What can we learn from bear market investing? How to truly benefit from bull market/pre-bull market investing?
1. First, there is less capital available in a bear market, which creates more opportunities for venture capital.
Why is this good? In a bear market, although there is less money available, it does not mean that there is no money at all. With limited funds, VCs tend to find better projects rather than spread their money across dozens of startups.
Investors are more committed to supporting founders because not everyone can survive a bear market. Furthermore, in a bull market, it is almost impossible for Tier III and Tier IV VCs to be stakeholders in a good protocol because they cannot compete with Tier I and Tier II companies like Polychain, Blockchain Capital, Pantera Capital, Variant, etc.
These top companies bring not only capital, but also their expertise in various industries, as well as their reputations. If a speculator sees a shiny primary or secondary investor on the capital table, they will automatically be more interested in the project during a bull market.
In a bear market, you have to be more picky and focus on different factors. For example, Signum Capital invested in Polymer Labs in March 2022.
Image source: Shenchao TechFlow
I'm not saying Signum Capital is a bad VC, but honestly, 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're smart enough to identify them, you probably won't get into them. Why? Because you are not famous yet. But this is possible in a bear market, which typically does not allow the best VCs to get good deals because of the different risk-to-reward ratios.
2. Secondly, builders are more invested, and this kind of investment cannot be faked or simulated.
I mean be more determined. Not everyone survives in a bear market, so surviving in a bear market requires exceptional talent and hard work. Builders will understand when I say it's harder to raise money in a bear market. 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 fever rate and a long runway. At this stage, efficiency and investment levels have basically reached their peak.
Builders are forced to make their products a huge success. As the old saying goes: "You have to desire to achieve the greatest results." Monad is the best example of this, a truly basic project with great mechanics that fills every gap.
Great team (ex Jump Trading).
Huge investment (building during a bear market phase).
Great marketing and content.
Great community building strategy (intern).
As their top investment in the bear market, they secured funding from Dragonfly, Shima Capital, and Placeholder in their first round, and Paradigm, Coinbase Ventures, Electric Capital, and eGirl Capital in their second round.
This was achieved while building one of the most well-known communities in the industry, along with Berachain.
Image source: Shenchao TechFlow
However, I don't want to mention the names of specific projects, but it's amazing what you can do in the pre-bull market phase. Basically, you can:
Get a combination of three different modular solutions.
Combine them.
There is almost no need to write a single line of code.
Raised over $5 million at a valuation of over $100 million.
3. Investment plans tend to be more attractive in bear markets, and that’s not because of their duration
Some may ask why investment plans are more attractive in bear markets, while in bull markets they are usually shorter, allowing investors to sell at the peak. The reason is that the time is different.
Let’s take 2022~2026 as an example. If you're raising money in 2022:
Your TGE could be in 2024.
You release low liquidity in pretty good market conditions.
You do daily, monthly, weekly unlocks.
You unlock most of the coins during the pre-bull and bull markets.
This allows for fair price discovery and some hype.
If you're raising money in 2024:
Your TGE could be in 2025.
You set a lock-up period of at least 6 to 12 months for investors.
This is followed by 12 to 24 months of vesting.
After 6 to 12 months, this is the final stage of a bull market or even the beginning of a bear market.
The vesting period goes into 2026.
History suggests this will be a bear market.
Since there isn't a lot of hype, selling is not attractive.
I'm not saying it's completely unattractive, it's just that the timeline is completely different.
How to combine the best of both worlds to make more accurate investments in a bull market?
The bull market is also a blessing. At this stage, there are very dedicated teams who have the power to select the best stakeholders and get the best "added value". You can raise a lot of capital to do some good things for the industry. Great community, opportunities, networking, and overall higher levels of engagement.
For investors: whether it’s liquid or illiquid assets: choose wisely, talk to people, recognize opportunities, be skeptical enough, 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: continue to speculate and identify the best opportunities. You cannot overestimate the importance of speculation in cryptocurrencies.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reproduced with permission from: "Deep Wave TechFlow"
Original author: Pavel Paramonov
