Arca’s Chief Investment Officer: Which Crypto Sectors to Watch in a “Small Bear Market”?

Decentralized finance (especially decentralized exchanges), miners in other jurisdictions, censorship-resistant storage/archiving (e.g. Arweave), autonomous storage/wallets, and of course Bitcoin.

Arca's Chief Investment Officer: Which Crypto Sectors to Watch in a "Small Bear Market"?

Recently, the cryptocurrency market has been so depressed that many feel a “mini-bear market” has arrived. Jeff Dorman, Chief Investment Officer of Arca, a crypto investment firm, shares his personal views on the current state of affairs, and let’s take a look at them with Golden Finance.

We found that the cryptocurrency industry has risen sharply since October 2020, and some people wonder what exactly caused this.

The first thing is that fast money is starting to enter the market. Depending on price changes, the rate of fast money entry does not seem to be getting faster or slower, and those who try to deploy a fast investment plan will still operate as planned. Although grayscale bitcoin trusts and Coinbase stock may be leading indicators as downward px swings suggest that the fast money money has started to slow down.

Next is low interest rates/low dollar. Even though there is quite a bit of inflation data in the market, dollar rates and prices have still not shown much reaction and continue to be very moderate, which seems to be very favorable for risky assets.

Finally, there is the celebrity effect. As it stands, social and corporate governance narratives like Elon Musk and some of the big institutions are unlikely to go away. Like religion, it’s almost impossible to rely on science to change people’s minds about religion, so from that perspective, the celebrity effect seems more political than substantive.

In the current market environment, if you can see through these three factors, then your thinking will be clearer when deploying your money for investment.

It is worth noting, however, that the following three behaviors often cause problems for investors (especially hedge funds): leverage; shorting (which seems to work in a market downturn right now, but doesn’t always work); and illiquid positions (many traders have suddenly become early-stage venture capitalists because there have been many “hot deals” this year, but now many crypto projects have become less popular).

Be aware that even if you have avoided the above three problems, you can still lose money, but this will ensure that at least you can afford to lose it. Generally most investors will sell their margin positions with two to three times the leverage as long as they have a good investment idea, and in the end you see which investment targets go up at the fastest rate to know what they have invested in the end.

However, there are some factors that prevent the application of the above investment behavior in the digital asset space, such as the fact that very few people will generally have the experience of heartache in the cryptocurrency space; that very few people will be able to manage cash/leverage better, so even if they do want to, most simply can’t; and that very few people will have enough conviction to do so.

In theory, if you take a finite value view, assets that are asset owned or have real cash flows are not affected, such as decentralized finance, centralized finance, and some NFT platforms and sports/gaming platforms. And those assets that cannot be valued (i.e. Bitcoin and most layer protocols) are generally the most difficult to price.

We found that early last year, shares of some social media and companies that provide telecommuting services had plummeted in the run-up to the new coronavirus outbreak, but the market quickly saw the opportunity as these companies would benefit when everyone quarantined at home. So over the next year, the stocks of such companies, most notably Zoom, rose sharply.

But in the past two weeks, some of the “crypto industry opinion leaders” such as Michael Burry, John Paulsen, Kyle Bass, etc. have suffered a lot of losses, mostly from people who made a fortune in the past in one trade, but haven’t done so well since. And for the average person, choosing the right position for you, trusting your analysis, maintaining your courage, and controlling your investment emotions will give you a chance. Digital assets are here to stay, and although there are sometimes plunges, as soon as market sentiment is high again, then the opportunity to gain wealth comes.

One wonders, what are the areas that will give us better returns when there is a “coordinated attack” on miners/cryptocurrency exchanges by governments/regulators? There are many such areas, including: decentralized finance (especially decentralized exchanges), miners in other jurisdictions, censorship-resistant storage/archiving (e.g. Arweave), autonomous storage/wallets, and of course Bitcoin.

In fact, back in 2008, when securities trading was very depressed, there were still a number of wealthy and savvy buyers who kept buying stocks, and now they seem to be largely correct. It takes an incredibly strong conviction on the part of the investor. Similarly, something similar is happening in the cryptocurrency market right now, where you don’t have to worry about price levels as long as you have cash in hand, you just have to keep deploying into assets that you believe in. As long as your overall valuation is going in the right direction, it doesn’t matter, you just need to buy a little bit at each price level without thinking too much about the timing of your purchases.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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