$290 billion market cap spilled in a widespread crypto sell-off last week. According to Fundstrat, these 3 investment strategies will help your portfolio during the crypto bear market.
How did the bear market come about?
As you follow on Kriptokoin.com, while the bear market prevails, investors are panicking while selling their crypto assets. According to CoinMarketCap, around $290 billion worth of crypto’s global market cap has evaporated in the last week alone. Additionally, the same figure hit an 18-month low of just under $1 trillion on Monday.
It’s impossible to know exactly what the root cause of the recent bear trend is. It is possible to call inflationary pressures arising from the hawkish monetary policies of the Federal Reserve. Investors may be wary of more speculative assets. It is possible that all of this will cause the tokens to be traded alongside risky technology stocks.
‘Lehman moment’ and crypto bloodbath
Elsewhere, the biggest names in decentralized finance are sinking into the mud. Crypto lending and borrowing platform Celsius has promised high returns. It then froze withdrawals from the user account when faced with potential liquidity challenges.
It is alleged that crypto hedge fund Three Arrows Capital is likely to face financial headwinds after liquidating $400 million. And finally, let’s not forget the ‘Lehman moment’ of the nascent crypto, some say. Namely, the May crash of the algorithmic stablecoin UST.
Sean Farrell at Fundstrat Global, however, points out differently. Farrell wrote that both the Celsius and UST debacle are the ‘long-term constructor’ for crypto. Farrell describes the current state of the industry as a ‘bloodbath’. Then he says:
Public demonstrations of such uninformed capital destruction are often overlooked in the traditional financial industry. Fortunately, we have the advantage of iterating and developing more quickly.
3 ways to adjust your investment strategies when there is a bear market
Volatility is nothing new for crypto. And there are ways to survive the bear market, according to the Fundstrat executive. For this, they can adjust their investment strategy in several ways.
First, it is possible for investors to reduce altcoins in their portfolios. Farrell recommends hedging in the near term, especially long-term hedging, such as about a month. Altcoins have taken some of the biggest hits of the recent jolt. After experiencing various network outages, Solana dropped 88.6% from its ATH and 24.5% last week. “However, we are still constructive about crypto-asset prices in 2H,” Farrell wrote.
Secondly, it is possible for medium and long-term investors to allocate ‘more aggressively’ to Bitcoin. This is partly due to the firm’s belief that the market is approaching the ‘bottom’ area for Bitcoin. This means that there is a buying opportunity to take advantage of a cheap price point for the token.
In recent months, the leading crypto has experienced a serious downward trend in its value. As of Thursday, it was trading around 69% above ATH. But its price handles the storm better than most. In the last three months, Solana and Ethereum have lost 67.55% and 62.13% respectively. However, Bitcoin has dropped roughly 49.64% in the same time frame.
Greg King, founder and CEO of $130 million crypto asset manager Osprey Funds, recently shared his views. King said that Bitcoin will also hold up better in current market conditions. Also, he mentioned:
People also wonder what I can do to hedge inflation? What can I do to buy assets that do well in this type of environment? And if Bitcoin is digital gold, it suddenly becomes one of the top contenders out there.
Finally, investors should be careful no matter what when investing in current bear market conditions. “In the near term, we think it’s wise to stay cautious and protect your downside,” Farrell says.
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