What can we learn from bear market investing? How can we truly benefit from bull markets and the previous bull market? This article is sourced from Pavel Paramonov, compiled, translated, and written by Deep Tide.
(Previous summary:
Bitcoin villain Peter Schiff predicts a BTC crash! Spot ETFs are suffering in the bear market!)
(Background:
50 market investment guidelines: Focus on growth and speculation in bull markets, focus on income and users in bear markets)
Table of Contents:
Firstly, there is less available capital in bear markets, which creates more opportunities for venture capital.
Secondly, builders are more invested, and this investment cannot be faked or simulated.
Investment plans are often more attractive in bear markets, and this is not because of their duration.
How can we combine the best advantages of both and make more accurate investments in bull markets?
Why is this good? In bear markets, although there is less available capital, it does not mean there is no capital at all. Due to limited funds, venture capitalists tend to find better projects instead of spreading money across dozens of startups.
Investors are more committed to supporting founders because not everyone can survive in bear markets. Additionally, in bull markets, it is almost impossible for third and fourth-tier venture capitalists to become stakeholders in a good deal because they cannot compete with first and second-tier companies such as Polychain, Blockchain Capital, Pantera Capital, Variant Fund, etc.
These top-tier companies not only bring funding, but also their expertise in various fields and their reputation. If a speculator sees a shining first or second-tier investor on the capital table, they will automatically be more interested in that project in a bull market.
In bear markets, you have to be more discerning and focus on different factors. For example, Signum Capital invested in Polymer Labs in March 2022.
I’m not saying that Signum Capital is a bad venture capital firm, but honestly, they are not a first or second-tier venture capital firm either.
It takes some research and talent to identify the best investment opportunities, but even if you are smart enough to identify them, you may not be able to get in. Why? Because you don’t have a reputation yet. But this is possible in bear markets because bear markets usually don’t allow the best venture capital firms to get good deals due to different risk/reward ratios.
What I mean is to be more determined. Not everyone can survive in bear markets, so surviving in bear markets requires exceptional talent and hard work. Builders will understand what I mean by saying that it is harder to raise funds in bear markets. Very difficult.
You have to have a great idea, a great survival plan, a “Real Madrid” team, and you still have to maintain a low burn rate and a long runway. At this stage, efficiency and investment levels have reached their peak.
Builders are forced to make their products hugely successful. As the saying goes, “You have to be hungry for the greatest achievements.”
Monad is the best example, a true foundational project with great mechanisms that fill every gap.
Great team (formerly Jump Trading)
Huge investment (during the bear market phase of construction)
Great market marketing and content
Great community building strategy (intern)
Paradigm, Coinbase Ventures, Electric Capital, Egirl Capital, Dragonfly, Shima Capital, Placeholder
Due to their highest investment in bear markets, they received funding from Dragonfly, Shima Capital, and Placeholder in the first round of financing, and funding from Paradigm, Coinbase Ventures, Electric Capital, and Egirl Capital in the second round of financing.
This was achieved while building one of the most well-known communities in the field, along with Berachain.
However, I don’t want to mention specific project names, but what you can do in the previous bull market phase is amazing. Basically, you can:
Combine three different modular solutions
Integrate them
Almost without writing a line of code
Raise over $5 million with a valuation over $100 million
Some may ask why investment plans are more attractive in bear markets and usually shorter in bull markets, allowing investors to sell at the peak. The reason is the different timelines.
Let’s take 2022-2026 as an example. If you raise funds in 2022:
Your TGE may be in 2024
You release with low circulation in good market conditions
You have daily/monthly/weekly unlocks
You unlock most tokens during the previous bull market and bull market
This allows for fair price discovery and some speculation
If you raise funds in 2024:
Your TGE may be in 2025
You set a lock-up period of at least 6-12 months for investors
Followed by a vesting period of 12-24 months
6-12 months later, this is the final stage of the bull market, or even the beginning of the bear market
The vesting period extends into 2026
History shows that this will be a bear market
Due to not much speculation, selling is not attractive
I’m not saying it’s not attractive at all, just that the timeline is completely different.
Bull markets are also a blessing. At this stage, there are very dedicated teams who have the power to choose the best stakeholders and gain the best “added value.” You can raise a significant amount of capital to do something good for the industry. Great community, opportunities, networks, and overall engagement are higher.
For investors, whether it’s liquid or illiquid assets:
Choose wisely, interact with people, identify opportunities, be skeptical enough, but also open to new ideas, and see the future.
For developers:
Build great tools that you would use yourself, not just for the sake of building.
For speculators:
Continue to speculate and identify the best opportunities. The importance of speculation in cryptocurrencies cannot be underestimated.
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