As the Crypto market is bearish, we all dream of beating the market. However, as you have probably noticed, this dream is counterproductive. In a bear market, the more you trade, the more you lose... Unless you are a very experienced trader (or you are particularly lucky... but it will not last).
The main reasons why this dream is counterproductive are explained below.
When the Crypto market is bearish, almost all the coins are bearish too
When it is red (i.e., when the daily change is negative), you can go through the top 100, top 300 or even top 1000 cryptos, most of them will be red too. And if you find one which is green and think that you should buy it because it is the one to have, it will probably be one of the worst ones the day after - because most of the guys who had this only green coin will sell it immediately.
Most cryptos are correlated with Bitcoin (BTC)
There is an excellent tool to check the correlation between different coins:
You will see that it is more than challenging to find one coin for which the correlation with BTC over one month is less than 0.5 (except stablecoins...). Therefore, even if you spend all your time trying to find some gems, at the end of the day, if BTC dumps, everything will follow. There are two options:
- If you think that BTC will continue to dump in the next few months, it could make sense to sell it and to wait for a new bull run to buy it again.
- If you think that BTC could rally again in the near future, then you'd better hodl BTC or some coins which may beat BTC in the mid/long-term.
By using the tool above, you will indeed notice that the level of correlation decreases with the time. Therefore, if you are patient, you can beat BTC.
Which coins can beat BTC in the mid/long-term?
Nobody can answer this question for you. That's where the fundamental analysis can be of interest. However, it does not guarantee anything. Even a fundamentally good coin can dump faster than BTC. A good example of that is Ethereum (ETH) which was outperformed by the controversial Solana (SOL) over the last few weeks... For various reasons, the main one being the liquidation of big whales like Celsius, which had to sell a lot of their ETH.
Therefore, you need to have a philosophy, without becoming maximalist. If you believe in a coin, you can accumulate it progressively. If you practice DCA (Dollar Cost Averaging), you need to be patient... Do not buy every day... Every month is a good rythm, slowly but surely, and stop if you do not feel it.
What to do with my coins if they continue to dump?
The idea is to invest only the money you do not need in the short term, to make sure you can wait until it generates some profits, which can take years... If, however, you want to use your coins when they are at 50% of the value you bought them (which is usual currently), you may use lending protocols.
Before chosing your lending protocol, you can use Defillama to check that it is (relatively) safe vs. risks of hacking. However, even a safe protocol (regarding risks of hacking) can get bankrupted if it has too many insolvent accounts. That's what we call the "bad debt". There is a tool to track that:
As you have probably guessed, you'd better stay away from the protocols which have a high bad debt ratio... As most of them are on the Binance Chain, if you hold Binance Coin (BNB), you can directly use the lending protocols on Binance (although it is only CeFi) or on QiDao (to stay on DeFi).
As usual, it is not a financial advice. Do Your Own Research.
Please find below a few links to earn a few coins...
