Are we in a bear market? I asked that question when Bitcoin (BTC) dipped below $30,000 back in July last year. If so, it would have been the shortest bull market in Bitcoin’s history. It used to be you could tell by the four-year cycle. But according to the four-year cycle, the bull market should have lasted at least into September and maybe November.

Then between August and November, Bitcoin (BTC) rallied to a new all-time high (ATH) of $69,000 on November 10. Maybe the four-year cycle was back. Many experts thought it would go above 100K by the end of December. Instead, it dropped. At times it would rally but still not get anywhere near the high in November. It would drop again, and rally again. The timing, one could argue, followed the four-year cycle.

I wrote a post earlier explaining why I think the four-year cycle may be dead. If it’s not dead, it certainly does not look like anything in the past. That being said, from November on is when we would expect a bear market. It could also be because traditional markets are down, inflation, supply-chain issues, the war in Ukraine, and all of that together seems to be pointing to a recession.

I came into crypto in a bull market. Now, whatever the cause(s), it looks like I’m going through my first bear market. Strategies have to change. What do you do with your crypto in a bear market? Everyone’s situation is different, so I can’t tell you what to do. I’ll let you know what I’m doing.

Keep in mind, though, I am not a financial advisor. Everything in this article is for information or entertainment purposes only. Always do your own research.

The Bull Is in Hibernation

I’m going to skip over discussion of how the economy in general is struggling. We all know the reasons. It’s not just affecting the United States but the entire world. That obviously makes people less willing to invest in anything, so we should not be surprised at the recent downturns in traditional markets, Bitcoin, and Altcoins. Every market is affected. But there are some factors unique to Bitcoin that are affecting it on top of the general state of the economy. That is what I will focus on.

Opinions from experts vary on when the bear market started. If you believe the four-year cycle, it started on November 11. For me (in my amateur opinion), the moment I switched from “maybe” to “definitely” bear market was the recent crash of LUNA and UST. It totally wrecked some people.

But before I get into that, when people experience an extreme financial loss, their minds can go to a dark place. I don’t want to use the S-word, because some algorithms don’t like it, but it has happened with every stock market crash. If you are thinking of harming yourself, please talk to someone. The National Suicide Prevention Lifeline is available 24/7 at 1-800-273-8255. No matter how bad it looks, money can be replaced. Your life cannot. Don’t confuse your net worth with your self-worth.

I don’t mean to make anyone feel worse than they already do. But there are important lessons we can learn from this experience. I’ll talk about my experience with the Luna crash, and then get into lessons for moving forward. I think the most important lesson is you are not your money. You are not your investments. You are not your portfolio. You are a child of God, a unique human being. Don’t ever forget that.

The Fall of LUNA and UST

Terra Luna (LUNA), a recent top ten cryptocurrency, crashed. Its stablecoin, US Terra (UST), crashed with it. And when I say crashed, I mean they both went to nearly zero. Tens of billions of dollars in market capitalization just vanished in a few days. Quite a few people lost money from both LUNA and UST, because they worked in tandem. The fate of one was directly tied to the other. Some of my YouTubers are saying it was market manipulation. I can’t confirm that, but I wouldn’t be surprised. Now that big money is buying crypto, manipulation is always possible. There’s another reason never to invest more than you can afford to lose.

Some people invested way too much in it, and it wrecked their portfolios. Some even lost their life savings. In a way it is understandable. Stablecoins are supposed to be the safe play, and it was possible just a month ago to get 20% interest on UST. So naturally people thought this was a safe investment with a guaranteed return of 20%. Who wouldn’t take that?

But if your portfolio got wrecked, or you lost your life savings, that means you put much more into LUNA and/or UST than you should have. But don’t despair. Whatever you lost can be replaced. You can come back stronger if you take the lessons of this experience to heart.

