Letter 78: Preparing for the bear market

8 things to think about for whenever the next bear market hits

This Letter isn’t meant to be alarmist in any way shape or form — I have no idea if we’re close to a bear market, or how severe it’ll be when it does hit — but I do know that there will eventually be one.

I think it’s important to have a plan for all market conditions. Bull, bear, sideways chop, and all variations of these. It doesn’t have to be super detailed, even a simple high-level plan can be good enough. But without a plan, you’re almost certainly going to be misplaying future markets and leaving money on the table.

I had the idea for this Letter because the other day I came across an NFT I wanted to buy, but the price was too high to justify picking up right now. This happens fairly often, especially when the market has been bullish for a while. Aside from putting out the occasional super lowball bid on things like these, I will also add them to a wishlist of things I want to buy during the next bear market.

This is one of the ways I am planning for the next bear. I’ll go into more detail below, as well as discuss 7 other things I think are worth keeping in mind for whenever the darker times do end up hitting.

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1. Create a wish list for NFTs

As mentioned, I have been putting together a buy list for future bearish times. It’s important to note that this is not a foolproof plan — some of the things on this list quite literally may never trade below their current prices again.

I don’t expect to be able to buy everything on my list, and I wouldn’t be able to afford to buy everything on it anyway. But it’s a list of things for me to check in on periodically and see if the prices are appealing to me — either from an investment perspective, or from a pure “I like the art and want to own this NFT at this price” perspective”.

Having the list serves an additional purpose: it helps to fight against fomo. While it’s not as good as buying the thing to make the fomo dissipate, it’s usually “good enough”, and knowing that you’re most likely going to be able to buy the thing at a discount some time in the future goes a long way to fighting the fomo.

2. Create a wish list for fungible tokens

This is a distinctly different category to the wish list of NFTs for one primary reason: sometimes with NFTs I buy them because I love them, and there’s no financial incentive in mind. I never buy a fungible token purely out of the love of the code or something like that — I am always looking to make a profit here.

Also the unit count makes a difference. With NFTs, it is often all or nothing (you either buy 1, or buy 0). With fungible tokens, you can employ dollar cost average strategies and buy partial amounts at various different prices.

Most of the tokens on this list are, unsurprisingly, tokens I already hold. These are the tokens I am bullish on and think will do well long term — but being a realist, I know there will likely be a point in time when crypto crashes or significantly corrects, and I will be able to buy these tokens at significant discounts to their current prices.

This list includes my current main holdings: BTC, ETH, HYPE, REKT, PENGU. But it also includes some high marketcap tokens that I don’t hold: SOL and XRP being the two primary examples.

From a trader’s perspective, you want to be looking at investments from multiple angles and timeframes. Would I want to hold XRP for 10 years? Probably not. Do I want to hold it now, at current prices? Not really. Do I think it’ll make a good investment if it crashes? Most certainly! Especially if it crashes much more than some of the other tokens on this list.

I think there will be points in time where the greatest opportunity in the market is in an XRP, or in a SOL, or a PENGU, or an ETH, or a BTC. Keeping this in mind for the bear market will allow you to make some of the greatest gains you can make in crypto, especially considering these are the tokens you can effectively buy with unlimited size.

It’s not always easy or possible to full port into an NFT collection or a meme coin. It’s always possible to full port into Bitcoin.

3. Understand that yields will go down