Winning public acceptance of cryptocurrency is the key.

Author: Jason Choi

Translation: DeepTechFlow

The following content discusses tactical strategies for dealing with potential bear markets.

First of all, most ordinary cryptocurrency investors have a binary view of bull and bear markets.

Unlike the strict definition of "bear market" in traditional financial markets, there is no consensus among ordinary investors on bull and bear markets in the cryptocurrency market!

For example, if the market drops by 50% but recovers a month's worth in a day, is this considered a bear market?

Or, if the market overall drops by 30% but gradually declines over six months with little relief, is this considered a bear market?

And if only Bitcoin rises over six months, is this a bull market or a bear market?

The main reason for this lack of precision is:

1. We are all emotional creatures.

2. The high volatility of cryptocurrencies. Based solely on the magnitude of fluctuations, most traditional definitions of "bull and bear market cycles" can play out within a week.

3. Misunderstanding of time frames. Due to the shortened liquidity time of cryptocurrencies, high-risk, early-stage projects have publicly traded quasi-equity in the seed round, making the situation even more confusing.

In short, in the environment you are in, founders promote on a ten-year cycle, VCs invest on a three-year cycle, traders operate on a monthly basis, and scammers manipulate the market in four hours.

Are you still wondering why people feel confused?

However, the binary view is not the reason for the failure of most investors. The real problem lies in the inability to reconcile these conflicting ideas within different time frames.

For example, holding the view "I am bullish on cryptocurrencies" and using this as a reason for leveraged long positions is why speculators in every super cycle of the bull market were eliminated in the last cycle.

Similarly, believing that "meme coins are overvalued" and using this as a basis to short every major meme coin last year is also a reason for failure.

And believing that "AI and cryptocurrencies are the future" and investing in every AI cryptocurrency project worth billions of dollars that has not yet launched a product, with a four-year lock-up period, is why we will see some poor investment returns (Distributed Profit Index, DPI).

All of the above views may have been correct in a few years, but what's the point if you lose everything in a few weeks because of betting on these views?

The whole problem is that cryptocurrencies themselves may be a long-term trend, but the market already knows this and has reflected it in the prices.

The market's confidence in this so-called knowledge depends on which stage of the cycle we are in. This is why investors must understand the stage we are in. While it is not possible to predict price movements accurately, probabilistically identifying the market state we may be in is key to achieving excess returns.

The difficulty lies in identifying changes in these market states—from bear market to bull market, and from bull market to bear market turning points, often only becoming obvious in hindsight.

Mature investors can keep this in mind and act probabilistically, constantly reassessing their views based on new information every day, as the future largely depends on these new inputs.

"Wait, if it's not 'buy in a bull market, sell in a bear market,' what should we do?"

CT (Crypto Twitter) is not a place for detailed analysis, so I hope these tactical and theoretical examples help illustrate my point.

Simple approach:

• I think a bear market is coming.
• Sell everything, go short, and tweet about the bear market every day.

Ordinary approach:

• I think a bear market is coming, but I am bullish on cryptocurrencies in the long term.
• Sell the least confident positions, free up cash to add positions when prices drop.

Mature approach:

• I have good reason to believe that we are more likely to enter a bear market in the next 6-12 months, and the risk value at this point (VaR) exceeds what I can tolerate.
• However, in one month, some credible catalysts may prove me wrong, and the market may rise significantly.
• In the long term, I am very bullish on cryptocurrencies, with a time span of over 5 years.
• Sell most of the spot holdings to free up cash, buy 1-month call options to hedge the portfolio's delta, tighten risk parameters, and shorten the time frame for any trades, deploying a 5-year long-term growth strategy when prices overreact.

And so on.

While these examples are simple, I hope they illustrate how probabilistic views can be translated into practical operational strategies.

I have personally seen the performance differences of different risk management methods in the market. For example, in a bull market, cautious investors (i.e., "bearish") may perform better than optimistic investors (i.e., "bullish"). Similarly, in a bear market, optimistic investors (i.e., "bullish") may persist longer than pessimistic investors (i.e., "bearish").

Finally, please remember that all these market discussions are relatively insignificant compared to the meta game:

Winning public acceptance of cryptocurrency is the key.

Without this foundation, whether it's a bull market or a bear market, it doesn't matter.

Because if that's the case, there's no game to play at all.

Wishing everyone a happy game and good luck.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。