The crypto market is currently going through one of the most brutal periods in its 13-year history. Investment expert Stefan Stankovic shares tips for surviving the Bitcoin and altcoin winter for investors who want to be stronger once the sky clears.
Follow the market during the bitcoin and altcoin winter
As you follow on Kriptokoin.com, the crypto winter is going through a tough one. However, it’s important to remember that bear markets are actually where many people build real wealth. This is especially true in crypto for two reasons.
First, projects that lack foundations, product market fit, or outright fraud are bathed in bear markets. At the same time, it shifts its domain focus from price action, marketing and hype to product and business development. Today, some of the leading crypto projects such as Solana, Cosmos, and Uniswap have entered bear markets. The leading altcoin Ethereum started life in the Bitcoin bear market in 2015. It traded below $10 until the 2017 bull cycle. Ethereum hit $1,430 at the tail end of this cycle in January 2018, delivering surprising returns for early investors.
And it’s important to be relevant to the market. It means staying engaged, learning and analyzing the market while the industry is in a bear cycle. Some of the most successful investors in the 2017 bull run were those who endured the 2014-2016 bear market. Similarly, most of those who made a kill in 2021 were stuck through a tough downturn from 2018 to 2019. First of all, it becomes the most decisive factor for success when the market turns.
Rethink your thesis in the winter of bitcoin and altcoins
Losing money is never fun. However, it is possible for him to be a great teacher. The Bitcoin and altcoin winter makes investors reevaluate their investment thesis. So it is the perfect opportunity for them to find the mistakes they made in the last cycle and prepare for the next leg.
An asset or an asset class that is 70% from all-time highs means different things. For example, a significant decline in an investor’s portfolio indicates that their investment theses are invalid. That is, they need to rethink their approach and rebuild their portfolios to better reflect the new reality. However, a significant downside does not mean that an investor’s thesis is invalid. It’s also possible that instead, it’s the perfect opportunity to double down.
Use second-order thinking
Every crypto bull cycle is triggered by multiple catalysts. Also, it is surrounded by different narratives. The 2017 bull run was characterized by Initial Coin Offerings on Ethereum and the “Blockchain not Bitcoin” narrative, in which startups raise millions by selling mostly useless tokens over empty promises about tokenizing and centralizing anything.
Those who successfully predicted the raid narratives had a kill, while those who were late unable to identify where the disc had gone had less of a chance. Predicting the dominant narratives of the next cycle requires second-order thinking or reflection that considers the long-term consequences of many causally related related events. In this respect, the investing game is the same as Keynes’ infamous beauty pageant, where investors have to guess what other investors will think rather than what they think.
Given that cryptocurrencies are subject to the larger phenomenon of idiots, successful investing is not necessarily about trying to find projects or assets that will outperform the market, but anticipating the expectations of others. First-order thinkers try to figure out whether the currently upcoming Tier 1 network Aptos will outperform Solana, while second-order thinkers try to figure out which Blockchain the most sophisticated investors will consider best when the next cycle starts.
Think in terms of expected value
Another useful mental model to use when trying to survive bear markets and crypto investments is to practice making only positive expected value investments. In this context, the expected value (EV) is the sum of all possible values for a random variable. It is necessary to multiply each value by the probability of its occurrence.
However, considering expected value makes it easier to judge whether a particular investment is worth it. Also, it’s possible that only a small change in default variables could turn a generally positive EV trade into a negative. This means that accurately judging the probabilities of certain events occurring is essential to investment success. Beyond that, given that there are thousands of cryptocurrencies on the market and investors have a limited amount of money, it is also imperative to compare the expected values of different investment opportunities and only invest in a diversified array with the highest expected value.
Be patient in the bitcoin and altcoin winter
Patience is essential in the crypto winter. It is possible that the winter period will last longer than expected. This is mentally challenging even for the most staunch believers. The current bear market comes on the worst macroeconomic backdrop since the Great Financial Crisis. Cryptocurrencies are likely to continue falling for two to three years. Or it is entirely possible for him to trade horizontally. For investors who stay on the sidelines, it’s relatively easy to be patient. But for those who hold a significant portion of their net worth in crypto, it is quite difficult.
Also, bear markets are much less forgiving than bull markets. So not making any investments is sometimes the best move you can make. This is especially true when most cryptocurrencies in the market have dropped over 99% from their ATH levels. Bear markets are where many investors create life-changing portfolios. However, it is important to make the right moves. Also, patience, research and foresight is required to choose cryptocurrencies that will outperform the market in the next step.
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