5 Tips for Surviving a Bear Market

The crypto market is fully in bear territory now, even though we have seen some relief over the past few days, with Bitcoin and Ethereum rising again, and a number of DeFi project tokens seeing double-digit percentage rise. For many of us in crypto, this is not the first time we’ve been in this position. We know that the market is cyclical, and that this time round macroeconomic influences are more influential, especially with a recession looming.

So, if you’re a crypto holder, what should you do? Should you sell or buy the dip? Or take some other action? Here is some advice from market watchers.

1. Take some profit

HODLing is widespread in the crypto community, but Tyler Reynolds, a Web3 investor advises selling a percentage of your gains at this time, rather than just sitting on your investment, or selling it all. An anonymous trader also said, “Set sell targets/take profit levels in advance, at least loosely, and stick to them. Your objective self from the past is a better guide than your euphoric self in the future.”

2. Do not panic sell

Its better to take some profit, or devise a strategy for exiting the market completely, but don’t panic sell says Fedor Linnik, an NFT builder. He added, “being greedy and being afraid to miss the top” was a mistake he made in 2018. Make your selling decisions based on data, not on emotion or on advice from social media.

3. Don’t try to ‘make it back’

Alex Svanevik, CEO of data analytics firm Nansen, said that those who invested in 2020 and benefited from the highs of 2021, need to realise the fun is over for now. He warns against entering highly risky trades to try and make back losses.  A trader tweeted, “Don’t trade or invest with the mindset of ‘making back’ what you lost in the bull; it’s an inherently flawed comparison.”

4. Research projects

Use this bear market time to look at crypto projects, new or old. Tyler Reynolds said that what worked for him during the last bear market was to keep investigating both new and old projects. “You will need to keep re-investigating as projects pivot from their original idea and find a much better product-market fit, like Aave.”

5. Get involved with crypto projects

Many crypto projects, especially those in DeFi, are structured as decentralized autonomous organizations, or DAOs. Anyone can join and participate, and if you are a developer looking for a job in crypto, it can be a good way of finding one.

Reclaiming blockchain technology

For as long as blockchain technology has existed it has played a ‘Cinderella’ role in the cryptocurrency story, the latter being the headline grabber. Any have overlooked the potential of blockchian as an advanced and evolving technology that could have many more uses.

Let’s start with the basics: blockchain is a a distributed database whose information is stored across every node running the network, and because of the distributed factor, it guarantees data stored within it is accurate and securely stored.

With cryptocurrencies, the blockchain guaranteed trust. For example with Bitcoin, one can accurately verify that funds aren’t spent twice, that its supply is limited, and one can see the history of transactions on the network.

Blockchain and supply chains

But as a distributed ledger, blockchain has many more use cases.

Francisco Rodrigues gives the example of IBM partnering with the Abu Dhabi National Oil Company to pilot a blockchain supply system for oil and gas production, while De Beers already uses blockchain to track diamonds on its supply chain.

It is already in use by government agencies and bigger businesses, as Johnny Lyu, CEO of KuCoin points out, saying that the use of blockchain is “commonplace among government agencies and businesses,” and giving the example of the Global Shipping Business Network (GSBN), a consortium that counts on the participation of major institutions including the Bank of China, DBS Bank and HSBC.

Blockchain answers consumer demands

Blockchain has many advantages for some industries, especially food and beverages where consumers demand transparency. Today the average consumer today no longer just cares about what they eat and how it should be cooked, but also considers where ingredients are sourced and how they’re handled. So, blockchain has a big role to play in logistics.

Sankar Krishnan, executive vice-president at Capgemini Financial Services, points out that blockchain technology is also “very ESG friendly,” referring to the environmental, social and governance standards which investors now pay more attention to.

Less room for errors with blockchain

Blockchain use also reduces the amount of data that has to be tracked. Without it every party involved either prints out information or exchanges it via email multiple times; a costly process with the potential for mistakes being made. These issues would be eliminated if transactions were processed on a blockchain.

So, if blockchain has many more use cases than crypto, why is it not more widely used? The brief answer is implementing enterprise-level software technology requires a significant investment. There may also be some stakeholders who are resistant to transparency. Adoption may be only slowly evolving, but its potential to revolutionize how some industries work cannot be ignored. Perhaps one day people will be saying that Satoshi Nakamoto’s best invention was the blockchain, not Bitcoin.

NFT Creators: Finding Fans and Making Money

“To make a living as a craftsperson, photographer, musician, designer, author, animator, app maker,entrepreneur, or inventor you need only thousands of true fans.” Kevin Kelly

Any artist relies on having fans, and having a large swathe of diehard fans, ready to buy whatever you produce, is a goal most would love to achieve. Back in 2008, Kevin Kelly wrote an essay on how the Internet would make this more achievable for artists in any discipline, simply because it opened up a global audience. However, while creative people waited for fans with spending power to arrive, the online took a slightly different direction to the one they hoped for.

Social media platforms, all of them centralized, was seen as a great way to connect with fans. Throw up a Facebook page, promote your work, and fans would find you. It did work, for a while, but then the SM platforms spotted an opportunity, you could say, a trick they were missing, and
started using algorithms that decided what fans saw, changing the relationship between them and the artists. What’s more, the SM platforms were keeping a lot of the revenue they gleaned for themselves.

