5 Tips to Win in a Bear Market
Lessons from previous cycles and how to stay ahead of the curve.
Lessons From ‘Crypto Winter’ of 2018
I remember the previous crypto bear market after the ICO bubble burst in early 2018. It was striking similar to this one, with most alts going to zero, and the better performing ones down 75-80%. Most never recovered.
I was still relatively new to crypto and felt dumbfounded. All the hype seemingly evaporated overnight and in some cases I was left holding the bag.
I temporarily lost interest, but never lost faith. After a short break from crypto and markets altogether, I came back inspired. I literally spent thousands of hours over the next few years in crypto, finance, and markets, despite nothing seeming to happen, at least on the crypto front.
That time prepared me for the bull run of 2021, where I capitalized. Seneca says that ‘luck is where preparation meets opportunity.’
I firmly believe the opportunity will come again, so the question is, will you be prepared when it does?
Here are the five key steps I took during the previous bear market and how you can apply them today to crush it going forward!
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Compiling these lessons in a simple digestible format, then scripting, filming and editing the video, and finally publishing this content, took my team and I about 10 hours. If you found this valuable, consider subscribing.
#5: Build a Solid Network
When I first became a poker pro, I realized I needed a support group to hold me accountable, help me grow and learn from each other.
I went to a popular tournament in the Bahamas and met other aspiring pros just like me. Some became lifelong friends, and I’m confident I wouldn’t be where I am today without their inspiration, support, guidance and knowledge. I like to think we helped each other get to where we are.
Poker and crypto are strikingly similar. On the surface, both playing and investing seem like individual activities, whereas in reality, both are team sports. While it’s true that ultimately I end up making all my own bets on the table and trades in the markets, the support, ideation and guidance of my network allows me to succeed at the higher levels.
In markets in particular, especially crypto, it’s all too easy to get swept away by the current, caught in the hype or lose objectivity when making bets. Simply running a trade, bet or idea by someone I trust has saved me thousands of dollars over the years. Of course, my savvy investor circle alerts each other about opportunities too.
Action Item: Start Networking
There are many ways to network in the crypto space. You can join a Telegram group, Discord, Meet Up Group, or my personal favorite, visit a conference.
Covid has shown there’s nothing like connecting in person, the way humans are meant to build relationships. Attending live poker tournaments was the single most important step toward my success in poker, and I believe the same is true for crypto and finance.
One single relationship can be worth the entire effort and cost. If you’d like to join me at a crypto event, I’m heading to Pacific Bitcoin on November 10th in LA. Join me and thousands of others speakers, influencers and crypto enthusiasts looking to network, connect, invest, and build in the crypto space.
I’ll likely be hosting a meet up there as well. Simply leave a comment, reply to this email, or DM me on Twitter, Instagram or Telegram if you’d like to connect.
(I’m @AlecTorelli everywhere - beware of scammers).
#4: Educate Yourself
I spent most of the bear market learning about crypto, the history of money, macro economics, and how everything ties together. It took thousands of hours, and was often painful, but not a second was wasted.
When the bull market came, I was experienced and educated. My understanding about narratives, bubbles, and market cycles, coupled with my experience from the previous crypto bull run helped me navigate the market. I still made mistakes, of course, and have a lot more to learn, but overall I fared well.
I focused on the big picture and where we were in the overall cycle, which led me to start selling back in December of 2021 and move into stables, where I’ve largely been ever since. I avoided most of the downturn, and didn’t get caught holding the bag, as I did back in 2018.
This was only possible because of the time and work I put in.
Action Item: Start Learning
A good place to start is my series The Future of Money.
Read The Bitcoin Standard by Saifedean Ammous.
Learn about market cycles in The Changing World Order by Ray Dalio.
Find a crypto podcast you enjoy.
Discover a crypto YouTube.
#3: Spot Upcoming Trends
Crypto is incredibly narrative driven. The market converges around an idea, hypes it up to extreme levels (often reflected in the price action of a niche), and then it all comes crashing down once people realize the time horizon to deliver on the promises will take years, not days.
I’ve seen this play out time and again across niches within crypto, from NFTs and Play to Earn Gaming, to Metaverse projects and social tokens, to Layer 1 (ETH Killers) and Layer 2’s.
What I look for during my research phase is what the market believes the next trend will be. As a short term trader (which I don’t recommend for 95% of people), I don’t care if this narrative will actually play out in the timeline or way the market believes.
I simply look to jump on the trend early, buy the most hyped projects, and sell before the bubble bursts. I documented my journey trading this way with meme coins and not only somehow managed to profit, but I learned a ton too.
Overall, I love the game, psychology and fast pace of making trades, so this is highly fun, enjoyable, and, if I do it right, profitable.
As a long term investor (most of my portfolio), I look for projects with a real use case, big vision and whom are solving real world problems. Once identified, I cross check that with the current narrative to see if the timing is right.
As I’ve learned in crypto, the right idea at the wrong time still the wrong bet. By way of analogy, it’s akin to meeting the right person at the wrong time in one’s life. For this to work, all the stars must align.
Action Item: Discover What’s Next
Do your own research. What are the next 3 big trends in crypto. Let me know in a comment.
#2: Build A Portfolio
I work hard during bear markets to build up cash reserves to be ready when an opportunity presents itself. Then, I sit like a cheetah in the grass waiting for the right moment to pounce.
Opportunity comes sometimes when one least expects it, and if you’re not there ready with cash on hand, it’s easy to miss it. While this may not be as true in slower moving markets such as real estate (which I love, by the way), it’s very true in crypto.
A week, or even a day late to a trade sometimes mean buying in 30% higher. Sometimes when I’m in the trenches, I discover a time sensitive opportunity where the private sale is about to close. It often takes a week or two or due diligence to vet the project, tokenomics and team, and sometimes I’m involved with other things.
In short, the more I can be ready to mobilize the more I can take advantages of the ever changing landscape of crypto and markets.
Action Item: Get Ready
What can you do to have more cash on hand?
Do you need to rebalance your existing portfolio?
What positions are the weakest that you could easily liquidate if a better opportunity arises?
What percentage of your portfolio are you looking to invest in more volatile, higher risk bets such as crypto?
#1: Be Patient
The biggest temptation in bear markets is forcing the action. One of the takeaways from Snowball, the biography of Warren Buffett, was just how patient he was. He’d read all day, research companies and sit back and wait for the perfect opportunity. Perhaps he’d only strike twice a year.
What I’ve found in crypto is if I’m patient enough the opportunity or trade almost always comes to me. Chasing has historically been a mistake. More, if it doesn’t come my way and I ‘missed it’, just like in poker, another playable hand comes sooner than one expects.
So, I’ve learned to patiently go through steps 1-4, and trusting that if I focus on the process, the great, winning hands will present themselves.
Then, I begin placing my bets.
Action Item: Get Clear On Your Entry Points
What tokens, projects or bets do you want to make?
What is fair market value for them?
How much do you want to allocate?
I’ll update you with more strategies, tips and lessons in the coming weeks. Which tip was your favorite? Leave your thoughts in a comment below, or shoot me a reply.
I look forward to meeting you in Vegas!
Alec