Preparing for the Crypto Bear Market | Three Options for Riding the Bear
We are in the middle of an exciting bull run for all of crypto. Bitcoin has gone from under $4000 to over $60,000 in a year, and countless other coins and tokens have had incredible gains as well. Just to be clear, I do not think the bull run is anywhere close to over. If I had to throw a guess out there, I would say that sometime in the 4th quarter of this year (2021) is where to start watching for the real bear market.
While it is endless fun throwing money at various crypto projects and watching it go up by 100+% in a day, or more, this will not last forever. When you believe that we are entering a bear market, it is important to have a plan in place for how you will exit your riskier investments and prepare to ride out the downtimes. If you look back to the previous bear market, you will see that every cryptocurrency crashed in value. Many went to $0, and even of those that survived, a loss of 90% or more was not at all uncommon.
So, where are you going to move your money when the inevitable bear market hits? If you play it right, you can minimize any losses, and even position yourself to make gains through the bear market that will likely last for years. While I am certainly no expert, and this is definitely not financial advice, here are the three places I have in mind for my money when the bears come to town.
Bitcoin
This is by far the most obvious option. At this point, there is virtually no risk of Bitcoin going to $0. While a bear market will certainly cause the price to drop, it is not going to get hit as hard as other cryptos. In the previous bear market, BTC dropped by more than 80%. This, of course, is a huge loss but it is far less than other assets. In addition, the price went down at a much slower rate than many other cryptos, which means you have more time to react and make decisions on where you will move your money.
Another advantage of having your money in BTC throughout a bear market is that it is almost certainly going to be the first to start to recover. When the bull run finally ends, Bitcoin will lead the running of the bulls once again.
Fiat or Stable Coins
Getting out of crypto entirely is another option. Whether you exit into fiat currency, or just move to a stable coin like USDT, it may be possible to avoid the massive losses that are experienced throughout the market. Having your gains protected in this way will also position you well to start buying when the markets reach what you believe will be their bottom.
This option does have some risks associated with it though. First, if you cash out to fiat, you will be creating tax events. This means that depending on how much you have made in crypto, you could end up cutting a massive check to the IRS (or whatever tax agency is running your country). Another risk is that once you move money into fiat, it is a lot easier to spend. Or at least it is for me. I’d hate to move my money out of crypto to keep it safe, only to waste it all buying frivolous items.
Basic Attention Token (BAT)
The last option is one that most people won’t likely have considered (though people who have read my writings in the past won’t be surprised about). Basic Attention Token may offer an incredibly safe port in the bear market storm. Why you ask? The following are some key fundamentals of BAT that I believe will help it ride out the storm much better than other crypto:
· Proven Project — BAT is the token used by the Brave Browser. As of today, Brave has 30 million monthly users. Almost everyone absolutely loves Brave, whether they use BAT or not. Brave’s popularity is not going to decline because of a crypto bear market. The fact that it is more than a whitepaper also makes BAT leaps and bounds ahead of most other projects during a bear market.
· Buy Pressure from Outside Crypto — As long as Brave has users, they will have companies buying BAT to run ads. This means that companies that have nothing to do with crypto will be dumping money into BAT (either directly, or through Brave buying it on their behalf) every month. In the past 30 days (as of this writing) Brave has purchased 686,043 BAT. Depending on the exact price they paid, this is somewhere around $850,000 in new buys just to cover the ads. Assuming the number of Brave users continues to climb, it is very reasonable to think that $1 million per month in BAT buys will be common throughout a bear run. This will obviously help to keep the price up.
· Performance on Previous Bear Market — Prior to the current bull market, BAT’s all time high was around $.89. During the bear market, the lowest it reached was around $.11. During this time, BAT had little more than a whitepaper behind it. The browser had not yet launched (other than beta versions). Despite that, BAT lost only around 80%. Sure, 80% is terrible, but compared to many other cryptos, it wasn’t bad at all. And that is assuming you bought at the top, most people lost much less than that if they held through the bear market.
· Proven Team — Brave has one of the most impressive teams in the market. They have over 125 employees working on various projects, making it the largest team in crypto that I am aware of. Most importantly, they have the iconic Brendan Eich, who is a true genius and innovator in the tech industry.
All of these points are just looking at BAT as it is today. It is very likely that before the real bear market begins, Brave will have launched Brave Search, the Brave Wallet, the Brave Dex Aggregator, and possibly even their own DEX. All of these things will add additional value to BAT, and help it to ride out any downturn in the market much better than other options.
What do you think? Where will you be putting your crypto money when the real bear market hits?
*As I wrap up the writing on this article, I am looking at a massive dip across crypto. Bitcoin is down 15%, ETH down 7%, BAT down 14%. I do not believe that this is a sign of a bear market. In fact, I’ll be trying to time the bottom with some additional buys if I can get the money together. This massive dip, however, should serve as a good reminder that we need to be prepared for when the bears come for crypto.