Turning The Tables On A Bear Market
Engaging The Bear
Bear markets have a way of taking the average investor by surprise. However, in hindsight, the warning signs are actually quite evident. Euphoria, greed, and predefined expectations work together to create a level of insensitivity to the market. The element of surprise is a bear market’s greatest weapon. An unsuspecting victim is, after all, the most vulnerable, and bear markets prey on the vulnerabilities of market participants.
However, what if you were able to see your attacker approaching, and instead of being an unsuspecting victim, made him your victim? In other words, a bear market is now no longer something to be feared, but rather something to be anticipated. This is the type of thinking that investors need to adopt if they are to flourish in a bear market, as opposed to being decimated. Essentially, turning the tables on a bear market, and ultimately utilizing it for profit.
This might sound too good to be true to those whose market skills do not extend beyond dollar-cost averaging. However, it’s not that difficult at all, provided you choose to apply a handful of alternative strategies. The average Crypto investor is far too one-dimensional, in that they are only able to interpret and envision gains via price appreciation. This is not only untrue but extremely limiting. Ultimately, robbing the unaware investor of potential gains.
Essentially, bear markets require buyers, in order to prevent an absolute collapse. However, it’s better to be part of the smaller percentage of investors who are actually benefiting from the effects of a bear market. It’s very much a case of the fool being servant to the wise. Knowledge, insight, understanding, and skill are what separate investors. Ultimately, your goal should be to enter this group of investors. Profitability takes care of itself, once you enter this grouping of traders and investors.
Investors who simply continue dollar-cost averaging into a bear market are unable to see the error in their ways. However, I am about to present a hypothetical case, in an attempt to dissolve this foolish behavior, and perhaps inspire some introspection. Let’s refer to the previous bull market as a point of reference, and make use of Cardano as an example. I am choosing a top-tier altcoin so as not to overstate my case.
A Superior Way
As opposed to hodling through a bear market, I choose to sell, once a topping out structure is in place, or I am satisfied with my gains. In the previous bull market, BTC topped out at approximately $69K. However, if we look to the charts for a confirmation of a reversal, we are able to ascertain that there was sufficient confluence at $46K. So, even if we sold at the $46K level, that would be sufficient.
Now, if we look at where ADA was trading during this time, we will find an average price of $1.30. The idea is to sell at this level. Remember, I am using a realistic approach, and not making use of the actual $69K top. That being said, I sold at the $65K level, which goes to show that selling at $46K was easily achievable. Altcoins usually collapse in excess of 90% in a bear market. However, to be safe, let’s use the 85% retracement level as the repurchase point.
You will note how generous I am in terms of providing a lot of leniency for the points of execution. Let’s say we had 10K ADA and sold them at $1.30. We would now have $13K and would look to repurchase at the 85% retracement level, which is $0.46. It’s interesting to note that ADA has already retraced below $0.25, revealing just how much play there actually is in incorporating such a strategy.
After repurchasing, we would now have 28.2K ADA, which is almost 3X the original figure. Furthermore, part (or all) of the $13K can also be used to short the market as it journies down to our predetermined entry price. Ultimately, increasing our ADA holdings even further. A hodler, on the other hand, loses value… and on top of that has to fork out additional capital in order to acquire more ADA. It’s not rocket science, holding through a bear market has zero benefits, except perhaps a tax benefit.
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Final Thoughts
By utilizing a strategy similar to this, a bear market becomes a profitable experience. A quick question: Why on earth would an investor not consider turning a losing scenario into a profitable scenario? This is precisely why smart money exits the market. Institutional investors might not know much about Crypto, but they understand profitability and cyclical behavior. Unlike the average retail investor, they also know how to implement that knowledge.
As always, this is not investment advice. However, it can definitely provide some food for thought and even spark a few ideas for the next bear market. As mentioned previously, I am looking to be even more aggressive in regard to shorting the next bear market. That’s it for this edition. Catch you in the next one, and remember, profitability is key!
Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.
