We take a look at the current bearish crypto market and consider alternative investment options
Even during a crypto bear market, there is money to be made by pivoting to new strategies and not relying on a single stream for profit-making. We take a look at the current trends across the Ethereum, Binance and Polygon networks. We’ll also assess whether or not the best value may currently exist outside of the cryptocurrency markets.
Cryptocurrencies do not exist in a vacuum. So it’s no surprise that markets are down as the world goes through a turbulent period. Countries are still recovering from the COVID pandemic, inflation affects major economies and conflict looms in Eastern Europe. It’s no wonder investors are putting their money in safe havens.
But all is not lost. The upside is that the current negative externalities are “known unknowns”. We may not know exactly how things will unfold; but we’re able to put good reasons behind the current market malaise. With this knowledge in mind, investors are better placed to act accordingly.
Big coins down over the past week
Three of the biggest blockchain’s native tokens are all down over the past week. As the world continues to go through political and economic turmoil, it would be safe to expect the short-term outlook to continue along the same path for these coins:
- ETH – the native cryptocurrency of the Ethereum blockchain. It has the second biggest market cap behind BTC (bitcoin).
- BNB – the native cryptocurrency of the BSC blockchain. Binance is the largest cryptocurrency exchange in the world in terms of trading volumes.
- MATIC – the native cryptocurrency of the Polygon blockchain. Polygon is a network of secure Layer-2 solutions and autonomous sidechains.
Below is the ETH 7-day trendline and we can see the value of the coin has dropped 16.09% over that period.
Instead of displaying the 7-day charts for BNB and MATIC, I can tell you that they follow an almost identical line. It’s a truism in the cryptocurrency markets that the majority of coins still mirror the highs and lows mapped out by ETH and BTC (bitcoin). As the markets mature, expect to see different coins taking divergent paths. But for now, it’s safe to assume that where the two big giants tread, the rest go in their wake.
ETH’s 30-day movement to the upside is a small reason to celebrate though, as the trendline below shows an increase compared to the January lows. The rise of 7.36% shows that 2022 hasn’t been all doom and gloom.
At this point, it may be instructive (and help avoid panic) to take a longer term view of ETH’s performance. The current bear cycle began properly in November 2021, following the explosive bull run over the September-October period. The highs and lows we see at the moment are not too unusual if we look at ETH’s entire lifecycle. The dip we are now experiencing could be the start of a longer term downward trend. But cashing out everything now could be a big mistake.
Viable hedges to fight off the bears
Let’s get the bad news out of the way first: the majority of coins with a big market cap (except the stablecoins) are down over the past 7 days. A sea of red covers every market tracker and we can safely say we’re in a bearish period. But across all decentralized applications and markets, there are viable hedges we can employ to fortify our position:
NFTs: NFT stands for non-fungible token. Non-fungible means that it can’t be copied or replaced with something else. It’s unique and has its own digital signature which is stored on the blockchain. While the cryptocurrency world has seen a drop-off in value, NFTs have held up relatively well. Bored Apes and CryptoPunks are two NFT collections worth looking into and potentially using to diversify your portfolio. DappRadar’s NFT Top Collections page is a good place to start your research for this particular market. People also invest in fractional NFTs which are a more affordable route into the space. The most valuable NFTs exist on the Ethereum blockchain, often tying their value to ETH and adjusting their ETH valuation against the dollar.
Short-term trading: While many cryptocurrencies have been trending downwards, there are still plenty of bargains to be snapped up. If someone does their research and takes a chance, they could see huge gains over a very short period of time. On the Binance blockchain, we see the Hashland Coin (HC) coin is up 126.18% over the last week and QMALL is up 178.09% over the same period. Sharp rises in the price of a smaller cryptocurrency usually follow a positive announcement from the currency’s developer or a technological breakthrough people see as a benefit. So keep an eye on the news and move quickly when you spot an opportunity.
