Panos

Many people have been constantly asking me “what to do to prepare for a bear market”? And here I am to give my answer from a long-term investor and holder perspective, and as someone who first of all supports the vision of crypto and believes in the technology. I can't speak as a trader or short-term investor, because I am not any of these and I am not planning to become one. If you are a trader or you are trying to trade between market cycles and time the market, then this post is not for you. But if you are a long term investor, focusing on the long-term success of solid crypto projects and building wealth, and you want to prepare for the next bear cycle in the best way possible, then this is for you.

You must first understand that each individual is different, has different risk tolerance and goals, but this should apply to most long-term investors that care about building wealth, passive income streams and big profits over the long run.

Foundational technology breakthroughs carry both great opportunity and great uncertainty, the two key ingredients in the recipe for cycles. Ever since Bitcoin started trading about 11 years ago, people have learned just how volatile the crypto market can be. Over the years, bull and bear trends have constantly replaced each other, with no way of predicting them or preventing them. Even the smallest detail has been enough to change the situation completely. The sentiment of the market can change quickly, from holding, “going to the moon” and “this is a revolutionary technology” to “there is no hope for this market anymore”, “the crypto market is a scam”, “nobody cares about the technology, I just want my money back and exit” and endless panicking. We saw that in 2018. Even the strongest hands and most disciplined investors doubted themselves.

Let's be clear: Market crashes and bear markets are just a part of investing. Cycles are neither good nor bad, they are simply natural. Peak euphoria provides the opportunity for the world to dream about the future. Rock-bottom despair forces practicality and clarity. When things are good, they're never as good as they seem and when things are bad, they're never as bad as they seem. It's part of the game and you can do nothing to prevent it, but you can do things to prepare.

First of all and most importantly, you need to prepare yourself psychologically and understand that this is normal, it happens in every market and there are no reasons to feel overwhelmed by your emotions. Seeing your account in the red day after day for months can take a tremendous mental and emotional toll. You will likely feel the entire spectrum of negative emotions, from anger to sadness to embarrassment to shame. There’s nothing wrong with feeling these emotions. BUT, what you want to avoid is making trades based on these emotions. Investing should be a cold, calculated process based on logic, reason and fundamentals, not an emotional Band-Aid to make you feel better after a bad day in the market.

While it’s impossible to predict the future, past cycles give us some sense of what to be ready for. They can help us imagine the potential aftermath of after the wave of euphoria. And they serve as a reminder that bouts of uncertainty and volatility are to be expected given the scale of the opportunity for crypto, a technology that could transform not just money, but the financial system and basically the whole world.

Is this time different? Yes and no. Yes, because the market is now more mature, there is more serious adoption, mainly institutional adoption, there are more serious projects, more utility, usage and problem solving. Future cycles will most probably look different than past cycles. We may not even be in another cycle. We could keep growing as a market for the next 1-2 years at least. But markets do tend to go through cycles, with key elements that generally repeat themselves. To prepare for future scenarios, it’s worth understanding the elements of past cycles:

1. They are highly emotional. People quickly gain or lose large sums of money and have a hard time handling either, completely rationally. Compounding this effect, periods of “hype” have historically been short, while “normal/down” periods have been much longer.

2. They attract massive public attention. The mainstream media starts sharing about crypto . Family members ask you to explain what's going on. Friends press for investment advice. There is euphoria everywhere.

3. They strengthen the ecosystem. Crypto have exited every cycle stronger than it entered. This is true across all key metrics: entrepreneurial and developer activity, academic research, infrastructural maturity, corporate adoption, public awareness and finally prices. Zooming out, cycles can be reframed as volatile periods around a relatively consistent adoption curve.

4. They wash out weak companies and projects. While in a bull market, everything seems like a success, poor fundamentals and flawed strategies are ruthlessly exposed in the bear markets. Many fail to survive. Those who do have the advantage of having built while others perished, typically thrive in the next cycles.

So... what to do?

When it comes to good projects with good fundaments, do... nothing! I have talked countless times about this. Best ever long term investment strategy is to just hold and keep accumulating and DCA. Market crashed? Either do nothing and hold or buy more. Most of the times it pays to stay calm and do nothing. Fluctuations are natural and If you make good investments, manage them well and stick with the long-term mindset, you will do better than the majority who will panic or try to trade between the cycles and catch the tops and bottoms. Market crashes are the best opportunity ever to invest and accumulate your favourite projects.

Alternative? When you see parabolic moves, you can simply cash out a portion of your crypto, like 10-20% and just hold on stablecoins, and if the market drops, you can re-enter. But still it's risky and if you are not experienced and you haven't learned how to control your emotions and leave them completely out of investing, then there is a big chance that you will lose money. So, you choose.

Now for short term investments and gamble coins, of course you must have set some exit points, so if you see parabolic moves and you are in good profit, do not hesitate. Sell and either put them directly on the good projects, or a wait for a dip and then buy the good projects.

Generally, you need to be prepared more psychologically and learn how to be disciplined, have a good investor mindset and focus on the long term and the big picture. It doesn't matter what happens in the short term and if the market crashes or if we enter a bear market. In 5-10 years the market will be exponentially higher. Not to mention that you can simply hold and keep earning passive income and accumulate more and more, either it's a bear or bull cycle. In the DeFi world, there are endless opportunities to earn both passive and active income. It's all about generational wealth. Be disciplined, have a good plan and focus on the big picture. Cryptocurrencies are much more than a simple investment, so do not treat them like that. They are a whole new economy and financial world with countless use cases, and they provide financial and technological freedom. You can also use the technology to benefit as an individual in many ways. Crypto and blockchain are the evolution of money and finance, they are here to stay and they are already changing the world. If the technology succeeds, you will make money as well. You are an early adopter and investor in the biggest technological breakthrough of the century. Enjoy the journey.

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