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The Crypto Bear Market: Why You Should Embrace It, and How to Profit

CryptoWhale
CryptoWhale
“Bear markets make people a lot of money, they just don’t know it at the time.”
For some people looking at their cryptocurrency portfolios right now, this quote, by Shelby Davis, couldn’t seem further from the truth.
But, the truth is, investing, and even trading has never been about “right now.” There is an ebb and flow nature of all things in life, the financial markets are far from excluded.
In 2020, we saw Bitcoin surge over 500% from its lows after the March 2020 flash crash. This huge growth was almost entirely caused by Tether, which is a fraudulent Chinese firm that has a huge influence on the price of BTC & alts.
In 2021, the growth slowed down significantly. But that didn’t stop maximalists and moon boys like Michael Saylor to take advantage of inexperienced retail investors by urging them to mortgage their houses, sell their kidneys, and go all-in. We also witnessed dictators such as Nayib Bukele invest, and subsequently lose, millions of his citizen’s funds by recklessly adopting Bitcoin as legal tender.
Since Bitcoin hit $64,000, I’ve been urging my followers to slowly take profits, and be cautious about the markets. It was extremely clear that we’re in a mania bubble fueled by fraud, and greed. This isn’t sustainable at all.
In 2022, the markets have tanked significantly. We’re down now over 50% from the all-time highs and fear is slowly starting to consume this space. But the fear has barely even begun yet, in my opinion. It will take several more months before we witness the true wrath of this bear market.
This bear market we’ve entered will likely be for many years and have no remorse for anyone. As many know, I’ve written dozens of articles and tweets warning about a bear market in 2022, and so far I’ve been spot on.
In this article, I’ll be explaining why instead of fearing the bear market, you should actually be embracing it. I will also share tips on how to profit in this market phase.
Why I Think Bitcoin is In a Bear Market
Before I get into the juicy stuff, I wanted to quickly provide a few insights into why I actually think we’re in a bear market in the first place as I know many reading this still think we will bounce to $100K+ by the EOY.
1. The Collapse of Tether
For the last several months, I and a few other accounts have been actively warning crypto investors about the risks of Tether. While we were branded as conspiracy theorists and “anti-crypto” haters, we were only trying to help others not fall victim to one of the largest frauds in history.
Tether is an un-audited, centralized company founded in the depths of China by a mysterious group of criminals, whose main goal is to manipulate the prices of Bitcoin, launder millions, and eventually disappear.
While Tether executives and Bitcoin maximalists promoted misinformation for many years, it’s clear they can’t keep the fraud running forever.
Jerome Powell recently addressed the Senate, and confirmed that he was “aware of the Achilles heel of the whole crypto business, which is Tether.”
He even hinted at new crypto and stable coin regulations which will essentially aim to tame the market’s most notorious frauds. With Tether gone, Bitcoin will seize to pump. That was the main thing pumping the markets this entire time, and many cannot admit that.
It’s not just the Federal Reserve that wants to regulate Tether. Almost every major regulator in the world has issued warnings, and I strongly believe they will be shut down or regulated out of existence in the near future.
This will cause a liquidity crisis as over 80% of the market is currently traded with Tether aka fake money. Expect exchange exit scams, withdrawals and deposits halted, severe price drops, and complete chaos.
Want to learn more about Tether, Check out my other article: The Tether Scandal: The Biggest Threat To The Crypto-Ecosystem
2. Record Levels of Inflows/Whales Dumping
Bitcoin Whales are dumping in flocks. Since April-May, I’ve been warning my Twitter followers about the massive whales sending their Bitcoin to exchanges (to sell), which was a major sign of an incoming drop.
I’ve been trading Bitcoin for over 8 years, and never have I seen metrics this bearish. Some of the biggest wallets in crypto have drastically shrunk their position sizing. They know what’s coming… The Great Crackdown.
3. Bank’s Shorting Bitcoin: Bitcoin Futures ETF Trap.
In November 2021, you may recall the extreme hype surrounding the first Bitcoin Futures ETF being launched. Maximalists promised it would propel Bitcoin to $100,000-$500,000 by the end of the year.
I warned that it would be a massive trap. I was right.
The Bitcoin Futures ETF reminds me of the Bitcoin Futures products that were first launched in December 2017. Which happened to go live on the exact day Bitcoin topped out at 20K.
