The bull market does not always call for optimism
I read a tweet thread about a week ago of a famous trader on Twitter who made a lot of money in the 2017 bull run and almost has nothing to show for it now at the market bottom. He went from $32,000 to $1.2M, then it’s back to basically zero once taxes are paid. The thread was a reminder of the cruel effect of the bear following a huge bull run. Almost every crypto investor has their share of such a story. The last few months have been a time of reflection by many.
In a previous article, I tried to point out the major takeaways from the 2018 market sentiment. This time, I want to go into more details into my own dealings and choices.
I started the year with some funds. Some were mine while some were kind of loans from other people. I told them what I intend to do with the money and gave them the conditions of return, accounting for every turn of events even the negative ones. I didn’t expect the negative turnout, but if I had to go back and start over, I would still do the same thing.
I planned for 2 things. The first was volatility, the second was the bullish case. This crafted the areas I targeted with my funds. The areas include mining, arbitrage, staking, and (passive) trading.
I went in around February. Having noticed the recent downtrends, I didn’t go all-in. I kept some cash back, but after running numbers on a bullish case, I decided to take the risk and kept little cash outside the market.
The first thing that went wrong was the arbitrage. I considered it a dicey thing to do and so I figured that putting money with firms that do it was a good idea. Well, it turned out to be a bad idea. Although the firm is still trying to salvage losses and return funds, a significant chunk of my fund is gone at least for the near future.
The passive trading began well and was steadily picking up the pace. The problem was that pressure began to build there since I couldn’t count on the arbitrage thing anymore. After a string of gains, I noticed losses wanted to start creeping in, so I halted the trading to regain the flow.
All this time I had been repaying those I took money from with the cash I held back so I can grow the funds in crypto well. Then, the drop from about $10k to about $6k in bitcoin price happened and that sent the message home.
At the new price range, staking made no more sense. I realized I won’t break even in a long time. I needed something in the short term. The arbitrage has collapsed, the staking has become insignificant, the previous profits in trading has been wiped out (because I kept it in bitcoin) and now even well below what I started with.
From the onset, I knew if the worst happens, I would cover up with my job-income streams. So, instead of continuing to fight the bear at $6k, I focused on income through jobs. Interestingly, I found some in the crypto space also. The amount I loaned initially wasn’t so overpowering, so the income could payback gradually. So I had peace of mind throughout.
I almost believed $6k was the bottom. It held in that range for a while. But I wouldn’t take any risk on it, I just reserved myself to pay attention to study the ecosystem like I never did before. Needless to say, bitcoin broke $4k and it was a real hit. The mining was no longer profitable and that got hit as well. All 3 areas were now officially down. But the contingency plan paid off.
During this time, I began to pay attention to the crypto industry itself. I began to study about the coins I had bought and sold. I began to research the fundamentals of each crypto project and what they hope to achieve. From there I began to understand what the blockchain wave was all about. I got myself some books, a few of which I mentioned here. I read whitepapers, newsletters and listened to a few of podcasts and it all began to make more sense. Even though the market was bear, the industry was up to something.
2018 was not a bad year for me crypto-wise, it was an awakening year. I got to embrace the industry as a key element for the future. Great investments are made in the bear markets, investments in the bull market are often terrible. I have no control over the time, but I have control over my position. And that’s where I stand today.
What’s your 2018 crypto story? And what are you doing differently in 2019?