Well, that happened quickly. On June 12, bitcoin was trading for more than $28,000. By the end of June 13, it had fallen as low as $21,000. By June 18, bitcoin had dipped below $18,000. Bitcoin has rallied a bit since then and is currently trading around $20,350.
Bitcoin dipped below $20,000 faster than I expected. I thought it would at least have the decency to wait until the July Fed meeting (July 26-27) or the next round of inflation data (July 13).
I don’t believe we’ve hit the bottom of this bear market yet. My best guess (as of right now) is that it will happen around $12,000 or $13,000. It could dip lower than that as well, with $8,000 certainly being a possibility. I lean toward the higher end of the range. But as I’ve written repeatedly, timing the market is a fool’s errand.
This is also the first time the crypto markets are dealing with both inflation and an equities market on a consistent downward spiral with no relief in sight. It’s uncharted territory for crypto investors.
But as I’ve written previously, these are the times when the best investors look for buying opportunities. Buy low, sell high. That’s what investors do. And bear markets provide some of the best buying opportunities.
Like other crypto investors, I’m focusing on infrastructure right now. Blockchain technology isn’t going away. And projects that specialize in making crypto more functional, scalable and efficient will always be in demand. That makes infrastructure a good spot to invest in as the crypto markets fall.
This month, I recommend investing in Polkadot (DOT). Before I explain why, let’s go over the rules of the road.
Rules of the Road
Investing in a bear market is tricky. It’s likely that the market will go down further from here. But it’s important to be opportunistic. So if you have capital to invest — and you’re psychologically and emotionally willing to enter what promises to be a highly volatile market — here are some guidelines to follow.
- Do not invest money you can’t afford to lose. The markets are in for a rough ride. If you can’t afford to lose the money, don’t risk it.
- