How Crypto Traders Are Weathering the Bear Market
Three full-time crypto traders share their best trades, worst bets and how they are weathering the crypto winter.
Crypto prices are excruciatingly range-bound. Search interest has bottomed out. Trading volumes and open interest on exchanges has plummeted as demand has evaporated.
Last year’s crypto casino that drew hordes to digital assets has become a ghost house of the discouraged and disenchanted.
This article is part of CoinDesk's Trading Week.
But among the remaining residents are day traders, a small group of steely nerved investors who bank on their ability to read cryptos’ daily price fluctuations to pay their bills. Some garnered well into six-figure incomes. Some became millionaires.
But the current bear market has complicated their jobs. How do you forecast an asset’s future when that asset correlates to wider, macroeconomic conditions that have reached historical levels of uncertainty? What strategies are useful when the asset is new and its market is suffering through a steep down cycle with no clear indication of an endpoint?
Three full-time crypto traders shared their stories with CoinDesk about how they’ve been weathering the current, bitter cold, crypto winter, including their biggest wins and worst bets of the last few months.
Bethany, Cryptogle and Howard Greenberg have adopted different tactics. Bethany has become cautious and analytical about when and in which digital assets she invests. Cryptogle has been holding investments longer and is shorting cryptos for the first time in his decade as a digital asset investor. Howard Greenberg is setting more moderate expectations on how much he expects to profit and is quicker to abandon investments when they start losing money.
Each of them remains committed to trading crypto, which has been lucrative in the past and which they believe will rally again once inflation and the global economy turn for the better.
“This might be a more painful downturn,” Cryptogle said. “But will crypto come back? Of course it will, and rally again.”
Wait and study your losses
Avid crypto and non-fungible token trader Bethany has mostly stayed out of the current market, although she’s collected some bruises by prematurely predicting that crypto markets would recover sooner.
“I have had some big losses thinking that this is the bottom or a relief rally is due soon.”
She found switching from a “bull mindset” to being more flexible in her crypto bets difficult after the months-long price upswing in 2021. “Since we were in this 'up only' mentality for so long it's been hard for me to shift away from that bias.”
She has been trading a lot less lately, part of a shift among investors to more risk-averse posture. “We've been in a bit of a sideways market and the risk-to-reward is not really there for me.”
Now, with more free time, Bethany is preparing for the next bull run. She has been reviewing trading principles and studying the potential impact of the broader, macroeconomic environment on digital assets. She has also been scrutinizing what traditional finance firms – sometimes referred to as TradFi in crypto circles – are doing in the crypto space.
“There's more institutional investment in crypto than ever before and it is happening at a time when a lot of retail has left crypto or reduced their investments in it. So understanding what's going on in TradFi has become really critical in trying to anticipate where crypto is going.”
Also, Bethany has been dedicating more time to research projects with the potential to hit “100x growth” when the next bull cycle kicks off.
She predicts the next bull run’s biggest gainers will be tokens with certain utility to its holders. “I'm thinking of play-to-earn (P2E) gaming as well as tokens with profit-sharing models or a collaborative building experience.”
Winner trade: “Longing luna classic (LUNC) at about $0.00018-ish and riding the wave up.”
Bagging profits by flipping charts upside down
The veteran trader, who calls himself Cryptogle on Twitter, has remained active during the crypto rout. Cryptogle, who first dabbled with bitcoin (BTC) in 2012, after trading options and stocks for a decade, has already experienced most of the wild swings in cryptos’ 13-year history and so remains optimistic even in crypto’s most recent darkest hours. “There always are opportunities,” he told CoinDesk. “The last quarter was one of my best.”
This year, he has placed 250 bets a day, on average, including trades made by bots, computer-coded software that executes purchases and sales automatically. Still, this volume is less than his average 800 daily trades in 2021.
Cryptogle has also changed his approach since last year, as he generally holds investments longer. And for the first time in any crypto cycle he is shorting – betting on an asset’s price to drop.
“Hysteria and fear are both easy to trade,” he said. “During the bull market you just throw a dart at the wall and likely you'll hit a big win.”
The same is true for the bear market, when everything is crashing. “Things have been so crap that you could just short the market,” he said. “But you gotta make sure you've got the capital available to cover.”
He is an advocate of flipping charts upside down, a trick some traders do to eliminate any bias when predicting prices. “That makes it easier to understand how to play these games and press the sell button instead of the buy button.”
During the bear market, he prefers making long-term investments in crypto infrastructure that might benefit from a new wave of users when better times come for the crypto market.
Winner trade: “Buying CAKE (decentralized exchange PancakeSwap’s token) before [its] initial farm offerings (IFO), and selling immediately when the IFO was released to the public. It was predictably very profitable as a long and a short for a few months.”
Biggest flop: “Doubling down on MAGIC (Treasure DAO’s token) a couple of months ago. “If I had thought twice I would have realized it had more downward pressure than upward at the time.”
Accept smaller wins and limit the losses
Howard Greenberg is a cryptocurrency trading educator at Chicago-based Prosper Trading Academy, a firm that teaches prospective traders about all types of markets, including crypto.
Greenberg saw a substantial drop in interest and commitment to trade digital assets from last year, adding, “Without a doubt, there was much more interest in trading during the bull run.”
He still has over 1,200 traders subscribing to his signals in his dedicated Prosper trading room, but the number of people who now trade with him has declined.
“Traders come in and out during the bear market, taking days or even weeks off,” he said. This contrasts starkly from last year “when everyone was in for every minute.”
He trades crypto on a daily basis and is making a similar number of bets as last year, but with extra caution. He sets smaller profit targets for winning trades and tighter stop-losses, if the price moves in the opposite direction to his prediction.
Greenberg’s survival tip for the bear market: “Be willing to make smaller wins and limit losses.”
Winner trade: Buying BTC with three times leverage leading up to the July 27 Federal Reserve meeting in anticipation of a short squeeze, together with his trader class. ”We were able to ride that from $21,500 to $23,460 in less than 10 hours. We hit our first profit target within one hour,” he said.
Biggest flop: Planned to short ETH as a “sell the news” event going into the Merge, but he got tricked by the huge amount of short open interest in the futures market that could lead to an epic short squeeze and went long. “The only thing that squeezed was my wallet,” he said.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.