Crypto crash in 2022: What to do now?
If you’ve been actively invested in the markets since the start of this year, be it stocks or crypto, your portfolio probably looks like this heat map:
Well, if it does, don’t worry because my portfolio looks something like that too! Nothing to be happy about here… but if you zoom out and look at the big picture, cryptos are still up by a decent amount since the start of 2021.
Bear markets are unavoidable, and we would probably never be 100% certain when one would come. But one thing we can be 100% in control of, is how we react to it.
In this article, I will be providing a brief overview of the current cryptocurrency market conditions and sharing some of the steps I am taking to cut some losses and continue earning.
Crypto market overview
About $1.6 TRILLION – yes Trillion with a “T” – has been erased from the total crypto market cap since its all-time high in November just last year. The total market cap now sits at $1.2 Trillion, which is equivalent to just Bitcoin’s market cap at its all-time high in November.
Needless to say, the market is looking pretty bad this year.
Bitcoin Dominance Index
The Bitcoin Dominance Index essentially shows Bitcoin’s share of the total crypto market (i.e. its dominance in the crypto market compared to altcoins). Based on the graph above, Bitcoin dominance has been increasing, suggesting decreased interest in altcoins in 2022 since more money is in Bitcoin.
On the technical side of things, it would mean selling off altcoins and holding more Bitcoins.
YTD Top 5 cryptos by market cap
Looking at the top 5 cryptocurrencies by market cap at the moment (excluding stablecoins), well, it’s a bloodbath with losses ranging from 30-55%. Even in the past 3 months, it pains me to look at it.
Fear/Greed Index
The Fear & Green Index is another measure of market sentiment, like the one seen in stock markets. For crypto, it’s currently hovering in the “Extreme Fear” category, indicating significantly high selling pressure. But as Warren Buffett once said, “Be greedy when others are fearful”. So maybe this could be a good sign for us?
Crypto Bloodbath
YouTube has no shortage of content when it comes to investing, and many of the popular finance Youtubers are showcasing their losses too, not just in crypto, but stocks as well:
From Graham Stephan losing $1.5 million to Biaheza losing $500,000. Well, it’s safe to say, it probably isn’t just you and me experiencing huge losses in 2022.
Earlier in May, when UST/LUNA collapsed, the market was filled with chaos and news coverage, even a report on a man breaking into Do Kwon’s (Founder of LUNA coin) house because he reportedly lost $2.3 million.
Friends of mine have lost over 50% of their portfolio in cryptos. My crypto portfolio ain’t all that rosy as well.
My experience with the Crypto market so far in 2022
To get straight to the point: I’m down a significant amount year-to-date, around 30-40% across my entire portfolio. Cryptos are high-risk assets that are insanely volatile, so I should already expect such large losses, despite that it does pain me to see my 2021 gains get completely wiped out.
Did I get burned in the LUNA crash? Yup, I saw Hodlnaut introduce the UST “stablecoin” offering a pretty good starting APY of 13.9%, so I swapped some USDC for it, and 3 days later, it sat at 20% of its original value.
Recently though, Hodlnaut gave out an airdrop of LUNA 2.0 tokens to previous holders of LUNA or UST, which well… reimbursed about 5% of my losses (better than nothing).
The larger cap cryptos I am holding are pretty much back to 2021 March levels where I bought in, some even lower. As for my altcoins, I would say I’m down about 50%.
Will I be cashing out on my positions?
Well… the straightforward answer is no. I intend to ride out the bear market by parking my cryptos in interest-bearing platforms like Hodlnaut or Celsius.
Collecting weekly compound interest
At the moment, I’m using Hodlnaut, but not long ago they adjusted the APY and are now offering just 9.4% compared to the previous 13.9% APY for USDC and USDT stablecoins. This goes for Bitcoin as well, the rates are now 5.3% compared to 6.71% APY previously, which kind of makes Celsius’ 6.5% sound more attractive now.
Another thing I did was reduce my altcoin holdings by converting some of them to USDC and just parking them in Hodlnaut to earn interest. The remaining went into a 50-50 split between Bitcoin and Ethereum which have a relatively long history so it’s safer crypto in my opinion, and these are also parked in Hodlnaut.
My Crypto.com positions
My CRO (Cronos, Crypto.com’s native token) is also down about 30-40% since the start of the year, and I haven’t been buying into it after the initial SGD$500 deposit to get the Ruby Red Visa Card.
But, I am still using it for regular daily expenses like food to get a 1% cashback in crypto, and also for subscription reimbursements like Spotify and Netflix.
2022 Course of action in the crypto market
As you commonly hear in the markets, “Historical results are not an indication of future performance”. I certainly don’t know where the markets are headed in the future, but my main course of action is:
- Save up more money to reinvest at a later date when the market stabilizes or isn’t churning out rate hike news left and right, or crypto crashes front and back.
- With the current crypto holdings, I am parking them in interest-bearing platforms to continue earning while the market goes sideways.
- Allocate just 5% of my current USDC holdings into buying up new IDO projects. This would be the highest risk speculation.
- Hold more large-cap cryptos like Bitcoin or Ethereum that can still generate interest in platforms like Hodlnaut or Celsius.
This negative news in the crypto market can be a big hit to its reputation, but investors like Mark Cuban also mentioned how it’s going through something similar to the early Internet – the 2000 dotcom bubble. Investors then speculated on volatile Internet companies which he said is similar to what’s happening now for cryptos.
Based on his word, “the chain that copies what everyone has will fail”, Ethereum and Bitcoin are probably the safest bet for the long-term.
What you can do in the current and future bear markets
As mentioned in pretty much all NAOF’s crypto articles, “Do not invest what you cannot afford to lose since crypto is a highly volatile asset class that is largely, if not completely unregulated”.
If you are deeply invested in crypto, here’s what I would personally do:
- Convert your riskiest cryptos (i.e. the shitcoins, and volatile altcoins) to more trustworthy large-cap coins that have a long track record. This would probably save your portfolio from fluctuating 10% every day. Large-cap cryptos are also more recognized and are typically offered on interest-bearing platforms for you to still earn while the market is burning down.
- Hold more stablecoins. If you don’t wish to exit the crypto space, holding onto stablecoins can be the equivalent of holding cash in a recession and slowly averaging back in. Holding stablecoins still enables you to participate in the DeFi space, earning up to 9.4% APY in Hodlnaut.
- Disable your price alerts. The last thing you want to do is to get a notification of crypto flying up by 10% and buying in because of sudden FOMO, and losing it all a day later. It’s also good to just take a break from the markets since the market is probably taking a break from its 2021 bull run too!
Conclusion
If you truly believe that crypto is the future, nothing is stopping you from buying up more, but as mentioned before: IT IS A HIGHLY RISKY ASSET CLASS. So please engage in your own due diligence work and know your risk appetite. Do not blindly follow the masses out of FOMO.
At present, I would say that crypto is definitely not the “hottest” asset class in the market, with most having invested near the top and now feeling the pain.
Ask yourself if you actually do believe in cryptocurrencies as a viable/alternate currency to fiat. If the answer is YES, then capitalize on the current weakness through a dollar-cost approach. There really isn’t a need to ALL-IN. If the answer is NO, then cut your loss, exit this market, and focus on the stock market, perhaps.
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Disclosure: The accuracy of the material found in this article cannot be guaranteed. Past performance is not an assurance of future results. This article is not to be construed as a recommendation to Buy or Sell any shares or derivative products and is solely for reference only.