My Experience with LUNA

I dipped my toes into LUNA and UST. I bought LUNA at about $52. Within two weeks it was up to $92. When it reached $104, I should have sold half of it to make back my investment. Then what happened to the other half wouldn’t have hurt. Of course, if I knew what was coming I would have sold all of it.

But I not only held, I bought more, because when you see it going up like that and everyone in the crypto community is high on the project, you think it will keep going up. There was a certain minimum I wanted to have for my portfolio, and I had it. Yay!

On May 9 LUNA started crashing, from a price of $64 to now less than a penny.

It was a top 10 crypto in market capitalization. Now, I don’t know where it is in the rankings, and I don’t care. UST was put out by the same organization, Terra Luna Labs. I tried that, too.

My Experience with UST

I wanted to take advantage of the 20% return on UST, but I had to do some research to find out where and how to do it. UST is a stablecoin backed by LUNA. In case you don’t know, stablecoins are cryptocurrencies that are designed to keep their value at $1.00. They may fluctuate a fraction of a penny, or even a penny or two. But if it’s working properly, the price will always come back to $1.00. It should have been a safe play.

When I first saw LUNA and UST dropping, I did not realize how bad it was. I saw UST at $0.89, obviously much lower than it should have been.

This has been known to happen occasionally with other stablecoins, but with them it was temporary. I bought a little, figuring when it got back to a dollar, I could make some profit. But a little more research showed me just how much trouble they were in, so I sold at $0.70. Even though it was a loss of 20%, it was the right move, because UST is now trading at less than a dime.

I wasn’t able to sell my LUNA. Every time I tried, the order would not go through. That can happen in a crash, because in order to sell you need a buyer. Who wants to buy something that is dying a quick death? Keep that in mind when you do your risk evaluation.

Many crypto experts are doing autopsies on it. To listen to them now, it should have been obvious this crash was coming. However, only a handful of experts predicted this would happen. Let this be an object lesson that investment always carries some risk, so NEVER INVEST MORE THAN YOU CAN AFFORD TO LOSE.

And the problem is bigger than LUNA and UST. In the same time LUNA dropped to zero, the whole crypto market lost over $300 billion, with Bitcoin dropping 15% from before the crash.

A Little Hope

Do Kwon, the founder, is trying to fix LUNA and UST and bring it back, and he seems to want to find some way to help investors who got wrecked. That means there is still a chance people can recoup their losses and even make a profit if they are patient. But I don’t have the same confidence in him that I did before the crash. Whatever he comes up with, I will probably stay away from. But if he offers a way to reimburse some of my losses, I’ll take that. There is talk of a “new LUNA” that will include an airdrop to those held the “old LUNA” before the crash, so maybe we can still recover something.

Regulation Coming

There is one more issue I need to address. LUNA and UST may not recover, but the crypto market almost certainly will. It has survived much worse than this. What concerns me more is bad regulation that could come in the wake of this. Treasury Secretary Janet Yellen is calling for sweeping federal regulation of stablecoins. SEC Chairman Gary Ginsler wants to call almost every crypto a security, so he can regulate it. He has already said stablecoins are securities, which makes no sense. And of course he is in the spotlight with the SEC’s lawsuit against Ripple Labs, the creators of the XRP cryptocurrency. The uncertainty around what’s coming makes me nervous.

I am not an anarchist. I don’t mind regulation. Like most people in the crypto community, I just want clarity, fairness, and common sense. Given the track records of Yellen, Congress, and especially Ginsler, I don’t have much confidence that is what we’ll get.

An Ounce of Prevention

Before investing in anything, here are a few rules to remember.

First, recognize that is a risky game to begin with. Before you invest in anything, ask yourself, am I okay if this goes to zero? With each Altcoin, the chance of going to zero varies. I think Bitcoin has been around long enough that the chance of it going to zero is virtually nil. But even with Bitcoin I ask myself that before I buy. If the answer is no, that means I’m investing more than I can afford to lose. Either spend less or move on to something else.