The Tide Is Turning

Now that tide is turning and returning to Kelly’s vision, and NFTs have proved to be the vehicles for change. That’s because non-fungible tokens enable artists to sell directly to fans without a third party taking a cut. It’s true that many will continue to use centralized social media platforms for promotion and to connect with fans, but the advent of NFTs
and a crypto=based economy is giving them other options to make money.

But, it’s not that easy to understand what NFTs are. Just ask a person in the street. The chances are that you might find one or two that know what an NFT is, while others might have an idea they are connected to Bitcoin, while others will never have heard of them. Those inside the crypto community might be surprised that a new sector that has such a big
buzz around it, and one where a lot of money is being invested, has had so
little impact on the wider public. But then the same could be said of
cryptocurrencies.

A Better Economic Environment For Artists

However, the lack of public engagement with NFTs is not an insurmountable issue. The NFT craze is in its infancy, which
means it has a way to go to mature, and as it evolves and expands, the size of the audience will grow as well. In this respect, NFTs are still a profitable
venture for creators. After all, NFT sales were valued at $2 billion in the
first quarter of 2021, according to Cloudwards.net.

First, NFTs are created on a blockchain.
This also means that even the owner of an NFT marketplace cannot charge
whatever they want for an NFT, because the artist is in control. Of course, the marketplaces will get a fee, and that creates a competitive environment for the creators who will look for those offering a strong sales performance and lower fees, or other incentives.

Second, NFTs allow for more finely tuned pricing tiers. For example, the hugely popular NBA Top Shots cards can be bought for thousands of dollars, or a few dollars. The same can be seen in CryptoPunks, Bored Apes, and any of the other series.

The third way in which NFTs help artists make more money is in the relationship with the user. Unlike buying say a painting at auction, where the auctioneer takes a fee from both buyer and seller, the person who buys an NFT pays very little to acquire a work. That’s because of the crypto factor! There’s very little marketing spend in the crypto market, and neither Bitcoin nor Ethereum has marketing budgets, yet millions of people own them. The same applies to NFT projects. Chris Dixon points out
that the NBA Top Shots cards, “generated $200M in gross sales within a
month while spending very little on marketing.” That’s because sales are significantly based on peer-to-peer marketing, which in turn is boosted by the community of fans that flock to collectible NFTs, and generate excitement about them. Plus,there is a feeling amongst these fans, who are also owners, that they have skin in the game, and the game has a real buzz.

There are still many ways for creators to build a fan base via NFTs, and boost their finances without the interference of intermediaries. Those platforms that impose distribution and monetization on creators are likely to find that they are challenged. Artists now have more choices, and as Chris Dixon says, when crypto and NFTs offer a new way to make money, that is probably the choice artists will take.

Dazzled by some insanely high APYs?

Have you noticed that a significant number of DeFi projects are offering insanely high annual percentage yields (APY), which, of course, look very attractive to investors, especially retail investors, who are those most at risk.

There are DeFi protocols that have been built using the proof-of-stake (PoS) consensus protocol offering eye-watering returns to their investors in return for them staking their native tokens. But, as most of us know, sometimes by getting burnt ourselves, if something sounds too good to be true, then it probably is.

The issue is that some projects are nothing more than cash grab schemes. Shiraz Jagati at Cointelegraph gives the example of YieldZard, a project positioning itself as a DeFi innovation-focused company with an auto-staking protocol, which claims to offer a fixed APY of 918,757% to its clients. Who finds that believable? All you would need to invest is $1000 to gain a return of $9,187,570! And YieldZard isn’t the only project offering fast and high payouts.

Assessing an APY

How can you as an investor assess the sustainability of projects like this? Here is some advice from Kia Mosayeri, product manager at Balancer Labs — a DeFi automated market-making protocol. “Sophisticated investors will want to look for the source of the yield, its sustainability and capacity. A yield that is driven from sound economical value, such as interest paid for borrowing capital or percentage fees paid for trading, would be rather more sustainable and scalable than yield that comes from arbitrary token emissions.”

Ran Hammer, vice president of business development for public blockchain infrastructure at Orbs, pointed to the fact that DeFi offers a another major innovation to the crypto ecosystem: the ability to earn yield on what is more or less passive holding. But as he says, not all yields are equal by design because some yields are rooted in “real” revenue, while others are the result of high emissions based on Ponzi-like tokenomics.

Understand the source of the ‘yield’

Ultimately, it is very important for investors to understand where the yield is coming from. For example, transaction fees in exchange for computing power, trading fees on liquidity, a premium for options or insurance and interest on loans are all “real yields.” Whereas those that are based on token inflation may turn out to be less sustainable, as there is no real economic value funding these rewards. 

So, if you see a dazzling APY offered, you should consider all of the above, as well as the fact that most returns are paid in cryptocurrencies, and since most cryptocurrencies are volatile, (just look at the market this week!) the assets lent to earn such unrealistic APYs can decrease in value over time, leading to major losses.