Bitcoin: Bitcoin is the biggest fish in the pond with a current market cap of $711.29 billion. If it was a company, it would be the seventh largest in the world, in-between Tesla and Berkshire Hathaway. For this reason, there are many powerful people who have a vested interest in not allowing bitcoin to crash. While nothing is too big to fail, bitcoin’s increasing acceptance by institutions and the sheer size of its market cap means it’s less easily swayed by market volatility. Its value may go down along with the rest of the market; but it shouldn’t go down anywhere near as much. It’s great for limiting your losses while holding open the door to a potential upside. Through layer-2 solutions like the RSK blockchain, users can directly put their bitcoin holdings to work in DeFi.
Staking: Staking cryptocurrency means locking up your crypto holdings in order to receive rewards or earn interest. In a Proof-of-Stake blockchain network users can put their native tokens behind a validator to earn interest, or perhaps set up a node. In that case they would participate in the validation of blockchain activity, and earn rewards for that. In addition there’s another form of staking, more aimed at consumers. Here you provide liquidity or lock away your tokens to reduce the overall supply on the market. This works similar to earning interest at a bank. However, in this case the APY is generally a lot higher, and paid in the native currency of that particular project. Learn more about staking here and read up on The Sandbox’s recent announcement about staking.
Stablecoins: Stablecoins are cryptocurrencies pegged to real-world assets such as fiat currency and gold. Most stablecoins are tethered to the US dollar which is one of the safest assets in the world. Stablecoins were invented as a hedge against the volatility of the crypto market so they’re the perfect place to put your money while you wait out the current dip. And they give you the option of keeping your money in crypto form as opposed to holding it in cash which has to be stored in a bank or under your mattress. However, keep in mind that inflation in the United States recently hit its highest point in decades. The power of the dollar is diminishing alongside its cryptocurrency counterparts.
The future LANDscape
All of the above are useful ways to fend off the current market volatility. But what does the future of blockchain look like? And which assets are the best to buy today, in anticipation of success in the future?
All roads appear to be converging on the metaverse. A slightly nebulous concept that everyone’s talking about, the metaverse is a collection of platforms and projects that aim to remake our physical world in virtual reality. Metaverse inhabitants will be able to socialize, shop, learn and work inside a series of worlds created by different companies.
While the idea sounds crazy, the sums of money attached to the projects are substantial and very real. Exclusible recently sold all 25 of the luxury islands it built inside The Sandbox for $2.9 million. Collectors and investors can purchase Legendary Palm NFTs for Nifty Island: the cheapest are going for 3.1 ETH ($8,407).
The floor price of land in Decentraland is 4.75 ETH ($12,890) on OpenSea. Land in the metaverse is a parcel of real estate represented by an NFT. The table below shows the 30-day performance of land in Decentraland. The average price and market cap of land on the platform has gone up in that period. And this is despite the number of land sales having gone down.
The Sandbox, another of the metaverse’s leading platforms, raised $93 million in a Series B investment round last November. It counts Snoop Dogg as one of its residents and the developers just agreed a deal with World Chess Champion Magnus Carlsen to host a virtual chess tournament for the scene’s leading players.
The chart below shows the 90-day average price and volume of land within The Sandbox. The blue trendline shows a steady upward path that defies the recent downturn in wider crypto and blockchain asset prices. Who knows what the future holds for this technology but it’s definitely worth looking into as a potential long-term investment.
Aside from Decentraland and The Sandbox, there are countless developers popping up with new ideas and projects for people to get involved in. And any one of them could be tomorrow’s next big thing. Here are some more metaverse companies and platforms to keep an eye on:
World events are affecting cryptocurrency prices. It’s difficult enough to predict what will happen tomorrow, but guessing what’s further down the line is impossible. By trying to judge how the culture’s moving and how people’s tastes are evolving, it might just be possible whether the storm and come out stronger.
The above does not constitute financial advice. The opinions given here are for purely information purposes. Due diligence and research is strongly advised before making any financial decisions.