Discover more from Vault
Buying and Holding
The following is not financial advice.
As prices across crypto begin to fall, it’s worthwhile to take a moment to adjust your investing strategy to factor in the assumption of a potential multi-year bear market.
It’s impossible to know exactly where the market will be 3, 6, 9, or 12 months from now—but given a long enough investment horizon, it doesn’t necessarily matter.
Given a potential multi-year macro bear market and two years until the next bitcoin halving now is the optimal time to focus on accumulating assets that you like, using a framework that is agnostic to price, and holding for the duration of the potential bear market.
What should you buy? That’s personal to you and what you like, what assets you deeply understand, and what you want to hold for multiple years or potentially decades.
Bitcoin and Ethereum will be that choice for many people.
Bitcoin has a market cap of $686 billion. It is currently trading at ~$36K, which is just about 50% of its all-time high price of $69K.
Ethereum has a market cap of $325 billion. It is currently trading at ~$2,700, or 44% of its all-time high of $4,878.26.
Depending on your investment horizon, both of these assets are trading at roughly half of their all-time highs, with the potential to drop even further depending on macro conditions. If you believe in either or both of these assets fundamentally, then this is an excellent time to begin accumulating.
Which leads to the next point: Does it make sense to attempt to time the market?
In my opinion, no. Even if we have more room to fall, the descent will be choppy. There will be copious bounces and fake outs, so attempting to time an entry or a potential reversal is unlikely to succeed.
The better strategy is to accept that these are difficult market conditions, focus on solid assets, and dollar-cost average into a position that you intend to hold for many years.
As Paul Tudor Jones said in an interview last week, “capital preservation is the most important thing” in the current market.
What else should you look at beyond bitcoin and Ethereum? Beyond the well-known, large-cap currencies—there are two other asset classes worth mentioning.
Alt L1s (Alternative Layer-Ones), are layer-one networks other than the bitcoin or Ethereum networks—which are the dominant networks by a wide margin.
Alt L1s attempt to address the problems currently associated with the main L1s. Most differentiations focus on cost and speed—which tend to be the problems that most focus on with the main L1s.
If you have a deep conviction in one of the Alt L1s, then accumulating the token now while prices are deflated could turn out to be an excellent investing strategy over the next few years. Keep in mind that there are significant risks associated with investing in Alt L1s, as these networks may not reach the adoption needed to succeed in the long run.
A few of the major Alt L1s:
The other asset class worth mentioning is blue-chip NFTs, as in—NFT projects with high market caps, that are well-known with significant cultural staying power, whose prices are like to appreciate over time in a similar way to art as an asset class.
The upside of blue-chip NFTs is that they tend to weather market downturns better than liquid assets. They also, for the most part, appreciate in price in the same way that a painting from a well-known artist might (without the storage, insurance, appraisal, and fees associated with buying/selling).
The downside of this asset class is typically the high entry price and the relative illiquidity of their markets.
A few examples of blue-chip NFT projects (there are many, these are only a few):
Art Blocks ‘Curated’ releases
Bored Ape Yacht Club
World of Women
Damien Hirst - The Currency (lower entry point)
& many more
With the right mindset, even if the market turns down over the next few years—we may see some of the best buying opportunities in recent years to acquire and hold solid, reputable assets over the long term.
Thanks for reading Vault! Subscribe for free to receive new posts.