Today, a range of "reciprocal" tariffs will be levied against every country in the world. The market is set to sell off ... but then what? Let's assess what might happen and then how to position yourself. It's always possible to make money in a bear market -- you just need the right tools.
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1 How Bad Will It Get?
Bloomberg Economics "found that a maximalist approach could ... [result] in a hit of 4% to US GDP and [lift] prices by close to 2.5% over a two- to three-year period. ... For comparison, this would be nearly as bad as the impact of the global financial crisis — which left the economy roughly 6% smaller after 3 years than its pre-crisis trend." So, from black bear bad to, potentially, grizzly bear bad. The key point: The direction is not constructive.
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2 The Short Game
It seems too easy. In a declining market, just wait for $BTC to drop below its SMA 200 (the red line) and short it. You can expect some volatility, but look at those potential gains! You can use $SBIT in the stock market to do this, or you can try Index Coop's -1x $BTC as a possibility. Our Art of the Bubble course explains a better approach than mere shorting, and I don't recommend any of it if you're not a professional.
3 Dollar Cost Averaging?
If you're not going to short, then at least you can buy cheaply, right? Dollar Cost Averaging might be the right way to approach this -- buying a little bit every week or so. Reserve Rights has an interesting index that does this for you called BED. It also earns yield on your $ETH and $BTC while, effectively, automating a dollar cost averaging approach.
4 Crash Cost Averaging
A better approach that I developed for high-volatility assets is crash cost averaging. Below is the original simulation and the performance has been fantastic. The green dotted line is the CCA strategy. The orange dotted line is DCA-ing through a crash. The blue dotted line is HODL-ing. The gist of the idea is to divide your potential buys into 10 positions and buy larger amounts as $BTC declines more. I have a Free article about this for you to read here: https://onepointtwolabs.com/how-to-crash-cost-average/
5 Concluding Thoughts
There are other ideas, such as taking a builder's long-term approach or liquidity farming. But I do think that DCA and CCA will serve most people better. They're easy, limited-risk options (all things considered). Also, historically, they've performed exceptionally well. Wealth is made in a bear market, riches in a bull run. Focus on building wealth.
NFA. DYOR.
Happy Trading!
-Sebastian Purcell, PhD
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