I was right in the middle of doing an expose on Chainlink 2.0 and the market decided to take a big steaming dump in my face. Holy shit, I'm looking at a 17.3% red number, and it doesn't feel good.
Guys, this is when millionaires are made. Bottom line:
It's too early. The demand for bitcoin alone has not been satisfied. Everyone who wanted to buy has not had time to buy.
Two: These types of corrections are expected. We've been through two of them in this cycle alone. These dumps are good to shake out all of the idiots who would ruin the market anyway.
Now why did it happen?
A number of reasons, but here's my guess as to the number one reason:
#LeveragedLosers... geez, so annoying, these people...
The second pump for bitcoin and altcoins did not go as high as expected. But just like every time before this, you've got trade-alert morons who want to long the tops. They don't go long when bitcoin is at $50k and about to pump. They go long after bitcoin surges to $64k and the pump is over. These idiots are mincemeat for well-informed whales to short. Although a $1T crypto market seems big, it's not. It only takes one or two whales dumping to affect the price of bitcoin, which affects the price of everything. When the 100X leverage long traders get liquidated in seconds, it triggers the 50X leverage trades to get liquidated. This triggers the 25X trades to get liquidated, and so on down the line. The result is a very dramatic drop in prices on bitcoin, which drags the entire market down.
Note that the liquidations can happen on one exchange, but those prices are eventually reported to other exchanges. Because of the centralized nature of the oracles crypto uses (Chainlink 2 expose!!), one group of idiots doing leveraged longs on one exchange can tank the whole market. It's also very true that exchanges trade against their users. This isn't a scam because it's publicly known. You aren't affected if you're not leveraging, so DON'T LEVERAGE UNLESS YOU KNOW WHAT YOU'RE DOING.
We also got news of SPACs undergoing new scrutiny from the SEC. Chamath Palihapitiya is the face of SPACs and connected to bitcoin. He in particular faced a great deal of scrutiny — his SPACs fell more than the average. Because crypto isn't fully decoupled from the stock market, when risky stocks fall, crypto will fall as well. It doesn't have to make sense; that's just the way it is now.
How do we know this is a temporary fall and not the beginning of the bear market like 2017?
1. The beginning of the bear market in 2017 was a lot of negative things all pushing together at once. Chinese New Year, scrutiny over ICOs, regulation in many countries, and a lack of development. This perfect storm of events just isn't brewing now. The number of Samsungs with built-in THETA is going UP. Universities are now accepting Elrond as payment. And think about it. You haven't heard about any Bitconnect-level scams in a while, have you?
2. We've seen this before. A single 20% dip isn't anything to be afraid of. Even as I write this, it's getting bought back up (I'm one of the buyers).
3. Retail is still strong. One good, easy way to check this is to look at the number of crypto videos made by normie outsiders like Meet Kevin and Andrei Jikh. If those clowns are still making videos about crypto, then crypto hasn't reached max adoption yet. When Gary V shifts to start talking about real estate or something again, then we know the tides have shifted.
Now I watch the markets 24/7, and I still got caught by this. It's not like I was able to shift everything into stablecoins, catch the dip, and buy up everything at the very bottom. I was shocked by the quick dip just like you were, and went about looking for answers. Fortunately, profitability in the market does not rely on "catching" these events. It's all about planning.
UPDATE: We got the number on the #LeveragedLosers. $3 BILLION liquidated in like an hour. Fucking morons. Stay out of the market, stupids.
So. What do we do about it?
First off, if you got caught but you didn't have a plan, just buy with your free stablecoins. That's all. Buy and wait for the recovery. I like to go to Coingecko's full coin list, organize it by biggest 24 hour losers, and buy the biggest losers. Theta was on the list — they dipped below $10 and are still on firesale at 20% discount. That's a great buy.
I had some strategies planned for shocks like this that I'll share with you now. They combine a number of defi tools, so if you don't know about those tools, I encourage you to read up on them.
Stablecoin/shitcoin yield farms on Pancakeswap.
I love, love, LOVE BUSD pairs on Pancakeswap. They are perfect for events like this. For instance: I've been holding the FOR-BUSD pair for quite some time getting around 150% APY. That's daily CAKE that I put into other projects. I hold my money in FOR as well, which makes a difference. See, this strategy doesn't work unless I actually believe in and understand the project.
