back (swing trading). While there are some experts who can do this sustainably, like any market, the algorithms (bots) set up to arbitrage and trade for low prices means the average investor doesn’t stand a chance.
In a bear market it might be best to keep your mind off cryptocurrencies, because the long term trajectory for this tech is only one direction – up. The minutiae of short term movements only matters if you’re not in this for the long haul.
4. Tether up and buy the dip
Tether (USDT) is a cryptocurrency whose function is to do just one thing – be worth a dollar. This is useful in the volatile world of cryptos, since you can exchange it at any time and be sure of its value. Sounds great, right? Well, Tether isn’t without its host of issues.
Tether is a project ran by the same people who run one of the largest exchanges in the world, Bitfinex. Almost every other day, hundreds of millions of Tether are printed. They aim to have a dollar reserve for all the Tether in circulation, but with a market cap of over $1.7 billion, does Bitfinex really have a billion dollar reserve lying around? Really makes you think…
Till Tether causes the cryptocurrency market to crash without hope of recovery in a hellfire worse than Mt. Gox, you can use it as a temporary storage of wealth in between the wild swings of cryptocurrencies. Sell off your coins and buy Tether, wait for the market to dip some more and then buy back in. Most large exchanges have a USDT pairing for popular cryptocurrencies (Binance has the most volume). This is an easy way to increase the number of coins you own in a bear market without moving out of exchanges to fiat and paying high transaction fees.
3. Convert your altcoins to blue chip cryptos
Blue chip cryptocurrencies are the ones that have been around for a while, are well established with long term roadmaps and have high market liquidity. Another way to phrase it would be that these coins are very safe cryptocurrencies, albeit in one of the most volatile and risky markets of our generation.
Check out my article on 5 Safest Cryptocurrency Bets for 2018.
Parking your money in stable coins like Monero, Ethereum and NEO will give you better chances of surviving a devastating dip or crash. Remember, the cryptocurrency market is bullish in the long term with some short term peaks and troughs. The stability that these high market cap, high volume cryptocurrencies provides can be used to weather the storm.
2. Buy some great coins at discount
We’ve all heard Warren Buffet’s famous quote: ‘Be Fearful When Others Are Greedy and Greedy When Others Are Fearful’.
Although Mr. Buffet doesn’t believe in cryptocurrencies, and he’s right, the market is definitely in a bubble (I mean would any of the startups doing ICOs right now be able to raise tens of millions of dollars if they weren’t cryptocurrencies?), his basic advice still rings true. A bear market is the best time to buy some coins for cheap. Currently, the entire cryptocurrency world moves to the whim and fancy of Bitcoin – when Bitcoin drops, so does every other coin. You can use automated trade alerts live so you don’t miss out on market movements or financial events. But the fundamentals of many of these great projects don’t change. Some of the most promising cryptocurrencies have long term visions which won’t materialise for many months to come, so a bear market is the best time to buy.
1. Post pink wojaks and Bogdanoff memes
No, just kidding.
1. Brush up on your research and project fundamentals
Even in a bear market, blockchain and smart contract projects are going to continue to revolutionize technology. Its interaction with automation, machine learning and artificial intelligence will enable businesses to bring more value with less resources. This is the direction the market is moving towards. Trustless decentralised applications, cheap transfer of value and bridging the global marketplace are just a few blockchain buzzwords that are literally taking place right now. Who knows what kind of cryptocurrency buzzwords I’ll be writing about 2-3 years from now?
Fact is, innovation doesn’t wait for markets to turn green. Ethereum was $1 in January 2015, back when Bitcoin’s entire userbase was less than 1 million wallets and Mt. Gox had killed Bitcoin from $1000 to $250. While traders, analysts and investors continued to chase the next pump, innovative projects proceeded to develop at the same time.
When trading candles turn red, the thousands of developers behind cryptocurrency projects don’t just quit their jobs. Which is why it’s always important to keep researching; read whitepapers, join communities and be on the lookout for great projects. Here are 10 things you should know that will help you do cryptocurrency research yourself.
