Dancing with the Bear...
Staying profitable in the bear, how to take a punch to the gut, and Bill Murray
Happy Friday,
Welcome to another bi-weekly installment of StakeSchool.com’s newsletter, by Angel City Stakes. For those that don’t know me, I recently founded Angel City Stakes and Stake School. I am a former trader, an investor for over 20 years, and a current liquidity miner. At the end of 2021 I put in my two-weeks’ notice to focus on cryptocurrency (mostly) full time. My goal for this newsletter is to instruct, educate, and help others in their crypto journeys. Crypto tech is a powerful tool that can serve us and help make our lives better, but with most things in life, success at it requires work.
First, a few quick housekeeping items…
This newsletter is a work in progress. If you’re reading now, you’re one of the early ones. But as such it is subject to change in its current “Alpha" state.
If you find the content valuable I suggest you you subscribe, so you can retain copies of all newsletters in your own email/archive. In the future, certain sections or posts are likely to be blocked by a paywall.
None of this is financial advice. Our goal is to share our stories and thought processes while incorporating traditional financial concepts, all while blending in the human element, like the process of osmosis.
No TL;DR section - jump to Bear Market Strategies for the meat
With that, let’s dive right in.
Dancing with the Bear…
Today’s content we’ll discuss ways we’re staying profitable in the bear market and ways you too can stay PUMPED UP and dance with this bear of a market.
A Cinderella Story
[Spoiler Alert: Warning - Spoiler Alerts for the 2005 film Cinderella Man]
The Bulldog
In 1934, James J. Braddock - the “Bulldog of Bergen” - pulled off the unthinkable in his defeat of Max Bear, the then World Heavyweight Champion. Bear weighed in 20 pounds heavier than Braddock, and had a slight height advantage. Bear was looking for an easy fight, and Braddock was specifically chosen for a quick payday. But Braddock had other ideas.
Braddock put in his work, training for years, engaging in any scrappy exercise he could to build his physical fortitude. He was out of boxing for a time due to hand injuries, and had to live through extreme poverty working on the docks in the Great Depression. He used these circumstances to build his character, endurance and mental fortitude, rather than succumb to them. His injuries healed, and because he never slowed down or surrendered mentally during this time, and was patient, he got another shot to get back in the ring.
The Heavyweight Championship
Braddock wasn’t your natural-born fighter like Bear. He was successful because he persisted long enough to stay in the ring, was scrappy, and was mentally stronger. He was known at the time for his “ability to take a punch” - even confusing Bear during the Heavyweight Championship for his ability to keep coming at him, despite suffering gut-wrenching blows. His persistence and determination lead to one of the largest pugilistic upsets of all time, and earned him a place in history as “Cinderella Man.”
The Crypto Bear
Bear markets are perceived as unpleasant and unwanted occurrences. Unless you’re a full-time prop trader (as I once was), you’re probably not making money shorting the markets. The majority of investors are losing during a bear market, but that doesn’t mean you have to fall into that category.
There are several ways to “win” during any bear market. But first you need to define what winning means to you based on your goals and tolerances. Winning could simply mean taking profits or not losing any more money (I.e. selling) for a given period of time.
At ACS we want to set ourselves up for success during the next bull, and even turn a monthly profit using active (non-passive) staking strategies.
Bear Market Strategies
Proof-of-Stake networks with strong tokenomics (which we covered previously) and governance can be profitable in a bear, but for individuals, some degree of strategy is required to navigate not only the markets but the landscape. A “winning strategy” need not focus on ROI, but could involve educating yourself with the goal of making more informed decisions or learning a new technical skill or application that could help earn you more in the future, or even land a job or new client.
This newsletter focuses on staking and liquidity mining and the strategies presented are focused on such. We view liquidity mining as a viable option for some investors who seek to dance with the crypto bear…
Re-allocate. When you find good opportunities, take advantage of them by ramping up the % of capital allocated to them gradually. // However, you probably shouldn’t put the majority of your funds at risk, no matter how good the opportunity seems. Unless you ascribe to the YOLO mentality, you likely don’t want to put yourself in a position where you could lose everything, or a significant majority of your capital.
Be patient, while you search for potential opportunities // Committing or locking up your capital too soon can prevent you from having enough “dry powder” when you find a REALLY good opportunity, and the best ones never last long.
Use competing strategies; to help you understand which strategy is currently working best and to diversify not only your holdings but your strategic decisions as well. // Even if your funds are diversified, committing to a single strategy could prove costly if you’re on the wrong end. For example, only hodling and waiting for a rising price, ending with a 0% return after 6 months, compared to both hodling and liquidity mining, where the latter would have likely turned profit every month in the same market environment.
