Investors forget to be greedy when markets are fearful, and cautious when they’re riding high.
There’s a time to be a bull, and there’s a time to be a bear. The worst-case-scenario is being caught short when the market makes a sudden move.
- Now is not the time to be a bear – the market’s already down 50%!
- Rate hikes have been priced into the markets
- Sentiment doesn’t always follow the market direction (it’s often a lagging indicator).
Sentiment drives investments
Volatility is the name of the game. Crypto markets tend to bounce hard from the lows, and crash fast from the highs. After an extended downturn in the market, a relief rally is inevitable. Dead cat bounce? Maybe. But a bounce nonetheless.
If sentiment is a lagging indicator, then being a bear when the market has been trending down for over three months (and is down over 50% from the highs) is a response to what has already happened, and not necessarily representative of what’s to come.
The Federal Reserve’s hawkish stance on the U.S 2022 monetary policy may not have been implemented just yet, but we believe the worst is already priced in. NASDAQ and tech stocks have taken a hit. Facebook’s META registered the biggest U.S. market drop in history of -21%. Paypal also dropped by -25%. There’s blood in the streets, and the Bitcoin Fear and Greed Index has been registering extreme fear, all year!
Be a bear in bull’s clothing
And don’t become a sheep! Being a bear while the entire market is down is easy. Bears can profit in the right conditions. But so can bulls. It’s the indecisive investors, fuelled only by changing momentum in sentiment, that get slaughtered either way.
The time to be bearish might have passed. November and December is when the entire market fell off a cliff. Three months later, we are closer to the bottom than the top. And the upside potential is higher than the downside risk. Better to be a bull than a bear when the market has already nuked (and hasn’t bounced!).
Bitcoin is down 50% from November’s all-time high of $67,000. Many alt coins are down as much as 70% (or worse). Save for an unexpected Black Swan event, the risk/return of being a bull or bear is skewed at this point.
Channel your inner Warren Buffet. Be greedy when others are fearful, and fearful when others are greedy. The time to be a bear was in May and November 2021. Being one now could be a mistake. When the bounce comes, and come it will (whether we’ve bottomed or not), you don’t want to get caught with your pants down.
Filter out the noise, resist the social media influence. Crypto has been languishing in a downtrend for months. Bitcoin is down 50% and some alt coins (even strong projects) more than 60% down. And the worst of the Fud (4 to 5 rate hikes, no more stimulus packages, Russia and Ukraine tensions) have been largely, if not entirely, priced into the markets. We might not be at the bottom just yet, we may have already seen it. Either way, being a confident bear today might prove to be a costly mistake.