While a growing number of economists are concerned that we’re headed for a recession (typically defined as two consecutive quarters of contracting gross domestic product, or GDP) — it’s not a foregone conclusion. Anthony Crescenzi, portfolio manager for fixed-income giant PIMCO, thinks the Fed can pull off a soft landing, and the U.S. will avoid a recession. And Goldman Sachs Chairman Lloyd Blankfein recently said the risk of recession is high, but it’s not “baked in the cake.” But whether we’re in for a sustained crypto winter or a temporary gulf, smart investors will tell you that bear markets are inevitable — and are often when fortunes are built. Here’s a little perspective.
- Keep your emotions out of it. It’s okay to feel anxious, but don’t let anxiety dictate financial choices. Emotional trading can lead to badly-timed trades, like selling when prices are lowest or buying at a peak due to FOMO.
- Instead of trying to time the market, consider dollar-cost averaging (DCA), in which you buy a smaller amount of an asset every week or month no matter what prices are doing. This is a smart strategy if you believe that crypto prices will generally trend upward over a longer time horizon. Although DCA is a popular way to buy crypto, traditional investors have been using this strategy for decades to weather stock market volatility. Anyone with a Coinbase account can quickly set up recurring buys for any listed asset.
- Use the time and mental space afforded by the down market to learn how to DYOR — crypto speak for “do your own research.” Spend a few minutes a day learning the basics, reading crypto news (including major financial newspapers and dedicated outlets like The Block and Decrypt); diving into the whitepapers of projects you’re interested in; and digging into analytics (via sites like Messari, DappRadar, Dune Analytics).
- Never abandon common sense. No matter how exciting a new DeFi project is or what you learn while researching, there’s no such thing as returns or yield without risk — so if you see double-digit interest rates when banks are offering fractions of a percent, only invest what you can afford to lose.
Why it matters… It’s important to zoom out and see the big picture. Crypto is still very much in its infancy. Historically, BTC prices have reached new peaks during each bull run. The uptrend in 2013 saw Bitcoin surpass $1,000 for the first time; four years later it almost reached $20,000, and the most recent cycle topped out at $69,000. The most important thing you can do right now is set yourself up for success for the next up-cycle. And if you have any questions or concerns in the meantime, reach out to a trusted and certified financial advisor.
