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The Wolf Den #491 - How To Survive A Bear Market

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May 3 · Issue #491 · View online
The Wolf Den Crypto Newsletter
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Bear markets are tough. They are designed to shake you out of your positions so that a more savvy investor can accumulate at a better price. Or worse, they flush out some of your coins into the abyss, never to return. If you have been in crypto for a while, you’ve likely experienced this.
I drafted my current top 5 tips to survive a bear market. The foundation for building wealth starts with decision-making at the bottom.
Fail To Prepare, Prepare To Fail
Everyone needs a plan for a bear market, that’s what this intro is about. If your plan is to just wing it, you have already failed. Some plans are simple, like to just HODL and do nothing else. This is perfectly fine and is recommended for most investors. Beyond HODLing, there are countless other ways you can take a stab at a bear market. Is your expertise in rebalancing? Dollar-cost averaging? Gem hunting? Shorting? Staking? Whatever it is, become an expert at it and stick to it. Good fortune favors those that are prepared and patient. The bear market is not a time to learn crypto, it’s your time to show what you know.
Look Away And Don’t Look Back
This advice is for your mental sanity and clarity. For most investors, it makes sense to ignore the bear market until it passes. In a practical sense, this means moving your coins to cold storage, deleting your tracker app, and turning off the news. To execute this strategy, you need high confidence in your bags. A happy medium is doing your best to ignore FUD as it comes and remember why you purchased crypto in the first place. If you believe that Bitcoin is a hedge against inflation or that Ethereum is the money behind the world’s most programmable blockchain, then stick to that narrative. Value has nothing to do with price. Protect your conviction.
Stake It Till You Make It
Staking isn’t for everyone, as it’s sort of like putting a ring on your long-term holds. Staking works differently depending on the coin and platform and can be a great strategy to fight off declining value. There are a lot of decisions to be made when it comes to staking. First and foremost you need to assess your level of conviction and willingness to hold. If you are ready to stake, you’ll need to consider what platform works best for your risk tolerance and if you wish to compound your rewards. The main options to pick from are centralized staking, direct staking, synthetics, or yield farming. Centralized staking is suited for investors with a lower risk tolerance and is a good place to start. The passive income from staking can be a lifesaver. Use it to pay bills or stash some cash for a dip. Every penny counts.
Find Shelter In Strength
Bear markets are not a good time to get cute and risk losing it all. If you are deploying a dollar-cost averaging strategy, it’s best to buy only the strongest coins i.e. Bitcoin or Ethereum. During most bear markets, the majors are susceptible to +80% drops and alts are susceptible to +90% or more. The difference between recovering from an 80% drop and a 90% drop is huge. Take two coins that are worth $100. If coin A drops 80% to $20, it needs a 5x to recover. If coin B drops 90% to $10, it needs a 10x to recover. It becomes exponentially harder to recover from just a few more percentage points.
Stash Some Cash
If all of the other steps were how to survive a bear market, this one is how to thrive. Bear markets are the reason you keep cash on hand. Without cash, your hands are tied. An even worse situation is being the investor that has a strong portfolio who is forced to sell because all of their savings are in crypto. Cash is your weapon against a crashing market. As assets fall, your cash becomes more valuable. Yes, inflation is real and your cash is losing value, but falling assets will always outpace the dropping value of your dollar. In the end, successful investing is really just about being on the right side of things and sometimes that means being cash-heavy. Just keeping 10%-15% of your portfolio in cash is a game-changer. Don’t be left out when big opportunities present themselves.
Good luck, we are all in this together.
In This Issue:
  1. How To Survive A Bear Market
  2. Bitcoin Thoughts And Analysis
  3. Altcoin Charts
  4. Anchoring Bias
  5. Tesla Still Believes In Bitcoin
  6. VanEck Prepares To Launch NFTs
  7. My Recommended Platforms And Tools
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Bitcoin Thoughts And Analysis
DAILY CHART
DAILY CHART
Little has changed since yesterday, Bitcoin remains in a descending wedge, bouncing off of ascending support with a higher low since the bottom around $33,000. $39,218 is the first resistance to watch.
Bullish divergence is still valid, price is still in a clear descending wedge. My only concern here is that RSI has not made the trip to oversold yet, which always happens eventually.
Altcoin Charts
I do NOT share signals in this section. I share setups and charts that I am watching, in an effort to help show you how I view a chart and what criteria would be necessary for me to consider taking a trade. NEVER blindly buy something because it is listed in a newsletter or posted on twitter. You need to have a plan when you enter a trade. These are just ideas, and are almost always “if, then” scenarios. If a certain set of things happen, then I would consider a trade.
ETH/BTC
Ethereum’s performance against Bitcoin is often a weathervane for the entire altcoin market, so it is worth revisiting regularly.
As you can see, ETH is currently forming a descending wedge after a nice move up, which is considered a form of bullish consolidation. Further, price managed to break back above both the 50 and 200 MAs yesterday, as they are about to perform a golden cross. MA crosses are usually a lagging indicator and I do not give them much weight. In this case it is at least notable, because price is right at both MAs as support. which is usually when we see an actual reaction, if the cross happens.
If ETH can hold those MAs as support and break out of the dsecending wedge to the upside, then altcoins could see a period of relief or outperformance. I will be watching this.
Anchoring Bias
This is the kiss of death for trend traders. Generally speaking, the anchoring bias is simply a heavy reliance on a reference point or our initial understanding. Holding on to this bias means we are unable to update our plans or predictions, skewing our judgment. For many traders, this is the belief that the future will continue to look like the present or the present will look like the past.
In other words, traders fail to recognize that a trend is coming to an end and anchor themselves to a fallible set of beliefs. This could come in the form of holding a dying asset or continuing to purchase an asset that is only headed down. This person is anchored to an old belief that the asset is valuable. Anyone who is continuing to dollar cost average into weak altcoins right now should be wary of this bias.
Tesla Still Believes In Bitcoin
Tesla ‘Believes in the Potential of Digital Assets,’ SEC Filing Reveals
As per a required SEC report, Tesla said the following about Bitcoin and digital assets.
We believe in the long-term potential of digital assets both as an investment and also as a liquid alternative to cash. As with any investment and consistent with how we manage fiat-based cash and cash-equivalent accounts, we may increase or decrease our holdings of digital assets at any time based on the needs of the business and our view of market and environmental conditions. We believe in the long-term potential of digital assets both as an investment and also as a liquid alternative to cash.
Tesla has diamond hands. They are here to stay.
VanEck Prepares To Launch NFTs
VanEck to Launch 1,000 Community NFTs That Provide Exclusive Access To Crypto Research and Event Invites - Ethereum World News
In 2 days, VanEck will make their first foray into the NFT space. The 1,000 NFT series is designed to offer holders unique access to educational content, advanced research, and in-person events. The project centers around a fictional character named Hammy who lives in the metaverse, inspired by Alexander Hamilton. If you want to own one of these, you can find the signup link HERE.
As a heads up, VanEck designed this project for utility, not for resale.
You must not attempt to obtain an NFT from VanEck if you view it as an investment. They have no value and are not intended by VanEck to ever have any value. … You must not attempt to obtain an NFT from VanEck if you plan to sell or transfer it.
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Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to “Buy,” “Sell,” or “Hold” an investment.
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