Thriving in a Bear Market
My phone picked a great day to be broken. It has spared me the pain of refreshing Blockfolio dozens of times over the day and seeing a major drop in my portfolio holdings. Instead of seeing the big (well, big to me) number at the top go down by at least 10%, I have to look at my various holdings individually on coinmarketcap and try to determine my losses.
Having lived through the 2008 crash, in which I was mostly in cash (and even double shorted the market a bit in the fall), I'm comfortable with markets losing value. I'm actually way more comfortable here than I was when ETH was going above $300 the first time, as my portfolio kept gaining so much so fast I didn't know what to do. It was awesome, certainly, but like many in crypto I found myself a bit lost in success.
Making Money with the Bear
Bear markets are incredible opportunities to buy underpriced assets. Keep in mind, the herd mentality that drives markets usually goes too far either way. I think Ethereum will be worth more than $400 per token sometime in the next few years (hopefully sooner), but when it hit that number last month, it seemed premature. Now the herd is running the other way, in a race to sell. Too many people, having bought at $400 and panic selling at $250, will learn why "hodl" is so often used on r/ethtrader by veterans of this space. Timing the market is incredibly difficult.
This doesn't mean that there aren't golden opportunities to increase one's crypto holdings. Down market days like today, which has seen tokens with 25% loss of value (including our beloved Steem), offer patient people opportunities to buy oversold tokens at bargain prices. Let's take a look at two such tokens, Golem (down 26% in last 24 hours as of this writing) and Numerai (down 29%). What follows is informational in nature, and not investment advice...it's how I look at possible "sales" in the market.
Golem has been a hot token, starting at $0.01 in December at the crowdsale and climbing to an incredible $0.69 at its peak in mid June. Golem's market cap is a staggering $270 million (today, at $0.32!), with no shipable product yet. Brass Golem, its first big milestone, has been delayed, with the devs backing off from offering a date at this point. Personally, I haven't followed Golem too closely, so I don't know what their approximate Price to Book ratio is (how much ETH they have left from the crowdsale), and I while I have seen estimates of how big their market may be, I've got little knowledge in this field and am at a disadvantage. Despite the 25% drop, I don't see a bargain here.
Numerai was released fairly recently, and had been rewarded to participants in a sort of hedge fund tournament for quants that allows anyone with a little math knowledge to submit their model against other quants. I first found out about Numerai when it was trading at $30 per NMR. Numerai was awarded to quants for doing well in the tournament, and many were non crypto people ("normies", as I've heard them called...probably the first time a quant was called normal in a long time), so as the price jumped up all the way to $150, quants who had been awarded NMR probably found themselves owners of an unexpected windfall in a turbulent and untested market. I don't blame those who sold-I probably would have in their shoes.
However, at $25 per NMR, Numerai has only a $30 million dollar market cap . Last week, the CEO Richard Craib announced that due to the higher than expected market price, he was going to drastically cut the amount of NMR allocated to participants. That means a tightening of supply of future tokens-and there are hundreds of participants every week competing for real money and bragging rights. Numerai therefore has a working platform that is not "alpha" or "beta" but operational, and they are using these crowdsourced results to drive their own quant hedge fund. It's an opportunity that is going to drive more "normies" into the world of crypto without even knowing they're in it.
To me, NMR looks like an amazing buy at these prices, as participants are incentivized buy and stake NMR for fun and profit. Currently, the 500 participants could own all the NMR created and they'd each own $60,000 worth. As more people find out about Numerai, bigger players will come in, professionals and thrill seekers alike who will want a whole lot more than $60k to gamble with. I expect a lot of upside pop in this token when that happens, and I'm a little surprised we're not there already.
Looking past the short term trends, and finding those tokens that are caught up in market madness, is how I intend to continue to make money in this market. Again, these are my thoughts-not investing advice, but a data point on how one person views and makes decisions while investing. I'm not a professional and I recommend only that if you buy ETH, you only spend money you can afford to lose. I may lose with this strategy. There is so much risk in this early market, and this bear may drag on longer than we can remain optimistic. However, with some planning and careful assessment, your experience with the bear may not be quite so scary, and may instead be cuddly and happy.