The owner of CME also said he had plans to “tame Bitcoin” which he did just that. As with all of Wall Street’s tools, its objective is to manipulate and control the markets.
4. Mt. Gox to Soon Dump 150,000+ Bitcoin
According to Nov. 16 notice from the Mt. Gox Trustee Nobuaki Kobayashi, the rehabilitation plan to disburse 150,000 BTC worth $8.5 billion is now “final and binding.”
The rehabilitation plan was first put into motion in 2018 with the intention to compensate creditors of the now-defunct Japanese crypto exchange Mt. Gox that lost 850,000 BTC in one of the largest hacks in crypto history.
Bitcoin will easily tank over 80%-90% once the creditors sold the BTC paid out as compensation. The last time they held BTC, it was $100-$1000. They will undoubtedly sell, which will trigger a major crash similar to March 2020.
Then all the retail will panic, and sell, which will cause it to drop even more.
This event will be very bloody.
There’s no way for maxis to spin this into a bullish event.
5. Record Low Institutional Demand
One of the biggest misconceptions in crypto is that institutional investors are interested in purchasing Bitcoin. These are totally false rumors spread by moon boys and Bitcoin maxi’s in an attempt to create false hype.
In the chart below, we can see Grayscale hasn’t increased its Bitcoin holdings in several months, which suggests little to no new institutional demand.
With no buyers and only sellers, the downwards pressure on Bitcoin is unlike anything we’ve ever seen before. Institutional investors likely won’t pick back up until we’re back far below $10,000.
6. Bitcoin is a speculative bubble, and the hype is drying up.
We all know Bitcoin serves no actual purpose but is solely a tool for speculators to gamble on. While that worked well for the last few years, its hype and attraction to investors are fading quickly.
Bitcoin has already lost over half of its value, central banks around the world are banning it, countries are banning BTC mining due to energy and environmental concerns, retail and institutional investors are rushing to exit, and the majority of the narratives have all failed.
Why You Should Embrace the Bear Market?
Think of what’s happening now as what happened in the 2000s with the dot-com bubble collapse. It’s structurally and fundamentally very similar.
While bag-holding some cryptocurrencies that hold zero intrinsic value may leave you with nothing, this is also a great opportunity for you to accumulate projects at discounted prices.
After the tech bubble popped, companies like Amazon, Apple, Facebook, Google, and PayPal grew into multi-billion dollar mega-companies that have made long-term investors extremely wealthy.
While 99.99% of cryptocurrencies are going to zero, there is still a small portion that will likely grow a lot in the future. Make sure to focus on real utility, and always do your own research.
Bear Market Flushes the Toilet
Right now, the crypto space is littered with thousands of fraudsters and shitcoins. Seriously, there are over 33,000+ crypto projects that exist, and most of them are just created by some sketchy Russian dudes who have plans to exit scam once they’ve lured in enough suckers.
This bear market will halt new inflows into these projects, and give investors the desire for a flight to quality, where projects with real value will rise.
I think that is something we should all be looking forward to!
How To Profit In a Bear Market?
Selling Bounces
In a bear market, a trader should replace the saying “buy the dip” with “sell the tip”. That rare moment in a bull market when the price dips low to support is seen as a golden opportunity to make money. The same can be said during the occurrences when the price bounces upwards off of a support zone during a bear market.
These bounces are chances for you to buy low and sell high, even while the price is trending downward. Of course, “the trend is your friend,” and counter-trading the direction of the macro movement always poses a risk, but if you would rather stay away from margin trading this is an option.
Don’t Forget to Short
In a bull market, simply buying and holding the most fundamentally sound cryptocurrencies and digital assets generally leads to a position of profit — i.e. it’s usually a good idea to buy low and then sell high.
The exact opposite can be said for bear markets, where selling early is typically best, and the trading methodology shifts to selling high, buying low, and repeating where possible.
But while opportunities to go long are scant in a bear market, the number of short opportunities skyrockets. However, fewer traders know how to comfortably trade on the short side, and even fewer are able to generate a profit while doing so.
There are a number of ways to profit in a declining market, this includes short selling, shorting options/futures contracts, holding inverse ETFs, using prediction markets, and more. Each of these methods comes with its own benefits and drawbacks, and it’s always a good idea to become familiar with each before risking substantial sums.
