Bear Prep
2022 is going to be a great year for crypto, so you should definitely prepare for it not to be.
Here are some tips from our newsletter on how to prepare for a bear market:
2022 is going to be a great year for crypto, so you should definitely prepare for it not to be.
Here are some tips from our newsletter on how to prepare for a bear market:
1) De-risk
Get 10% on USDC at Crypto:com or 8.5% on DAI with Vesper. Or even 19.5% on UST with Anchor.
None of those things are entirely risk-free, but it’s as close as you can get without retreating all the way back into traditional finance.
Get 10% on USDC at Crypto:com or 8.5% on DAI with Vesper. Or even 19.5% on UST with Anchor.
None of those things are entirely risk-free, but it’s as close as you can get without retreating all the way back into traditional finance.
2) Lower the cost basis on your ETH
Option skews are still pretty wacky with March $10K ETH calls trading at 150% implied vol.
Writing those each quarter would yield an annualized 25%. Which is to say the cost basis on your ETH would be almost $1K lower by this time next year.
Option skews are still pretty wacky with March $10K ETH calls trading at 150% implied vol.
Writing those each quarter would yield an annualized 25%. Which is to say the cost basis on your ETH would be almost $1K lower by this time next year.
3) Sell protection
Yield while you wait for the crash by selling puts. $2,000 strike ETH puts will make you about 20% annualized.
Level it up with an options vault that gets extra yield by working the collateral: the StakeDAO ETH put selling vault yields 57% currently.
Yield while you wait for the crash by selling puts. $2,000 strike ETH puts will make you about 20% annualized.
Level it up with an options vault that gets extra yield by working the collateral: the StakeDAO ETH put selling vault yields 57% currently.
4) Buy at a discount
The Kujira protocol allows you to buy LUNA or ETH from levered longs that are being closed out in sell-offs.
On the way down you buy at a discount and can either flip for a quick profit, or dollar cost average into a position.
The Kujira protocol allows you to buy LUNA or ETH from levered longs that are being closed out in sell-offs.
On the way down you buy at a discount and can either flip for a quick profit, or dollar cost average into a position.
5) Liquidate people
Deposit the pegged stablecoin LUSD with the Liquidity protocol and your funds will be used to buy ETH from margin-called sellers.
The advertised APY is 12% at the moment and you’d presumably do better than that in a bear market.
Deposit the pegged stablecoin LUSD with the Liquidity protocol and your funds will be used to buy ETH from margin-called sellers.
The advertised APY is 12% at the moment and you’d presumably do better than that in a bear market.
6) Avoid crowds
When things get choppy you’ll want to be off on your own. You won’t have much company trafficking in non-USD stablecoins at the moment, which is evident in the high APYs on offer for providing liquidity. Yearn Finance’s vaults on KRW, GBP, EUR yield about 40%.
When things get choppy you’ll want to be off on your own. You won’t have much company trafficking in non-USD stablecoins at the moment, which is evident in the high APYs on offer for providing liquidity. Yearn Finance’s vaults on KRW, GBP, EUR yield about 40%.
7) Be a hedge fund
If you are based outside the US, you can go to Perpetual Protocol and short perps just like hedge funds short futures, it’s a delta neutral way to make 5% to 15% APY on the basis trade. Or go to Lemma Finance( It only works if the basis is positive).
If you are based outside the US, you can go to Perpetual Protocol and short perps just like hedge funds short futures, it’s a delta neutral way to make 5% to 15% APY on the basis trade. Or go to Lemma Finance( It only works if the basis is positive).
8) Lend to hedge funds
On Maple Finance you can lend USDC to Alameda Research at 8.5% and get MPL rewards for a total APY of 16%.
There is counterparty risk, of course, but I’m guessing Alameda won’t stop making money anytime soon and would likely make more in a bear market.
On Maple Finance you can lend USDC to Alameda Research at 8.5% and get MPL rewards for a total APY of 16%.
There is counterparty risk, of course, but I’m guessing Alameda won’t stop making money anytime soon and would likely make more in a bear market.
9) Find things with real earnings
Near-term earnings get a premium in a bear market, but there’s not much of that on offer in crypto.
SUSHI and YFI are the only two that come immediately to mind and those earnings are pro-cyclical, which is not ideal.
Near-term earnings get a premium in a bear market, but there’s not much of that on offer in crypto.
SUSHI and YFI are the only two that come immediately to mind and those earnings are pro-cyclical, which is not ideal.
10) Find things with NAV
NAV can be defensive support for stocks. Things like YGG, MC, and BPT hold digital assets that could offer valuation support.
Beware of protocols that include their own token in calculating NAV (like YGG) that’s not an asset, it’s just future dilution.
NAV can be defensive support for stocks. Things like YGG, MC, and BPT hold digital assets that could offer valuation support.
Beware of protocols that include their own token in calculating NAV (like YGG) that’s not an asset, it’s just future dilution.
11) Buy bitcoin?
Will BTC be a defensive outperformer in a bear market? That would be the best outcome for the whole space.
A resilient BTC would be proof of concept for crypto and the way to get big new institutional money to come in on the next upturn.
Will BTC be a defensive outperformer in a bear market? That would be the best outcome for the whole space.
A resilient BTC would be proof of concept for crypto and the way to get big new institutional money to come in on the next upturn.
11) Writing the new playbook
The sample size of crypto bear markets is too small to really have any idea what the next one will look like.
The prediction is that it will be much more interesting next time around as it’s no longer just BTC, ETH, and scam coins.
The sample size of crypto bear markets is too small to really have any idea what the next one will look like.
The prediction is that it will be much more interesting next time around as it’s no longer just BTC, ETH, and scam coins.
12) The space is getting diverse enough that it’s no longer just a binary question of in or out of crypto.
In equities, defensives are hard enough to find that they always get a premium rating.
In equities, defensives are hard enough to find that they always get a premium rating.
13) Whatever cryptos outperform in the next downturn should get a lasting premium as well. And then we’ll have our playbook for the next, next bear market.
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