Author: Pavel Paramonov

Compiled by: TechFlow

What can we learn from investing in bear markets? How can we truly benefit from investing in bull/pre-bull markets?

1. First, there is less capital available in a bear market, which creates more opportunities for VCs

Why is this good? In a bear market, while there is less money available, it does not mean there is no money at all. With limited funds, VCs tend to find better projects rather than spreading their money among dozens of startups.

Investors are more committed to supporting founders because not everyone can survive a bear market. Also, in a bull market, it is almost impossible for Tier 3 and Tier 4 VCs to be stakeholders in a good protocol because they cannot compete with Tier 1 and Tier 2 firms like @polychain, @blockchaincap, @PanteraCapital, @variantfund, etc.

These top companies not only bring money, but also their expertise in various fields, as well as their reputation. If a speculator sees a shiny primary or secondary investor on the capital table, they will automatically be more interested in the project in a bull market.

In a bear market, you have to be more selective and look at different factors. For example, @Signum_Capital invested in @Polymer_Labs in March 2022.

I’m not saying Signum Capital is a bad VC, but to be honest, they’re not a Tier 1 or Tier 2 VC 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 get in. Why? Because you are not famous yet. But this is possible in a bear market, which usually does not allow the best VCs to get good deals because the risk/reward ratio is different.

2. Second, builders are more committed, and this commitment cannot be faked or simulated

I mean be more determined. Not everyone survives in a bear market, so it takes great talent and hard work to survive in a bear market. Builders will understand when I say that it is harder to raise money in a bear market. Very hard.

You have to have a great idea, a great survival plan, a "Real Madrid" team, and you still have to keep the burn rate low and the runway long. At this stage, the efficiency and investment level basically reach the peak.

Builders are driven to make their products a huge success. As the old saying goes, "You have to be hungry to achieve the biggest results." @monad_xyz is the best example of this, a truly foundational project with great mechanics that fills every gap.

  • Great team (ex @jumptrading)

  • Huge investment (building during a bear market)

  • Great Marketing and Content

  • Great Community Building Strategies (@intern)

  • @paradigm @cbventures @ElectricCapital @egirl_capital 、 @dragonfly_xyz @shimacapital @placeholdervc

As they topped out during the bear market, they received funding from @dragonfly_xyz, @shimacapital, and @placeholdervc in their first round of funding, and @paradigm, @cbventures, @ElectricCapital, and @egirl_capital in their second round of funding.

This was achieved while building one of the most well-known communities in the space, alongside @berachain.

However, I don’t want to mention the names of specific projects, but it’s amazing what you can do in the pre-bull phase. Basically, you can:

  • Get a combination of three different modular solutions

  • Putting it all together

  • You barely need to write a line of code

  • Raised over $5 million, valued at over $100 million

3. Investment plans tend to be more attractive in bear markets, and not because of their duration

Some may ask why investment plans are more attractive in a bear market, while in a bull market they are usually shorter, allowing investors to sell at the peak. The reason is that the timing is different.

Let’s take 2022-2026 as an example. If you raise money in 2022:

  • Your TGE could be in 2024

  • You release low liquidity in fairly good market conditions

  • You perform daily/monthly/weekly unlocks

  • You unlocked most of your tokens during the pre-bull run and bull run

  • This allows for fair price discovery and some hype

If you are raising capital in 2024:

  • Your TGE may be in 2025

  • You set a lock-up period of at least 6-12 months for investors

  • This is followed by 12-24 months of vesting

  • After 6-12 months, this is the final stage of the bull market, or even the beginning of a bear market

  • Vesting period starts in 2026

  • History suggests this will be a bear market

  • Selling is not attractive as there is not a lot of hype

I'm not saying it's totally unappealing, it's just that the timeline is completely different.

How to combine the best advantages of both to make more accurate investments in the bull market?

Bull markets are also a blessing. At this stage, there are very dedicated teams who are empowered to choose the best stakeholders and get the best "value added". You can raise a lot of capital to do good things for the industry. Great communities, opportunities, networks, and overall engagement are all higher.

For investors, whether in liquid or illiquid assets: choose wisely, talk to people, recognize opportunities, be skeptical but also open to new ideas and see the future.

For developers: build great tools that you want to use, not just build for the sake of building.

For speculators: keep speculating and identify the best opportunities. You cannot overestimate the importance of speculation in cryptocurrencies.