Second, you can protect yourself by taking profit, meaning when you have a chance to sell at a decent profit, take it. Between September 2020 and April 2021, I was able to let my Altcoins double in value, then sell half. That way I recovered my investment, and whatever I could gain after that was gravy. That is pretty easy in a bull market. But in a bear market, you may need to think in terms of 10, 20, or 30% profit.

Third, use stop-losses. If you don’t know what that means, it means you need to educate yourself before you even think about investing.

Fourth, NEVER INVEST MORE THAN YOU CAN AFFORD TO LOSE.

Fifth, don’t put all your eggs in one basket. Professionals tell you to diversify your portfolio, and that goes for crypto, too. Putting all your money into one or two Altcoins is like putting it all into lottery tickets.

Help! My Crypto Is Down!

Even if you take those steps, at some point your crypto will go down in value. You have three choices:

1. Sell at a loss.
2. Hold until the market goes up again.
3. Trade for a better crypto.

Let’s talk about each of them.

Sell at a Loss

Sometimes that is your best option. For Bitcoin, I think holding is usually the right move, unless you need to pay some bills (not financial advice). But with Altcoins, you need to be ready to sell. I learned the hard way “hodling” is for Bitcoin, not Altcoins (with maybe a few exceptions). From now on, I’m taking profits when I can. And if that Altcoin turns out to be a Sh*tcoin, go ahead and take the loss.

It was no fun selling my UST at a 20% loss, but it was absolutely the right move, especially considering it’s trading at less than a dime now. I would gladly have sold my LUNA at any price, but now it’s totally worthless.  

Professional investors have this already built into their strategy. When they take a chance on a risky investment, they put in a stop-loss. That means you can set it up where if the price drops, say, 20%, it will sell automatically. That will keep you from getting wrecked.

Selling at a loss is no fun, but sometimes it is better to cut your losses than stay in a sinking ship.

Hold until the Market Goes up Again

There are nearly 20,000 Altcoins listed on coinmarketcap.com. Many if not most will not survive the bear market. The few that do, however, will gain more than BTC, simply because they are smaller and have more room to grow. Knowing that makes people sometimes hang on to losing Altcoins longer than they should. Myself included.

I am holding (or “hodling”) my Bitcoin no matter what happens. Except if the price goes above 100K, I might sell a small percentage, because you always need cash. I believe Bitcoin has the fundamentals to survive the bear market and take off again in the next bull market. That is also true of a few Altcoins. There are a few I’m holding on to, even though my investments currently are in the red. If I need the cash, I might sell to pay bills and wait to re-invest when I’m better situated financially. This bear market is likely to last for a while, so if it’s a good project, you will get another chance.

It’s okay to sell your Altcoins, whether to take profit or cut your losses. But if your research tells you the project is solid and a good long-term investment, it’s okay to hold too.

Trade for a Better Crypto (or Other Investment)

Everything in the crypto market went south between May and July of last year. It caught me by surprise. According to the four-year cycle, we should have still been in a bull market. I had small investments in probably twenty different Altcoins. Bitcoin dipped hard in May because of FUD from Elon Musk, and my Altcoins dipped shortly after. I was looking at selling everything at a loss.

With most of them, instead of selling I traded them for Bitcoin. All those investments had lost value relative to the dollar. But Bitcoin rose and fell in tandem with them, so their value relative to Bitcoin was still roughly the same. It didn’t feel like a loss because of that, and because when Bitcoin pumped again, I recovered those losses. Well, I would have if I had sold. More on that in another post.

That looks like the situation we’re in now as well. There is always some risk. But in a bear market, I’ll take my chances with Bitcoin over any Altcoin. It has been around for thirteen years, longer than any other crypto. It has seen multiple bull markets, bear markets, and black swan events, and it is still here. Even when it dumps, it dumps less than Altcoins. It is the most secure network anyone has ever built. No one who has ever bought and held for at least four years has lost money. How many investments can say that? In fact, I am almost to the point where I’ll take my chances with Bitcoin over any other investment period.