Remember, even if you are fundamentally bullish on certain cryptocurrencies or the cryptocurrency industry as a whole, almost all cryptocurrencies will likely experience a downturn in a bear market. Because of this, substantial gains can be made by trading on the short side where opportune.
Warning: Please avoid using high leverage. This can be seriously risky, and you will likely lose everything if you aren’t experienced with margin. Also, don’t start shorting after we’ve dropped a lot, same as you shouldn’t buy after we’ve pumped a lot.
Unfollow the Maximalists and Moon Boys
“It’s easy to look like a “market genius” when every stock is in an uptrend. It’s only when the tide goes out that you learn who has been swimming naked.”
— Warren Buffett
Now that the bubble has popped, many moon boys are being exposed for the charlatans they truly are. They know nothing about investing.
These scammers should be unfollowed by everyone. If you want to profit in the long run, you need to cleanse your feed from those who begged you to go all-in at all-time highs with leverage.
Brush Up On Your Knowledge
Although bear markets certainly make it more difficult to turn a profit while trading or investing on the long side, they do offer an often much-needed reprieve from the mania that is a bull market.
This time can be used to get a better understanding of the market, see what works and what doesn’t, and better prepare yourself for the next bull market. At the very least, it can give you the time to reflect on your previous investment decisions, to better understand what you did wrong, what you did right, or what you’d tweak if given the chance.
For absolute beginners, bear markets are an excellent opportunity to really hone your understanding of cryptocurrencies and the blockchain space in general, focusing on the how’s and why’s of major cryptocurrencies, and getting to grips with the factors that can influence the market.
If you’re particularly bullish on a particular vertical — such as second layer solutions, interoperability platforms, blockchain games, privacy coins, etc. — then you may wish to take a deep dive into these, since this will help you better project how these assets are likely to evolve over a given time scale. It’ll also help you recognize undervalued assets more readily.
Some of the more useful things you may want to brush up on might include:
  • Technical analysis: to identify market patterns that indicate a good entry/exit point;
  • Fundamental analysis: to spot undervalued projects with long-term growth potential;
  • Sentiment analysis: to understand the general tone, fear, and hype in the market;
  • Risk management: to learn how to manage your risks, budget, and diversify your investments;
  • Trading strategy: research and test various trading strategies to be competent enough to deal with more opportunities.
By ensuring you are properly informed and well-equipped to spot and act on potentially lucrative trading opportunities, you’ll stand the best chance of success in both a bull and bear market.
Scoop Up Discounted Gems
While bear markets can be trying times for many investors and traders, they also represent the best possible opportunity to purchase promising coins and tokens at rock bottom prices.
Between 2018 and 2020, the vast majority of cryptocurrencies experienced staggering losses — many of which lost more than 90% of their value in these three years. Zooming in on Bitcoin, it fell from a peak of more than $20,000 down to almost $3,000 at its lowest point. Despite collapsing by more than 80% in the bear market, Bitcoin would then go on to gain more than 2,000% in the recent bull market to break successive all-time highest values.
However, few traders actually bought Bitcoin at or even close to this low point, due to the psychological difficulty of purchasing an asset after such a sizable drop — while those that did probably didn’t hold long enough to maximize their returns.
That said, with the right mental fortitude and a plan, bear markets are arguably the best time to accumulate positions in fundamentally strong cryptocurrencies. But identifying which are simply suffering due to the prevailing bear market and which are seeing a permanent sell-off is easier said than done.
As always, past performance isn’t always an indicator of future success, but if a cryptocurrency has demonstrated cyclic price action and repeatedly recovered stronger than before, this certainly bodes well for the asset. As always, remember to play the field and ensure you are exposed to multiple projects across several sectors, rather than putting all your eggs in one basket. This helps to even out any losses while ensuring you stand a better chance at catching a unicorn.
Conclusion
It is important to realize the necessity of the down days for the existence of the days in green. Instead of running for the hills and hiding from the red, learn to turn around and give the bear a hug.
This opportunity should be accepted, excitedly, with open arms, because, to quote the great John Templeton, “there will always be bull markets followed by bear markets followed by bull markets.”
Thanks for reading!
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