The past few weeks have been a roller coaster in crypto (and stocks),
with no clear sign of when that will change.
Markets always move in cycles, and it's more fun to be an investor when prices are moving up (bull market).
However, markets are based on how people PERCEIVE value, long term and short term, so things have to go down once the market feels like assets are over-valued.
Everyone wants to get a good deal, and wants to make a profit.
There is no point in being in financial markets if those things are not important.
I've been through 2 major crashes in my lifetime that were significant - the 2000 dot com crash, and the 2009 banking crash.
Both crashes hurt people financially and emotionally.
In both cases, the markets rebounded and lessons were learned.
1 - Hype sells in a bull market (prices going up). People get excited about the *IDEA* of something and rush into the market.
In 2000, the idea of the internet changing many facets of life. It did, but not in 2000. It was too early for most of the promises during that time to become used by the masses.
In 2009, the idea was easy money in real estate.
The belief that everyone should own a home (get the most expensive one you can).
Flipping real estate became really popular, and there were several TV shows that started at that time pushing new investors to believe that was easy.
When I look at the current situation, there isn't much hype, and last year's bull run felt like a recovery from covid.
I have not seen the euphoric levels that I imagine would feel like "covid is over, everything is back to normal, crypto is the future".
Some people who were deep in crypto last year feel like 2021 was that time as a lot of new people got in.
2 - It's scary to invest in a bear market. I completely relate to that, and my recent buys have come with a "am I being really dumb to buy right now?"
Many wise investors like to preach "buy the fear, sell the hype" which means lots of quiet investors are accumulating now when prices are low.
However, it is very possible prices will continue to go down which is why it's scary.
This type of investing requires patience and a clear understanding that it might be months before the returns are felt.
Our current culture of overnight shipping has led many to demand "get rich quick" or I'm out.
3 - Bear markets are darwinistic. The weak businesses will be culled from the herd. Only the strong will survive.
When people are more cautious about their purchases,
only the best offers win.
Lot's of crypto projects won't make it through a bear market, so investing in "idea" projects that have no utility is not wise.
What are "idea" projects?
In my opinion, many metaverse projects that are years out from being built are going to struggle.
Same with many gaming projects.
The games with great developer teams, raving fan bases and fun gameplay will thrive, but the copy cats that are just-another-play-to-earn-game will be forgotten.
4 - Utility is important. Just becomes an investment opportunity is a crypto project, or has an NFT, or a token isn't even remotely enough to attract investment in a bear market.
It does back to basics of a good offer:
what problem does this solve?
who is it for?
why should people use this offer vs. another option?
If you can't clearly explain to yourself or someone else why a specific investment addresses a need in the market, it's a risky investment.
5 - Be careful if you are betting against the interests of the big banks. They have massive resources at their disposal and can easily manipulate markets, influence government regulation and plant stories in the media.
Small investors like us love David & Goliath stories but you are better off betting your money on plays where the large institutional banks get what they want. That sucks but appears to be the current reality.
Smart investors win by investing in bear markets.
Dumb investors will not.
Be one of the smart ones.