The year has been terrible for cryptocurrency investors. Bitcoin and other digital assets have been battered by macroeconomic unrest, suffering a decline that has sent many of last year’s new crypto adopters running for the exit. After an extended market rally saw the global cryptocurrency market capitalization top $3 trillion in late 2021, Bitcoin and other digital assets have experienced a decline. Currently, the market is valued slightly under $1 trillion, and both Bitcoin and Ethereum are selling at prices that are more than 70% below their all-time highs.
Even the most enthusiastic supporters of cryptocurrency have been put to the test this year, but early adopters have grown accustomed to extremely high volatility in both directions. The popularity of cryptocurrencies has historically increased every four years as more people become aware of the technology and enthusiasm increases, but these booms have always been followed by devastating crashes. These periods of decline, which have come to be known as “crypto winter” phases, are characterized by sharp drops in interest and market activity, as well as project washouts and massive selloffs. Bear markets may not be welcomed by many crypto enthusiasts, but they can be a great chance to rest and assess the situation before the next market cycle. Here are our top five suggestions for navigating the current crypto winter. Those who adhere to them ought to be in a good position to prosper once cryptocurrency gains traction.
Stay put through the crypto winter
Although the crypto winter can be difficult, it’s vital to remember that many people actually become truly wealthy during downturn markets. Due to two factors, this is especially true with crypto.
One is that bear markets wipe out projects with weak fundamentals, poor product-market fit, or blatant frauds. The market shifts its attention away from price action, promotion, and excitement and toward product and business development at the same time. Solana, Cosmos, and Uniswap are just a few of the top cryptocurrency projects that were developed and introduced during bear markets. The second-largest cryptocurrency in the world, Ethereum, was introduced in the midst of the bear market for Bitcoin in 2015 and traded below $10 until the 2017 bull market. At the end of the cycle, in January 2018, Ethereum reached a peak price of $1,430, generating incredible returns for early investors.
This brings up the second factor that makes hanging on essential for making it through the crypto winter and flourishing in the following cycle. When they are “greater fool” assets, many respectable cryptocurrencies are incorrectly referred to as Ponzi schemes. According to the larger fool idea in finance, investors can occasionally profit from “overvalued” assets by later selling them to a buyer (the “fool”) for a higher price. This psychological phenomena causes economic booms, which are followed by significant corrections, and is exacerbated by herd mentality. And while this applies to all markets, crypto assets are more vulnerable, emphasizing the value of being early.
Being a pioneer in the cryptocurrency space also entails remaining active, learning, and market-aware even when the sector is going through a bad cycle. Those who persevered through the 2014–2016 bear market were among the most successful investors in the 2017 bull run. Similar to how many people who prospered in 2021 persevered through the challenging downturn of 2018, 2019, and 2020. The most important element for success when the market flips around is perseverance.
Re-evaluate your thesis
Although losing money is never enjoyable, it can be a great lesson. Investors should take advantage of the crypto winter to review their investing strategy, learn from any mistakes they made during the previous cycle, and get ready for the next leg up.
Different things could be indicated by an asset or an entire asset class falling 70% from all-time highs. An investor may need to reconsider their strategy and rebuild their portfolio in order to better reflect the new reality if they experience a big drop in their portfolio, for instance, which could indicate that the market has rejected their investment thesis. If this is the case, it could be wise to sell at a loss and make other investments.
A sizable drawdown, however, does not automatically imply that an investor’s investing thesis has been proven false. Instead, it can be a great chance to go all in. For instance, investors who appreciated a cryptocurrency at $1,000 should like it even more at $200 if its fundamentals improve. The price of an asset declining doesn’t always mean it’s a bad investment. Despite improving fundamentals, an asset may briefly drop for a variety of causes, many of which are exogenous or unrelated. The task of an investor is to pinpoint these market inefficiencies, purchase assets that are momentarily undervalued, and then sell them at a better price once the markets have caught up.
Use second-order reasoning
Every crypto bull cycle is brought about by a number of catalysts and is surrounded by a variety of stories. Initial Coin Offerings on Ethereum and the idea that “blockchain, not Bitcoin” defined the 2017 bull run saw firms generate millions of dollars by selling tokens that were largely useless and made bogus claims about tokenizing and decentralizing everything. The last bull run began with the halving of Bitcoin in 2020, which came at the same time as the enormous post-pandemic money printing that highlighted its importance as the top inflation hedging asset. The cycle continued with the explosion of food-related decentralized applications on Ethereum at a time that came to be known as “DeFi summer,” followed a year later by the mainstream explosion of NFTs that gave rise to “NFT summer.” Alternative Layer 1 networks Terra, Solana, and Avalanche experienced a quick ascent and decline at the end of the 2021 cycle.
Latecomers who couldn’t forecast where the puck was heading fared worse than those who were effective in predicting the prevalent storylines.
Predicting the prevailing narratives of the next cycle involves profound contemplation or second-order thinking that takes into account the long-term effects of numerous pertinent causally connected events. The game of investing is comparable to Keynes’ famed beauty contest in this way since investors must predict what other investors will think rather than their own opinions.
Given that cryptocurrencies are prone to the greater fools phenomena, successful investing is more about predicting other people’s expectations than it is about trying to uncover ideas or assets that would exceed the market. Second-order thinkers are attempting to predict which blockchain the majority of naive investors will believe is best when the next cycle begins, whereas first-order thinkers may presently be attempting to predict whether the future Layer 1 network Aptos will outperform Solana.