So if your Altcoins have lost their shine, I always think trading for Bitcoin is a good move (Again, not financial advice).

Moving from Risk-on to Risk-off

Also in a bear market, you need to be more conservative with your investments in general. Professional traders and investors use the terms risk-on and risk-off. Risk-on refers to assets that are new, speculative, and could bring either great gains or big losses. In other words, risky. Risk-off refers to assets that have been time-tested, are less volatile, and likely to bring smaller gains but also smaller losses if the market goes down. Ask your financial advisor what that means in practical terms.

In a bull market, you can make great profits with risk-on investments. But in a bear market, the professionals will move their money out of risk-on investments and into either risk-off or cash. More traditional investors are selling their Bitcoin than they have in recent months, because they consider it a risk-on investment. Personally, I would call BTC a risk-off investment (for reasons stated above), but I’m not a professional. Talk to a financial advisor about it first and do your own research.

But traditional investors moving away from BTC is another indication we have entered a bear market, so you may want to consider stocking up on more traditional investments for now. We are likely in for a rough few months. Crypto Jebb saw a bear flag formation on the charts that could mean BTC is going down to $20,000. You don’t have to know what that means.

Just know that it’s possible. In the past, BTC has dropped as much as 85% from previous highs during bear markets. We saw a high of $69,000 November. A drop of 85% would take it to $10,350. All of that to say even though the price has stabilized for now, we may not have seen the bottom yet. Add to that the challenges of inflation, the supply chain issues, whales possibly manipulating the markets, the war in Ukraine, regulatory uncertainty, and a natural bear market on top of that means, well, I don’t know what it means, but it won’t be good most likely. If nothing else, I think we can still count on another bull market after the next BTC halving, which is estimated to take place in May, 2024.

But just as bull markets present opportunities that don’t exist in bear markets, bear markets present opportunities that don’t exist in bull markets.

The Silver Lining

The silver lining of any bear market is that if you can identify good long-term investments, now is a time to buy the dip. Back in October and the beginning of November, people were saying, “I wish Bitcoin would dip, so I could buy some.” What do you think this is? Bitcoin is settled at about $30,000 for now. That is over 50% off from the previous high of $69,000. If that’s not a dip, what is? But remember, only buy if you are not going to need the money any time soon. It could be a while before the bull market returns.

But what if it goes down further?

Buy it again. (Not financial advice). As Warren Buffett says, “Be fearful when others are greedy. Be greedy when others are fearful.” In other words, sell when most people are buying. Buy when most people are selling. Of course, that only applies to long-term investments. If you think BTC is a good long-term investment, now is a great time to accumulate.

My preferred strategy for buying is dollar cost averaging (DCA). This is like if your employer offers a 401K. The best way to invest is to have it deducted from your paycheck automatically. That way, you don’t miss it. DCA works the same way. You set up with an exchange to buy automatically on a regular schedule. Some weeks it is lower, some weeks it is higher, but on average I am getting a good price.

I started with $10/week of Bitcoin. Even on a tight budget, you can probably work that out. I don’t know your situation, but there is probably something you can sacrifice to get started purchasing something for your future. Coinbase and Gemini are two exchanges that let you set up recurring buys (same as DCA). Their transaction fees are pretty high, though.

There is a service called Deltabadger that will allow you to avoid most transaction fees on your DCA. You can go on their website to see which exchanges you can work with. I use Coinbase Pro, but there are several others. If you sign up with this link, you will save 10% off your first purchase. And you don’t have to pay at all until you buy $1200 worth.

Sign up for Delta Badger here.

If you want a more detailed account of what happened with LUNA and UST, you can watch this.

Thanks for reading. I hope this was helpful. How are you feeling right now? Are you hodling or selling? Which projects do you think will survive the bear market? Which ones won’t? Let me know what you think in the comments.