To beat the bear, you have to think like the bear. Here’s how…
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Dear Bankless Nation,
If this is your first bear market, you’re probably fighting the urge to bury your head in the sand and wish that it all just goes away.
Don’t do that!
There’s a lot to be gained from engaging with Web3 in times like these — you just have to adjust your perspective.
Today, Frogmonkee offers up strategies for beginner, intermediate, and advanced crypto traders that will have you best positioned for the next bull market.
We’ve also got some words of wisdom on how to keep your mind focused.
Remember: To beat the bear, you have to think like the bear.
Let’s do it together.
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– Bankless
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First things first: are we in a bear market?
Let’s get our basic definitions aligned. Let’s consider the definition offered by our old friend Investopedia:
“A bear market is when a market experiences prolonged price declines. It typically describes a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.” – Investopedia
Okay, we have questions: What are “prolonged price declines?” How is “pessimism and negative inventor sentiment” defined? “20%” drops? That’s a bad Tuesday in crypto. In 2018, the market experienced drawbacks of 80% or more. Okay, so let’s try another way…
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David put it well when he wrote:
“Instead of trying to categorize recent price action as a bear market or not, ask yourself, does this feel like a bear market? If yes, then act accordingly. If not, then act accordingly.” – 5 reasons to be excited for the bear market
In my degen niche of crypto, I’ve noticed a tangible retraction in enthusiasm. Fewer people are apeing into new NFT projects or taking risks with small-cap tokens, while more are converting their tokens into ETH/BTC or stables.
A quick look at the market shows we’re far, far down from ATHs. According to CMC, crypto’s market cap peaked back in early November at just under $3T. As of writing, crypto sits at roughly $1.25T.
That’s a 58% fall over the span of 7 months.
Even after accounting for crypto’s volatility, we’re still looking at three times the drawdown from the 20% heuristic.
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Evaluating your risk profile
Before we dive into any strategies, I want to first talk about risk profiles. A risk profile is a tool that investors use to identify if a particular investment falls within their appetite for risk. Here are some high-level examples:
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Aggressive Risk Profile
Mostly small cap tokens, some BTC and ETH, no stables.
Willing to use protocols that have not been audited
Invests across dozens of different projects
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Moderate Risk Profile
Majority BTC and ETH, some stablecoins, and some small cap tokens
Stakes in higher yield pools, but is determined to understand the protocol first
Uses a small percentage of portfolio to ape into projects
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Conservative Risk Profile
Entirely BTC, ETH, and stables
Stables are parked in a Compound market earning low single digit yields
Does not keep more than 5-10% net worth in crypto
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Having a risk profile in mind will frame what types of investments you pursue in general. For a bear market, I’d recommend between a conservative to moderate risk profile as more aggressive risk profiles benefit from market manias indicative of bull markets.
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A few Sample portfolios for the bear market:
• Figure out your balance: stables, low risk, medium risk, & high-risk plays.
• Then decide on Projects. I created a few sample portfolios for you to look at. (education, not financial advice )
Two years, our team at First Round, led by partners Bill Trenchard and Brett Berson, began to quietly build out a program to help our founders navigate the choppy waters of follow-on fundraising.
All together, we have immense knowledge in fundraising that we’ve accrued witnessing our companies raise over 1,000 rounds and $18 billion in follow-on funding. It’s possible for startup founders to know more about almost every facet of company-building, but fundraising is one area where we’ll always be able to offer more experience.
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Realizing how well positioned we were to help, we built a program called Pitch Assist — a four to six week bootcamp for our startups that are getting ready to raise follow-on capital. At the end of the program, they emerge with a well-designed deck, a strong narrative, and a clear strategy for how to approach the fundraising process.
Unlike normal fundraising advice, Pitch Assist is an immersive program where we advise, build presentations and rehearse side-by-side with First Round founders. Trenchard, in particular, has experience on both sides of the table, having started and fundraised for 5 companies before joining the firm.
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What follows is an inside look at how we run the Pitch Assist program, and what startups everywhere can apply from what we’ve learned helping create fundraising pitches and processes for over 10 years.
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FIRST, FIX YOUR TIMELINE
Given the cyclical nature of tech and venture, there are distinctly good and bad times to raise capital. “Avoid August, the second half of November and December, when many venture firms slow down.
The year-end holidays and summer dog days are dead zones for fundraising, so why set yourself for an uphill process? July can be slow, too. You can finish your fundraising process in late July — just don’t start it then,” says Trenchard.
Small businesses have largely been ignored during the debate over digital currencies, even though they’re a hugely significant part of the U.S. economy and have much to gain from cheaper, more efficient payment systems.
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These businesses work with small margins, have less bargaining power than large companies, and suffer from cash flow problems as they wait to be paid for goods and services.
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Stablecoins and central bank digital currencies can help.
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These technologies can reduce payment processing costs, allowing small businesses to keep more of what they earn, and significantly accelerate how quickly they get paid.
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This could drastically improve small businesses’ liquidity and cash buffers, and help them survive negative economic shocks and thrive.
Fed money printer goes into reverse: What does it mean for crypto?
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What will happen to the crypto markets when quantitative tightening takes full effect and the Federal Reserve shelves the money printer?
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The United States Federal Reserve is starting the process of paring back its $9 trillion balance sheet that ballooned in recent years in a move called quantitative tightening (QT).
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Analysts from a crypto exchange and financial investment firm have conflicting opinions about whether QT, starting on Wednesday, will put an end to a decade of unprecedented growth across crypto markets.
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Laypeople can consider QT the opposite of quantitative easing (QE), or money printing, which the Fed has been engaged in since the start of the COVID-19 pandemic in 2020. Under QE conditions, more money is created and distributed while the Fed adds bonds and other treasury instruments to its balance sheet.
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The Fed plans on shrinking its balance sheet by $47.5 billion per month for the next three months. In September of this year, it plans on a $95 billion reduction. It aims to see its balance sheet reduced by $7.6 trillion by the end of 2023.
