Is This The End of The Crypto Bull Market?

The past few weeks was a mixture of chaos, fear, euphoria and more importantly, the market was becoming extremely irrational which left many confused and angry.

So what exactly happened? To sum it up, it was due to a few contributing factors:

1. Elon Musk’s Tweets and SNL

2. China Banning of Crypto FUD

3. Mainstream Media Coordinated Attacks on Crypto

4. Crypto Whales unloading their Bitcoin bags

Not only did the sell off cause a shock wave in the crypto markets, it also had a ripple effect on crypto-related public companies such as Coinbase, Riot Blockchain and Microstrategy.

For those not in the loop, we saw cascading liquidation of leveraged longs during this sell off and over-leveraged traders who got margin called at every level along the correction.

Basically, those that were on margin and borrowed too aggressively were punished. Leverage is a double-edged sword, if you do not have sufficient collaterals or do not know what you are doing, it is best to stay away from leverage as you can magnify your losses.

Leverage aside, if you are simply investing your own money into crypto, there should be nothing to worry about as you will not be forced to sell or add more collateral. However, first time investors might be afraid of the volatility and sold off due to panic instead.

Without huge volatility, don’t expect handsome returns.

The price to pay for massive market beating returns and alpha is dependent on whether you can withstand huge amount of volatility.

This is why small cap stocks tend to do better than large cap stocks but is risker because of the volatility. The same thing here applies to crypto.

The reason why crypto returns are so attractive and typically outperforms stocks over time is because crypto is way more volatile as an asset class than stocks.

After all, it is still in its early stages of adoption and therefore market volatility is expected and it is normal.

Brief Market Overview

Panic selling crushed the entire crypto market, which sent Bitcoin’s price to $30,000 for the first time since February. However, on chain data shows that Bitcoin whales bought the dip.

Notice the volume of Bitcoin outflows from crypto exchanges? Yup, the whales were loading up while people were panic selling.

Cheaper Bitcoin are transferring from weak hands over to strong hands.

To put things into perspective, this is the buying volume compared since June 2020 below.

This market downturn also sparked outages and other delays across a few of the top crypto exchanges such as Coinbase, Binance, Bitfinex, Huobi, Gemini and more.

Binance even had to halt Ethereum withdrawals due to a spike in gas fees while Gemini app crashed during periods of high volatility.

Prices of most Altcoins basically went free fall and even Ethereum fell to a low of $1900.

This was also the same moment the crypto nay-sayers and boomers were celebrating and telling people that Bitcoin is going down to $0.

Not only is this nonsensical, it is hilarious considering they don’t even understand the asset class and making baseless claims that Bitcoin will go to zero.

If it goes to zero, that means no one on Earth owns Bitcoin and miners stop mining, that only happens if the entire internet shuts down.

Is the bull market over? In my view, it is far from over.

While history does not repeat itself, it often rhymes. When it comes to crypto cycles, it is usually a 4 year cycle due to Bitcoin’s halving schedule.

We are in the midst of a massive adoption cycle where institutions world wide are preparing to set up crypto hedge funds, crypto custody services and even Morgan Stanley is training and educating 3000 over financial advisors about Bitcoin so they can start selling crypto products to their clients over in the US.

With Bitcoin and Ethereum ETFs still in progress of being released, while public companies continue to load up Bitcoin into their treasury and billionaires around the world slowly learning about the potential of crypto while naysayers continue to believe mainstream media about the dangers of crypto. The future is bright for the blockchain industry.

Decentralised Finance is also gaining traction and we see record volume and Total Value Locked in DeFi continues to rise every day.

Even banks are rushing to get into DeFi to get a taste of the alpha and mind-boggling 3 digit interest rates which makes bank accounts obsolete.

Even governments and central banks are trying to make a move into digital currency by creating their own Central Bank Digital Currency (CBDC) with China as the first-mover after announcing that they are issuing the digital Yuan (e-CNY).

Lets take a look at the current cycle compared to 2017:

Crypto cycles may or may not repeat itself but again history often rhymes. Is the bull market over? I don’t think so.

Now lets look at the 2013 cycle:

I leave you to decide for yourself on what this means but just remember to have a proper entry and exit strategy in place.

During the crash, literally nothing changed about Bitcoin or Ethereum or any other fundamentally strong coin, and again I reiterate that volatility is part and parcel of investing into any asset class and that includes crypto.

If you cannot stomach the volatility then crypto is really not for you. Your risk appetite does not equate to your risk profile and if you are affected, that means you are over-invested and you should stick to lower volatility investments but also expect lower returns as a result.

Things I did during the crash

During the liquidation phase, most of my crypto assets are yield farming in Binance Smart Chain and Fantom Opera.

I did not do much and was HODL-ing as none of the crypto I hold is a shitcoin, so I was just happily earning yields but of course the token prices were down but I wasn’t planning to sell anything at all.

When Ethereum dropped to below $3000 however, I swapped some of my Bitcoin into Ethereum and I managed to accumulate more Ether than before.

Unfortunately I did not have Stablecoins when the market was crashing so I was unable to buy more of the dip. So lesson learnt here is to always have a small allocation to cash and Stablecoins to buy the dip.

I also wanted to get rid of my BAND and ZIL tokens but they were being locked up and staked in the blockchain and hence I decided to just let it be and just sit this correction out.

No matter what, I am earning more yield on my crypto so I was not too affected by it. I do wish that I was able to buy more since the last time a drop of this magnitude last happened in March 2020.

Moving Forward

Ultimately, such a correction is inevitable and part and parcel of investing into crypto. Even as I am still bullish about the asset class over the long run, the bear market will eventually come, so I am thinking of a proper exit strategy right now.

While I do believe that Bitcoin will eventually recover and go on to hit $70K or more due to more price catalyst in the next few months, I will be cautiously accumulating but at the same time start to build up a Stablecoin allocation to buy any impending dip or even prepare myself for the bear market when it comes eventually.

The current correction is still a great opportunity to load up but one needs to understand what they are buying to justify it as an investment. The bottom for Bitcoin is probably $30K but a drop to $20K will not be surprising since $20K is the next level of support.

Ultimately, crypto investors should be focused on the fundamentals of a project, and should refrain from speculative coins such as Doge, SHIBA Inu Coin or Safemoon which are fuelled by hype so unless you know what you are doing, then its better to stay away because you will most likely lose money from it.

I will just leave a quote I really like by Su Zhu, CEO of Three Arrows Capital below:

"If you don't understand crypto and refuse to learn, it's gonna be a tough century for you."

Thats it for now! If you have any question, do drop a comment below! Cheers and buy the dip!

And of course, none of these are financial advice. Please DYOR!

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Alright that’s it! For now, think long term, tune out the noise and avoid the temptation of gambling meme stocks, think of the companies that will do well in the long run simply find bargains/dollar cost into your positions. If you need some inspiration for companies to research, you can check out my post on 5 stocks to buy if the market crashes here.

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