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When to buy and sell alts in a bear market

When to buy and sell alts in a bear market

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When to buy and sell alts in a bear market

Article contributed by Avran Wong

Follow him on Medium here

Whether you like it or not, we are in a bear market and the top question on everyone’s mind is probably “How do I make it all back?”. If you’re still holding any altcoins, chances are that you have seen it drop 50%, and another 50% again. Considering historical bear markets in the past, this shouldn’t be too surprising at all. However, since BTC is already down 60% from its ATH and alts are rekted harder, shouldn’t we hold on to them as alts typically have a better reward at the bottom?

“Alts should have a better r/r since we’re around down xyz% right? Right??”

To me, the biggest fear in a bear market is waiting for a bottom that never comes or buying a dip that keeps dipping. Crypto is known to bleed slowly on the way down before a quick and decisive reversal. The best-case scenario would be similar to May 2021, where we chop sideways for a few months before resuming our way. While the worse would be a multi-year bear market where we get a slow and painful decline.

In this article, we will be studying the performance of altcoins during the May 2021 “bear market”. Using a data-driven approach, we can use this as a best-case scenario when it comes to holding alts right now. Although every bear market will be different, this analysis does help us manage expectations and avoid unrealistic targets. As a sample size, we will look at the price actions of BTC, ETH, SOL, AVAX, and FTM. These are arbitrary but were in my opinion the most relevant layer 1s at the time. There are 4 key dates we will be looking at:

May 10th 2021: Defined as the last green candle before a close below the 20W SMA (the local top)

May 24th 2021: Defined as the first green candle after 2 straight weeks of red (the local bottom)

July 19th 2021: Defined as the absolute bottom before going up (the bear market bottom)

July 26th 2021: Date with 7 straight days of BTC going up (the start of “alt” season)

Peak to bottom decline during the May 2021 “bear” marketSo you started what they tell us that they don’t know what we doing what they don’t think there is any value in it we

These are the percentage declines throughout the “mini bear market”. Historically in a bear market, we can always expect the BTC dominance to go up, while the rest of the market underperforms. Even though everything is red here. BTC dominance still went up from 40% to around 48% simply because other coins were getting rekted. The best performer in this scenario was SOL, but of course, saying that you only suffered a 43% loss is no consolation prize

“What if you bought the dip”

Of course, July 19th would have been the best time to buy basically any token. But since it’s unreasonable to time the exact bottom. We can assume that most people that bought the dip did it around the prices of May 24th. This was the first green candle we saw after weeks of a straight-down trend.

Performance of BTC and alts when buying the dip

Calculating the returns from May 24th to the “end” of the bear market (I used July 27th because it was quite obvious that risk was back on at the time). We can see that BTC mainly chopped sideways, while the rest of the markets continued their downtrend

“What if you did manage to time the exact bottom”

Timing the exact bottom perfectly

Even by assuming a best-case scenario where you magically timed the bottom, we still see at best similar returns for altcoins. To me, this shows that buying altcoins in a bear market is a trade that at most gives you similar returns (to BTC), but way more downside risk. This also doesn’t take into account the negative emotions of holding through such volatility.

My Strategy

Tweet by Benjamin Cowen

While it sucks to have realised a bunch of losses for “paper handing” alts. It is quantitatively the best course of action if history is any indication. You need to be super convicted on your alts if you’re still holding them now. Since this is my first “bear market”, its safer to assume that I do not have an edge in identifying tokens that will survive through this period. My strategy is to hold mainly BTC, ETH and stablecoins while preparing a shopping list in case of a reversal. To me, now is not the time to take the risk no matter how tempting it feels.

With this bear market, we no longer have to chase Ponzis and play musical chairs. If you think that crypto is here to stay, we now get all the time in the world to learn about web 3 and let the opportunities come to us.

Hopefully, this article has been useful in shaping your mindset in the world of Crypto. The bear market can be a brutal, brutal environment if you’re not careful. But i’d like to think that those that stick around are the ones that usually have the most to gain. If you like the content do consider following me on my journey and sharing this around 🙂 What alts are you holding in this environment?

Article contributed by Avran WongFollow him on Medium here

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