FOR is a lending protocol that allows me to leverage my holdings. So say I've got $100,000 worth of assets in FOR. I can borrow $60,000 in BUSD and make money from $160,000. Part of that money was in the FOR-BUSD pool. So when the shock happened, I just took the FOR-BUSD out of Pancakeswap and cycled it back into my FOR bank account. So now I'm no longer in danger of liquidation, and most importantly, I didn't have to sell anything. You might also argue that I didn't lose any money. Because even though FOR went down in dollar terms, I didn't have to sell it. It's still earning me an interest rate. And when things recover, I'll just re-borrow, put the FOR and BUSD back in Pancakeswap, and go back to earning my 150% APY until I get ready to sell my FOR at a profit.
Yield farms as a whole are a great tool to wait out bear markets. The goal is more tokens, and if you farm through dumps, you end up with more tokens. When everything recovers, you have more money.
Buying into high yield shitcoin farms
NOW is the time to buy into those high yield shitcoin farms. We're still in an overall market of speculation. You don't make your money picking the best project, because none of them have really delivered on anything. You make your money getting the best buy price. If you get a good buy price on a high yield farm during a dump, you can lock in profit on the recovery and get into a position where you never have to sell the farm.
Get in on those shitty shitcoins RIGHT NOW. Personally, I like Oddz and APYSwap because they are supported by Pancakeswap. I'm also looking into projects supported by Quickswap, the leading AMM on Polygon. Deflect, Hex, Matic and Dark are good projects that you can get yield on in Quickswap while you wait for the pump.
Also, yield farming keeps you from having to pull out of your low caps when they dump. You're still making money on them, so you can wait out the dumps and even buy more of them. Now is DEFINITELY not the time to sell your low caps. Farm them.
Use lending protocols
When you buy your assets at low prices, you can multiply their utility if you put them in defi lending protocols and borrow. So you don't want to go shitcoin dumpster diving. I think everyone agrees that buying bitcoin and ether after a 17.5% dump is a pretty decent idea. If you use a protocol like Cream or FOR you can gain 150-170% exposure to these assets by buying the assets, putting them in the protocol, borrowing stablecoins, buying more assets, and refolding those assets back into the protocol. When the recovery comes, you get 150-170% of the rewards. If you want, pay back the cash and walk off with the assets.
Make sure to watch your collateralization rate. That number is much more important than the dollar value of your assets. Re-read the "Stablecoin/shitcoin yield farms on Pancakeswap" section above to understand why.
Everything centralized stops working during these dumps
I wanted to buy some Theta on Binance, and the shit is giving me "network errors." Hilarious. But this is the third or fourth time I've gone through this, and we should all expect it by now. You must plan ahead of these dumps, because all of the centralized shit in crypto will fall apart during the dump.
You should pick out your favorite defi AMMs and bridges beforehand so you don't have to go searching for them during dumps. I have mine in bookmarks so I don't have to waste a second if I have to move. Also, this is another reason not to keep your coins on exchanges. If you need to move into a stablecoin quickly, defi is the best place to do it, not COINBASE or Binance. For stuff like Theta that is only on centralized exchanges, go to the less popular ones to ensure better performance. Huobi and Hoo are my choices. And after you make the trade, move those coins into personal custody immediately. You never know what those clowns have up their sleeves.
Restructure your thinking
The strategies above all rely on you divorcing yourself from the notion of crypto being valued in dollars. Remember, this market loses 80% of its value if governments and central banks stop doing stupid things. A large part of the value in crypto is based on being short fiat. So you can't get upset if fiat has a little dead cat bounce every now and then.
The important thing is DON'T SELL during a pullback. If you have to sell anything during a pullback, you're doing something wrong. Perhaps you're overleveraged or you're just not emotionally ready to trade in this market. But you shouldn't be trading back into fiat until you have truly life-changing gains and you want to move into another asset that requires fiat to purchase. Outside of that, the fiat value of your crypto is meaningless. We are in a better system that will win out in the long run. That's a fact. Short term hiccups mean nothing. Short the dollar.
I'm trying to get this out quickly, so there may be some things I forgot to say. But we'll pick up the discussion in the comments if you all have questions. It's also much better to come with your alpha. Don't just come in begging for help because your portfolio is red. No one likes that. Show what you know, and others will be very happy to help you with what they know.
Diamond hands, Alucards! This is time to get rich. Look out for my Chainlink 2.0 article next. I read their whitepaper, and there are some disturbing things in there that I believe will increase the need for privacy coins.
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