Be active. The best opportunities for achieving passive income in the market are, unlike inflation, ALWAYS transitory. If you are serious about becoming a profitable liquidity provider, you should be checking where the best rates are, where they’re moving next, and what tokens are prone to rises and vulnerable to sell-offs. // For better or worse, crypto can sometimes be like a game of hot potato. You don’t want to be the one left holding the bag (potato) when momentum turns (which it will).
Be strategically passive. You do not need to be active, as long as you are strategic about it. In fact you could have a passive, fully automated investment process that runs on autopilot, no matter what is going on in your life. I’m talking about Dollar Cost Averaging, and it applies to stocks, cryptos, your 401K, and anything else you can invest into on an automated basis from your paycheck. // Being passive doesn’t mean don’t do your research, or blindly buy-and-hold. It means you have a plan and know when to keep following it and when to adjust course.
Test theories and concepts. You can invest very small amounts in crypto in various different locations and measure how they perform. If you’re not sure if something is accurate, test it yourself. This is a process of continual discovery and mastery of the space or certain platforms to stake on. // However, if something is working well it could be detrimental to take away from it and try to find something else, which ultimately could be fruitless or even perilous. Use very small amounts in tests.
Be contrarian. Don’t be afraid to go against the herd. Usually when everyone is thinking one way, the opposite happens. There are always surprises, it’s what makes a market. If your basis is telling you something, don’t assume you’re incorrect if no one else would agree with you - this is our natural tendency as social creatures. // Don’t be contrarian just because you want to buck the trend or rebel in some way. If the markets are sending very clear signals that support each other over time, often those signals play out as it becomes entrenched in everyone’s mind as a self-fulfilling prophecy.
Get Back Up. If you end up on the wrong side of a trade or investment, dust yourself off, take care of what you need to take care of, and get back in the ring. // The markets can be ruthless for long periods consistently. If you’re learning the same lessons over and over again, you haven’t learned the lesson, or the market is trying to tell you something. You can get back up; stay cautious and patient. If and when you spot a potential opportunity, decide from your current basis.
How to “Take a Punch” in Crypto
Re-adjust your portfolio allocation after any adverse event. If you don’t have a way to track your portfolio, you should find one.
Sharpen the saw - take a break from crypto, don’t check prices for days, relax and go outdoors or reconnect with nature, or get lost in a book you’ve been meaning to.
Fill the hole. If something has been lost that was providing value, plug the gap by finding something else to replace it, or redirecting funds to this area.
Meditate on what’s important. There’s nothing like loss to get us humans to see what’s really important. We get lost in the game. Until we suffer a punch to the gut by the very same game. Take a step back and evaluate what makes you happy and what you’d like to accomplish.
Ask for help.* If you’ve suffered a serious blow, you have options such as reaching out to friends and family, or signing up for any of the various services available online such as BetterHelp. Depending on your circumstances, it is possible to suffer PTSD due to major financial loss. *Not medical advice; seek the advice of a medical professional.
Learn. Learn from your situation. Why did this happen to you? Are you steps you could have taken to prevent it? Think about how you’ll apply this lesson in the future. If you learn from your loss, it’s the price of tuition so you can be smarter and tougher in the future.
What I’m Looking At
As a Historian by trade, I’m always interested in how crypto compares to the rise of the internet. This article offers a nice comparison: No, the Crash Isn’t Like the Dot Com Burst.
Charts of Bitcoin Miner Revenue. The “other” (PoW) miners. What Bitcoin does affects the whole crypto market, so it’s interesting to pay attention to. The charts illustrate the cyclical nature of markets (and all things) and support an optimistic view that the current trend will reverse, at some point.
The latest Keplr dashboard redesign. Chains are accessed from the Nav pane and display in the main pane when selected, now with their staking rates displayed alongside. There’s also (finally) a dark/night mode option, which looks very cool.
Some of the coolest NFT’s (if like me, you like Bill, and used to have him as your twitter pic) - Bill Murray 1000 - by Coinbase NFT. Each is a 1 of 1 and each has their own story, quote, one-liner, or “Murrayism".” One of my favorites is the inspiration for the selected photo of Murray and story behind it (link to the KCCO NFT). The collection sold out in 35 seconds, nice job Coinbase.
Pop, Pop.. Bang!
If you keep hunting for opportunities, you are likely to snag a good one sooner or later. Couple it with sound risk management principles and persistence and mental fortitude and you’ve got a fighting chance.
Stay nimble,
Mike Broudy, ACS and StakeSchool.com founder