Utilize the concept of expected value
Making only assets with positive expected value is a valuable mental model to utilize when trying to withstand down markets and investing in cryptocurrencies. The expected value (EV) in this context is the product of all potential values for a random variable, each value multiplied by the likelihood that it will occur.
Assume an investor is thinking about investing $1,000 in token X. A small-cap cryptocurrency with a high degree of volatility, the in question token has a 95% probability of dropping to $0 and a 5% chance of rising to $25,000 in value. The following equation might be used to determine the expected return on this investment:
EV = (-$1,000 x 0.95) + ($25,000 x 0.05) = $300
This indicates that the expected value of the bet is positive and that, on average, the investor would make $300 per investment if they continued to stake $1,000 on bets with the same odds eternally. Simply put, if they invested $100,000 in 100 assets, lost the entire amount in 95 of them (Minus$95,000), and made a 2,400% profit on five of them (5 x $25,000 = $125,000), they would make a $30,000 profit ($125,000 – $95,000).
While taking into account anticipated value makes it simpler to determine whether a certain investment is worthwhile, even a little change in the factors that are assumed can frequently make a positive EV trade turn negative. This implies that accurate estimation of the likelihood of various occurrences occurring is crucial for successful investment. Beyond that, it’s crucial to compare the expected values of various investment opportunities and only invest in a diversified group of those with the highest expected value because there are hundreds of cryptocurrencies on the market and investors have a limited amount of money.
As an illustration, let’s say an investor has a choice between investing $1,000 in Bitcoin or Ethereum at their current market prices and believes both have the same 50% chance of either dropping to zero or rising to their former all-time highs. In that instance, they can determine which investment has a better anticipated value by calculating it for both. Given that it would need to increase more than Bitcoin in order to achieve its prior all-time high price, Ethereum has a little greater predicted value in this situation.
Patience is key
The crypto winter is a time for patience. Even the most devoted believers may find the winter season to be mentally taxing because it sometimes lasts longer than anticipated. The Great Financial Crisis’ worst macroeconomic conditions since then are the backdrop for the present bear market. Cryptocurrencies may continue to fall or trade sideways for a period of two to three years. It might be simple for individuals who aren’t actively trading, but it can be very difficult for those whose net worth is heavily invested in cryptocurrencies.
Additionally, bear markets are considerably less forgiving than bull markets, so sometimes staying out of the market is the wisest course of action. This is particularly true given that the majority of cryptocurrencies now available are down by more than 99% from their all-time highs. Many investors create portfolios that change their lives during bear markets, but to make the proper decisions and choose the cryptocurrencies that will outperform the market during the next leg up, patience, research, and foresight are required.
The crypto market is not for the faint of heart, as this year has demonstrated. Cryptocurrencies can soar to incredible heights during bull runs thanks to upside volatility, but they can crash just as hard during protracted downturns. However, the biggest winners in the field to far have typically been those who adopt a long-term attitude and learn to appreciate downturns. If cryptocurrency doesn’t disappear, investors can get ready for the next rally by using the advice provided in this section. Despite the fact that we are in a crypto winter, the fundamentals remain the same. Anyone who has the big picture in mind will fare considerably better during crypto winter.
Are there any tokens that can still do well in a bear market?
It is a question in everyone’s mind – during wintertime, is there anything you can invest in, that can still do well, in the short, medium or long-term?
One of the very promising projects we have on our list is IMPT.io, a brand-new project in the area of green technology, focused on using blockchain to create a more sustainable world. This blockchain-based ecosystem aims to transform the opaque carbon credit market by incentivizing individuals and companies to reduce CO2 emissions.
IMPT’s primary service is streamlining the process of obtaining and trading carbon credits, which play a fundamental role in the fight against climate change. These carbon credits are essentially contracts that allow the holder to emit a specific amount of CO2 into the atmosphere. Each carbon credit typically relates to one ton of carbon dioxide emissions.
As noted in IMPT’s whitepaper, the volume of carbon credits required globally is expected to increase at least 20-fold by 2035. This increase in demand necessitates a safe and transparent marketplace that allows individuals and companies to work together for the common good.
IMPT raises over $5 million in the first two weeks of the presale
The presale for IMPT has commenced, and the project has already managed to successfully sell out almost $5 million. As the presale progresses, the price will steadily rise, meaning that the earliest buyers are the ones who will end with the best deal.
While there was a brief early adopter sale, right now, IMPT is in its first presale phase with IMPT tokens being sold for just $0.018. There are a total of 600,000,000 tokens (3 billion IMPT is the max supply) up for grabs during this round, with a further 660 million to be sold for $0.023 during round two, and another 540 million to be sold during the third and final presale phase for $0.0280.
Earn cash back in IMPT on spending
One of the main incentives for people use IMPT is the fact that they are able to earn cashback on spending.
Every time someone makes a purchase through the platform, they can opt to become part of the solution for high carbon emissions, by earning IMPT tokens in return. Those who earn IMPT can then choose to use the tokens to acquire carbon credits as NFTs.
Over 10,000 brands have agreed to join IMPT.io
One of the main claims that the project makes on their website is how pleased they are to have such a large array of brands on board with their vision. Thus far, according to their website, over 10,000 brands have agreed to join IMPT.io and to work with them in the future as part of their mission to reduce emissions.
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