Bear Market Coping Strategies

Happy Monday!

We’re officially in a bear market.

Interest rates are rising, Inflation is at all-time high’s over the past 30 years, crypto is falling and consumer sentiment is down. This not good.

It feels like we’re going through a negative spiral of: restricting capital —> lack of borrowing —> consumer spending falls —> companies report negative numbers —> lower income & savings levels —> less capital available for economic expansion and it continues on.

With everything going on, what are some practical strategies we can all use to handle a bear market?

For some of us, this is the first time we’re in this arena. But that’s okay, every generation must deal with the cyclical nature of the market.

Below, I’ll share my take on what’s going on and some of the strategies I’m using to cope with everything.

Let’s get to it!

How we got here:

After a brief slowdown at the beginning of the pandemic, the economy rebounded overnight. Stocks were at all-time highs, home prices kept climbing, and Crypto became the standout student in the alternative assets classroom and broke out into the mainstream. Everything was up and to the right.

It was pretty obvious the economic conditions were organised in a way that made growth inevitable:

• Interest rates have been at historic lows

• Trillions of dollars pumped into the economy via quantitative easing

• Active and ‘hot’ funding environment leading to many unprofitable companies continuing longer than they should’ve

• Companies raising at crazy valuations

All of the above led to inflation hitting record highs over the past few months, leading to a sudden increase in the cost of gas, food, mortgage interest costs and more.

In addition, the stock prices of every recent tech IPO dropped by 70%+ as growth slowed, expectations and interest rates increased and suddenly we were hearing about unsustainable companies having to shut down (*cough* Fast *cough*).

Speaking to this web3-focused newsletter, Crypto was hit hard. Terra was the beginning, now we’re hearing about cryptocurrency exchange Celsius pausing withdrawals and locking up funds as they face liquidity crises, Crypto Fund Three Arrows Capital facing insolvency and Coinbase laying off 1,000+ employees.

So in summary: 

• Times were good, and we basked in its glory

• During those good times, we got greedy and over-extended ourselves (classic humans)

• Now, we’ve hit our ‘oh shit’ moment and realize times aren’t good forever

• Prices for basic living goods are rising and we’re worried whether our paycheck will cover our next trip to the gas/petrol station

How should we cope?

In situations like this, we all have our own coping mechanisms. Things that work swimmingly for me, may cause you to stress out or ask yourselves: “why am I sitting in this sauna while my PORTFOLIO IS SINKING?!”

In times like these, it can be easy to lose hope, succumb to fear and FUD (Fear & Uncertainty), and stick our head’s in the sand.

While no two experiences will be the exact same, here are a few ideas for beating the bear:

1. Breathe 

Macro situations shouldn’t impact our health the way they do, but when we see our portfolio in free-fall, it’s hard not to be impacted by this.

Take a step back, go out in nature, take a few breaths.

Our health provides us with opportunities to explore this industry and be actively involved. 99.9% of things are recoverable, even if we’ve lost everything.

Have the perspective that there are bigger and better things out there for you, even if you lose your entire net worth.

2. Return to Fundamentals

We have to remember why we got excited about this space in the first place. What are the products and innovations that we think will be game-changing? Take the time to read some of the classics - here’s a great thread:

Take the time to rediscover your conviction.

3. Stay In the Game

Rest and remove yourself from a stressful situation, but if you truly have conviction in this space, don’t turn your back on it completely.

After 2017, I left the game for a while. I would usually ignore the news surrounding Bitcoin or Ethereum, shrug and move on.

In 2021, I was down the rabbit hole again.

After seeing how the space developed, I felt foolish for having not stuck around and not dollar-cost averaging into Ethereum/Bitcoin over the years.

If I were to do it all over again, I would keep learning, experimenting and staying up-to-date in the space, so I would’ve been ready for the 2020/2021 summers/bull runs.

4. Keep learning and adjusting your compass

There is a lot more time to think when prices go down.

One of the best things to think about is what you believe will drive and shape the return of market excitement. Soulbound tokens? Metaverse NFTs? This is your chance to build those theses.

Closing Thoughts:

I have no idea what’s going to happen to prices or even if some of the things I’ve invested in will still be around in three months, let alone a year.

What I do know is that I’m a long-term believer in the power of cryptocurrencies and digital assets to unlock a new way of organising money, information, culture and the way we live our lives.

While this is a scary time for some, if you’re ever alone, I’m always up for a chat / to bounce ideas. I see this part in some newsletters, and think: “Really? so if I email you a bunch of stuff/half vent to you, you’ll actually respond to my ramblings?!”. The answer is yes - especially if you’ve read this far!

Until next time

I hope you enjoyed this week’s edition - I'd love it if you shared it with a friend or two.

Got feedback? Reply to this email or tweet at me and let’s chat.

Fahim