The cryptocurrency markets are down. A lot.
The market cap of the entire cryptocurrency complex is down by 83% from the all-time-highs. There is also a great deal of pessimism and general negativity that is being thrown about.
Gone are the Lambo and moon memes and in their place is a strange mix of outrage, gallows humor and resignation.
So what is a cryptocurrency investor and adherent to do? How can you still make rational decisions and help with the development of the cryptocurrency space?
In this post, I will take a look at the most effective methods to take advantage of the bear market and contribute to the broader cryptocurrency ecosystem.
Stop the FUD
Yes, I know.
There are some very real concerns that people may have with the cryptocurrency complex at the moment. People expressing their concerns about the state of adoption, infighting and regulation are raising legitimate concerns. We cannot dismiss all criticism of cryptocurrencies as someone merely spreading FUD.
However, much like whether something is pornographic, you will know FUD when you see it.
News articles on financial sites that proclaim “Bitcoin is Dead“. Reddit posts that claim Bitcoin is going to zero without any supporting facts or information. Sensational statements that are trying to illicit a reaction.
In many cases, they get exactly what they are looking for. They will get the clicks from their salacious article titles. They will get the reddit Karma from all those other users who upvoted their pseudo masochistic meme.
Do not let the fearmongers cloud your judgement or thinking. Take a careful and deliberate stance when you read negative news about the prospect of crypto. Take everything with a pinch of salt as there is indeed quite a bit of salt going around.
Change Your Investment Thesis
Given that markets have changed so dramatically over the past few months, you also have to change your investment thesis. You cannot merely rely on rumors of institutional adoption from the likes of Bakkt, Fidelity, Goldman and every other bulge bracket bank on Wall Street.
It’s not going to be happening anytime soon.
Moreover, this should not really be the point. Let us not forget that the reason that Bitcoin was first developed was because Satoshi wanted to free us from the strictures of centralised finance and fractional reserve.
Your investment thesis should mostly be based on the promise of the technology.
Which projects are pushing the most code? Which ecosystems have the most enthusiastic communities? Which coins are being actively used and are solving real world problems?
By asking these questions, you are addressing the question of value. You are basing your investment thesis on those coins that are likely to offer more to the world than a meteoric price rise.
Change Your Horizon
The main problem that cryptocurrency “investors” had when they were entering the space is that they were doing it for the wrong reasons. They were looking for a simple get rich quick scheme.
For a time, it actually worked. Traders would buy some low cap obscure coin and watch their stake increase by 10-100X the initial investment. However, it was clearly not sustainable as the coins that rallied the fastest fell the fastest as well.
Short term riches should not be your focus. You should be investing with a longer-term horizon in play. Sometimes value takes time to work its way into price. The coins that get pumped on promises had no value to begin with.
Hence, once you have chosen the coins that you would like to invest in you should move them to cold storage and lock them away for a longer term HODL. Don’t let your attention be distracted by short term hiccups or euphoria.
While you are holding your coins you should check in not at the price but at the development roadmaps. You should focus on cases of real world adoption that can confirm your opinion.
Of course, this does not mean that you should never change your mind. If something has fundamentally changed in the project that warrants a different valuation then you can include that in your analysis and re-evaluate your investment horizon.
Contribute to the Cause
It is not just about buying a cryptocurrency, sending it to your cold storage and then walking away in the hope that others will use it and build on it. You should actively contribute in whatever way you can.
The beauty of cryptocurrency is that it is open source. This means that community contributions are encouraged. They also help to crowdsource talent across a global pool of really smart developers.
Can’t code? No problem, there are a number of other things that you can help with.
For example, you could help making the Bitcoin network more decentralised by running a full node. You could also do this with a number of other cryptocurrencies that rely on decentralisation for their security.
You could also help to spread the word about the project. Some of the most technically involved projects don’t have time to focus on marketing of the coin. This is where community driven efforts work so well.
Create a community twitter account or blog that aims to provide news and resources about the coin in question. The more that no-coiners and newbies are able to learn about a project from these resources, the more adoption we are likely to see.
Some of the most promising projects and cryptocurrencies are those that have a dedicated and distributed community all working towards a common cause.
We Have Been Here Before
In times like this bear market it is important to not lose sight of the forest for the trees. Bitcoin has been through similar periods of price retracement and subsequent bear market. In the end the market tends towards its long-term value.
Yes, there are likely to be a lot of shitcoins that will end up dying. There was never any value in these projects to begin with and they were inflated by pump-and-dumps and FOMO.
Much like the dot-com bubble shook out the weak internet companies, this bear market will separate the wheat from the chaff.
Emerging from the same dot-com crash were the likes of Amazon, Apple and Google. With prices at rock bottom levels, some investors picked them up on the basis of their value proposition.
If you had bought Amazon immediately post crash, you would have made 208x return on your investment. Moreover, Amazon has transformed the way we live our lives and replaced entire industries.
This is what we want from the cryptocurrency ecosystem.
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