Bear Markets: The Best Time to… Buy?
The article below is not — and does not constitute as — financial advice.
You read the title correctly. While bear markets are notorious for their red charts, growing unease, and uncertainty in the industry, they’re also arguably the best time to buy and invest in projects with solid fundamentals. So while your portfolio may be bleeding, and you’re asking yourself if your projects will live on, read more below and consider the situation at hand.
“Buy when there’s blood in the streets, even if the blood is your own.” — Baron Rothschild.
During difficult times, those of fear and uncertainty, people tend to abandon luxuries to ensure they’re able to afford necessities. In economic terms, luxury isn’t defined as a sports car or a high-end smartphone, but rather as goods and services that are unnecessary and/or have additional properties beyond their basic utility.
This doesn’t mean, however, that there isn’t a market for such goods — far from it. What it does mean is that the harsh economic circumstances are making them more difficult and unpractical to obtain. But does this mean that investing in such businesses and industries is a bad idea?
A bear market - the ideal entry point.
Such periods of hardship are merely temporary; while so are periods of prosperity and stability, they tend to last much longer than their unfavorable counterpart. This essentially means that those with the patience to wait out economic winters will be there to witness their investments blossom when spring kicks into gear.
When people, businesses, and institutions don’t have to worry about revenue, debts, liabilities… and so on, they immediately begin to look for opportunities in ideas that promise growth — but those opportunities come at a price. As indicated above, the prices of stocks and crypto are directly correlated to the confidence in the economy, and this speaks volumes about the timing of investment.
And those times look very similar to today’s market.
When investing during a bear market, you are purchasing assets at a very cheap price because you’re agreeing on taking the risks that come with such an act. Conversely, when investing during a bull market, the prices are rather high because growth is anticipated and stability is implied.
It, therefore, follows that if you invest in a project with good fundamentals, i.e. a project with real and practical use cases, one that solves an existing problem… it will more than likely pay off if it survives until the bull run. This is especially true for projects that are tried and tested, and provide a function instead of mere speculation.
Take, for instance, Bitcoin.
Some people cannot fathom how there was a time when Bitcoin was trading for a few cents, and how users were able to mine them by the dozens with nothing but a home computer — over a decade old ones at that! This is because the risks associated with Bitcoin were, at the time, very high. No such concept had been implemented before, and for all people knew, it was just worthless internet money. Once people began to realize the true value and potential of Bitcoin, its price began to appreciate at a rapid pace, and it became the best performing asset of the decade.
In the context of a bear market, Bitcoin has always managed to recover and hit all-time highs after dips and crashes. It is statistically likely to provide a positive ROE after the time span of just a year, and maximalists eagerly wait for such opportunities to purchase cheap Sats (the smallest denomination of BTC).
To further illustrate the point, let’s observe what the 2018 crash did to some of the most notable projects in the industry, and how they are doing in today’s bear market.
Ethereum: Prior to the crash, ETH went up as high as $1396. It then plummeted to as low as $84, and it wasn’t uncommon to see it below $200. At the time of writing, ETH is worth a whopping $1862 and is more than 50% down from its all-time high.
Cardano: ADA enjoyed a price of $1.11 for a very brief moment before it went into a deep slumber for around 2 years. From late 2018 to as early as mid-2020, you could have picked up ADA for about $0.04, give or take a few cents. Today, ADA is worth around $0.48 and is the 8th biggest crypto by market cap.
Monero: XMR touched a price of $469 in the final days of 2017, and after a few volatile swings, it crashed as low as below $50. As of writing, it is trading for $191, and in early 2021, reached a new all-time high of $483.
We could go on, and on… and we encourage you to explore the price history of various projects with screeners such as CoinMarketCap or CoinGecko.
What’s the key takeaway here?
Projects with a purpose tend to come back stronger than before once markets recover, and the data is there to back this claim up. The decrease in demand during bear markets isn’t due to the lack of purpose or potential in some of these projects, but simply due to external factors and the desire for stability.
What does that say for projects like Precog Finance? Well, the PCOG token isn’t out yet (for obvious reasons), however, Precog is as far from speculation as a project can get. For one, its automated trading protocol — Sentient — functions and provides returns regardless of market conditions. Cerebral on the hand — the futures and options marketplace — is a DEX that aims to support assets from multiple chains, starting with the Ethereum network.
Two purpose-built products with a well-defined focus and objective. Two protocols with multiple features and tools for traders to use, bear or bull market. Two dApps, one protocol, one token governing it all.
To make it convenient for everyone involved, we’ll be sure to launch PCOG under more suitable market conditions.
In the meantime, let us know your thoughts, or read more about the project with the links below: