Ep. 5 | Building in a Bear Market
It’s no secret that we are experiencing a bear market in the crypto space. The 12 months prior to the date of this article, the dollar value of one bitcoin rose to over $60,000 in late October 2021. As of today, that value has fallen to approximately $19,000 — approximately 68.33% decline in value over that time period. The same story applies to most all other alternative cryptocurrency assets. As an investor, this level of downward volatility can be painful. However, emphasizing the words “can be painful” does not mean that “it will be painful”.
The truth is, your experience or potential “level of pain” is completely dependent on how you position yourself on the board.
Allow us to explain…
Because we are wolfish, that means we position ourselves to win regardless of market sentiment. Now I’m sure you’re thinking…but how can I be winning if my portfolio is down by almost 70%!? [insert angry emoji face]
That’s a great question, and the answer depends entirely on your position on the board. After experiencing both the effects of a bull run and the current crypto winter combined with the education we’ve accumulated through the past 9 months inside The Guardian Academy, we’ve found that positioning yourself on the board comes down to one of three things…
- Your macro belief. This was covered in our Guardian Capstone, but what this essentially means answering the question — what assets do you want to accumulate the most and why? You should have a deeper fundamental understanding of your macro belief, so this feeling of loss you’re experiencing could be related to your lack of understanding. Perhaps now is the time to DYOR (do your own research).
- Your time frame. If you’re a long term investor with a 5–10 year time frame like you might claim to be, then why are you concerned about another crypto market cycle? This level of downward volatility is nothing new to crypto. In 2011, Bitcoin had a flash crash from $32 to $0.01, and people thought it was the end of Bitcoin! Here’s a video to show real time action of the crash. If you’re truly worried about your crypto investments during a bear market, then just be honest with yourself. Revisit your positions and timeframes to determine if they are aligned with your macro beliefs.
- Your participation. Are you a silent investor who buys and holds the asset then goes back to their real life endeavors? OR are you interested in participating in the web3 space with regards to engaging in the utility and communities that are built on top of blockchain? Could be that you’re a mix of both. Regardless which one you are, there’s opportunity to still win in the bear market — which is a great segway into the next segment of this article…
5 ways you can benefit from a bear market as both an investor and builder in the web3 space.
1.) The cream rises to the top.
Leadership is best measured during times of adversity. When times are good and everyone is winning, the incompetence of poor leadership is forgiven by investors and participants (for the most part). However, the true test of leadership is during times of adversity. People are losing, and your community questions every move with a high degree of scrutiny. How they respond to this adversity is a true test of competent leadership.
So how is this beneficial?…might you ask. The answer is simple — it’s much easier to discern the competence of a project’s team during times of adversity, which is the case during a Bear market.
For projects with incompetent teams that get hit with the bear claws, you’ll typically find them make a bunch of empty promises, overhype, or completely withdraw from the project all together (aka rug pull).
The teams who exhibit competence find ways to strategically navigate through the rough terrain, they consistently communicate with their community, and bring creative solutions to the table. So what does the bear market offer? Disparity between the competent and incompetent, in other words it’s much easier to see who’s the real deal.
2.) Stand out from the masses.
One of the key benefits, specifically within the NFT space, is the opportunity to get close proximity with leaders and community members who are making waves in the space.
This proximity comes with many benefits; building your network, recognition for your contributions, etc. There’s endless benefits, and it all depends on what you want as to why you pursue proximity with certain people.
During the bear market, people tend to retreat from the community. Engagement on social or inside Discord is down, the show up rate declines. But if the team continues to show up with conviction, this is an opportunity for you to show up with them — proving your allegiance. Your chances of becoming noticed and recognized are much higher during the bear market for this exact reason; which also increases your chances of gaining proximity with the right people as defined by you.
3.) Reveals the strength of the floor.
Most people think of the floor price in this context, which is technically correct — the bear market does reveal a stressed scenario of the floor price and this can be beneficial from the standpoint of finding an attractive entry point to take a position.
However, there’s another floor that is rarely mentioned in the space — the floor of the community. Understanding the community floor can be useful as it shows how much conviction is actually held for a project’s mission.
Weak communities are largely comprised of people who only show up in a bear market to FUD; which we define as the act of spreading fear, uncertainty, or doubt due to the inherent need to constantly receive validation, certainty, and/or short term profit.
Strong communities are largely comprised of people who show up in the bear market to contribute to the community in a positive way. They ask thoughtful questions and participate in the project for the mission it’s designed to serve. These people are patient, long term investors, and most likely invested into the project for reasons that best serves them and what they want most in life.
The good news is the bear market tends to filter out the weak community, people will only FUD for so long before they move onto the “next thing”. In this case, you’re left with the strong community inside the project. Toxicity is removed, and you can now build with the the ones who matter and there for the right reasons — representing the true floor of the community.
4.) You mature.
Crypto is a volatile space, it’s common place for people to catch a “moonshot” where a $100 investment turns into 6 or even 7 figures of wealth. We have experienced this level of euphoria first hand, and will say that it does not necessarily make you a better person sitting in euphoria while wealth is growing exponentially with no effort. In fact, quite the opposite is true based on our individual experiences — just listen to the podcast for this episode and you’ll learn more.
The fact of matter is the bear market adds maturity. For those who’ve never invested in the crypto or NFT space, it’s important that you go through one of these cold crypto winters. When times are bad, so much is challenged and brought to question; your beliefs, conviction with certain investments, time preference, and emotional stability. All the things mentioned above in first piece of this article.
The bear market brings an entirely new perspective to the space overall, and what mattes most to you — giving you a much stronger understanding of how to position yourself moving forward.
5.) Accumulate on a discount.
This one was saved for the end for a reason, that’s because it’s the most obvious and talked about in the space — for that reason, we won’t spend much time on this point.
In short, if a project is fundamentally sound and trading below it’s intrinsic value — then it’s an opportunity to buy. Not financial advice, of course. But to wrap this up, we’ll leave you with this Warren Buffett quote to help drive the point home for you…
Hope you found this information useful. If so, please consider giving us a clap and a follow. It would mean a lot, thanks for being here and we’ll see you on the next one!
-Jake & Dwayne
Listen to episode 3 on the Wolfish on Web3 podcast [ link in link tree] https://linktr.ee/wolfishonweb3
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DISCLAIMER: These articles are for educational purposes only. Nothing in this article should be construed as financial advice or a recommendation to buy or sell any sort of security or investment. Consult with a professional financial adviser before making any financial decisions. Investing in general and options trading especially is risky and has the potential for one to lose most or all of their initial investment