5 tips for investing during a global recession

5 tips for investing during a global recession

The economic outlook in Wales is bleaker than the forecast, and few are rushing to buy risky assets. Here are some tips to weather adverse market conditions.

Option #1: Save cash

It’s acceptable to hold off and accumulate cash or stablecoins. When bullish momentum resumes, you’ll have plenty of dry powder on hand to make sizable allocations. In the interim, there are still plenty of ways to profit from the cryptocurrency markets. If you believe in the protocol, you are using. But isn’t this the era of the impossible market? Possibly.

But it’s more about spotting momentum and broader market trends than more specific price predictions or call reversals. Bigger trends are easier to spot. However, if that’s risky, there’s another option.

Option #2: Dollar-cost average (DCA)

Have you ever seen a physical therapist for a wrist or back problem? He expects a quick and easy cure, but he’s given a series of measly, tedious exercises every day for three months, Dollar Cost Averaging is the investment equivalent of this. It’s not very interesting, but it has a good chance of working in your favor, given a long enough time horizon. Additionally, automated bots that do it for you are available today, which is helpful.

​These first two options could be combined to create a strategy. For example, set aside 50% in stablecoins, wait for bullish momentum to return, and bring 50% to market regardless of price. This tactic allows for market exposure, which can help you resist FOMO when the demand is rising, even if your overall thesis remains bearish.

Option #3: Find assets that outperform

The craze of the bear market has been decentralized perpetual exchanges. Where can I short? Traders cried as they flocked to decentralized options following the FTX scandal. Many chose protocols like GMX and ApeX, which have increased this year by about 70% and 50%, respectively. There will always be assets that outperform during bear markets, but finding them requires a lot of work, and taking positions while the market is down is dangerous. This strategy should be approached with caution and is best used by investors with the intelligence and experience to spot a good project and employ sound risk management.

Option #4: Use derivatives

Many strategies use derivatives and mixtures of agreements to lock in profits in a downtrend and flat market. For example, use options to create a “bearish selling margin” to make money when an asset falls by locking in a good sell price at a discounted rate. There are also pseudo-delta neutral strategies that advanced yield farmers use for long and short positions on either side of a liquidity pool. This reduces your exposure to the volatility of assets holding, allowing you to charge pool fees while reducing your downside risk. The hard part isn’t putting these strategies into practice (instructions are available online) as managing them and determining your position.

Position sizing and management can make or break these types of trades. They can be profitable in a bear market but should be used cautiously.

Option #5: Keep your head on while others are losing theirs

Unless you’re a free climber like Alex Honnold, I would only attempt to scale a cliff with good safety gear. The same applies to investments in cryptocurrencies. What safety equipment? Well, a cash-only emergency fund is a good place to start. It should cover about six months of basic living expenses and not be used for income, credit, or gambling.

You should also have a sinking fund held in similar circumstances (read: very liquid) to pay for big expenses that come up, like car repairs or, say, being stuck in expensive Singapore for a week while your visa delayed. The sinking fund gives you that extra supportive protection so you can keep your emergency fund pristine and only use it for real emergencies. Recessions are difficult, so be sure to look after your sanity. Constantly checking your portfolio or the price will reduce your mind and ability to make wise decisions when the time comes. So exit your computer and head outside to play.

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