As many of you are aware, 2022 is considered the “crypto winter” since cryptocurrency has lost almost $2 trillion in market cap since its peak. Many investors have experienced the effects of the painful market contraction through 2022, and the bear market continues.
Last Friday, we had the honor to invite Nathan Cooper, Chief Program Officer of Sheesha Finance, to talk about how we can stay in the green during a bear market. Let’s check the Q&As between Bitrue and Legend Trading below.
Could you please introduce yourself and Sheesha Finance to our Bitruers?
Hi everyone, it is a pleasure to be invited to speak with such a vibrant community, so first and foremost, thank you Bitrue for inviting me. It is truly an honour.
So, I am Nathan Cooper, the Chief Program Officer at Sheesha Finance. A little bit of background about myself, I was born and raised in London, England. I’ve been working in the financial services industry for 20 years, focusing on technology projects, business intelligence systems, and strategic optimization. Doing this work has given me the opportunity to travel to over 60 countries, engaging with different cultures and helping me become a more well-rounded individual in the process and I feel as a leader, it is very important to have these experiences.
I made the move from traditional finance to decentralized finance having invested in projects for a few years and once I learnt the true value of blockchain technology, rather than the appeal of cryptocurrencies, I was captivated for life. This lead me to want to pursue my learning where I’ currently also working on a PHD with the focus on our very own industry where scholarly literature is nascent and I believe it is a great opportunity to learn and add to that literature as a person not only who is interested in finance and technology but interested in continuous learning and personal growth.
This lead me to join forces with Sheesha Finance — a decentralised multichain ecosystem, incubator, accelerator, and much more. It is a company that I had seen grow from just a few people to the 50+ stronghold we have now and believe me, we have a lot of innovations and ideas we are working on that will indeed mean growing into 2023.
My role is it to manage the portfolio of projects that we have invested in, incubated, and provided strategic advisory services for, while maintaining a healthy balance of high-quality strategic partners and ensuring that projects we partner with, are provided the white glove treatment from A to Z.
What is a bear market?
I like to keep things simple for everyone so that we are all clear on this definition. A bear market is really just a prolonged decline in investment prices. Generally, the consensus is that a bear market happens when a broad market index falls by 20% or more from its most recent high, and what usually follows is a total 30% decline. While 20% is the threshold, bear markets often plummet much further than that over a sustained period, but not all at once. Although the market has a few occasional “relief rallies,” the general trend is downward.
Pessimism, low confidence, and negative sentiment are also major characteristics of bear markets. During a bear market, investors often seem to ignore any good news and continue selling quickly, pushing prices even lower, rather than opt for a buy-and-hold strategy.
What are some of the factors that lead to a bear market in crypto?
We know that bull markets don’t last forever, and at some point, investor confidence will begin to decline. This could be triggered by a plethora of things including — increases in inflation and interest rates, general economic decline which could lead to recession, bad news like unfavorable legislation to unforeseen circumstances like the COVID-19 pandemic, or a number of other socio-political factors. All it takes is a sharp downwards price movement that can start a bear market, where more and more investors believe prices will continue to fall, causing a downward spiral as they sell in order to prevent further losses.
How long do bear markets usually last?
I think we can all breathe a sigh of relief that, past data shows is bear markets tend to be shorter than bull markets — 363 days on average — versus around 1,742 days for bull markets. They also tend to be less statistically severe, with average losses of around 33% compared with bull market average gains of 159%, according to data compiled by Invesco.
However, in reality, there is no crystal ball to tell us when these events occur and it’s notoriously difficult to predict when the bear market might end and when the bottom price has been reached. As rebounding is usually a slow and unpredictable process that can be influenced by many external factors such as economic growth, investor psychology, and world macro news or events. There are just so many factors at play here and this is what makes this topic so fascinating!
What are the early signs of a bear market?
We often get many of our partners at Sheesha Finance asking about market sentiment and how can we tell if we are in a bear market, so we created a Weekly Sentiment Report that goes out every Monday that shares some of this high-level information. Please feel free to go out there on our LinkedIn page and engage with the document, as it is created by my team and meant to be digestible for any type of investor.
Although there are agreed definitions of what a bear market is, there is no agreed quantitative definition, as there are many factors which drive this economic situation. As a result, what we tend to do is look for early signs of a bear market, and based on historical trends, we know that a bear market often occurs just before or after the economy moves into a recession, but not always. When we see a shrinking economy, investors expect corporate profits to decline in the near future. So they sell stocks, pushing the market lower.
A bear market can signal more unemployment and tougher economic times ahead, but remember, all things come to an end, and we try to educate our community at Sheesha Finance that these are just natural cycles, and the bear cycle WILL end.
How can one prepare for a bear market?
At school back in London, England I was a big fan of studying history. At the time, you think to yourself as a teenager, why do I need to know so much about past events? It doesn’t way before my time. Well, as you get older and more mature, you realise that history is an important thing you learn from. If your investment strategy is longer-term, buying during a bear market can pay off when the cycle reverses itself. Investors with shorter-term strategies can also be on the lookout for temporary price spikes or corrections. And for more advanced investors, there are strategies like short selling, which is a way of betting that an asset will decline in price.
Another strategy many crypto investors employ is dollar-cost averaging, in which you’d invest a set amount of money (say $50) every week or month, whether the asset is rising or falling. This distributes your risk and allows you to invest through bull and bear markets alike.
What are the things we should avoid doing when we find ourselves in a bear market?
I studied financial economics during my MBA in Madrid, Spain. We had to write a dissertation about some of the finest investors in history — one of them being Peter Lynch, the legendary Mutal Fund manager at Fidelity Magellan Fun. One noteworthy thing I remember him saying was that every investor needs to know the market will go down sometimes. If people are not ready for this, then they shouldn’t be investing. I echo his sentiments and relate finance to relationships we have with family, friends, or partners. Sometimes things will be great, and other times the road is a lot bumpier. Still, it is nevertheless the cycle of relationships, and this is akin to the cycle of stocks, shares, and crypto. Markets will go down, things will happen, and no one really knows when they’re going to happen, but you’ll always have that one friend who said he predicted it would happen, right?
So what I’m trying to get at here is that, yes, it can be scary to see crypto prices fall hard, but the one thing investors shouldn’t do is attach that market sentiment to any of your flight or flight human emotions that may make you panic. Panicking in any situation, in general, causes one to make irrational decisions. Always remember one man’s meat is another man’s poison. By that, I mean there are always opportunities to be had during market declines, and finding those opportunities will make you a more rounded individual.
We know from my previous answer that the average bear market lasts less than a year, and investors like yourselves can mitigate the effects through techniques and focus on the long term. At Sheesha Finance, we look at projects from a longevity perspective, not just what will pump quickly in order to get a high return on our investment. We make sure that we do enough due diligence to ensure that we really understand projects and their business model and look at the plasticity of teams.
Volatility is not necessarily a bad thing in our industry; however, people must understand what assets they own, and that’s why projects that come to us, especially in our incubator called Sheesha Foundry, we understand that the business needs to be strong from within and must make sense, despite the token element, and if that business really makes sense, despite volatility in the market, if you continue to invest your time and effort in them, in time, things will improve, So by equipping yourselves with adequate trading tools, both traders and investors can also stand to gain during a bear market. Therefore, it is important to remain level-headed and well-balanced during a bear market and if you are working for a project, this is the time to dig deep, build and innovate.
That’s the end of the AMA sessions. If you want to know more about Sheesha Finance please pay attention to their official website and social platforms, and don’t forget to drop a follow and support.
For more information please visit: www.sheeshafinance.io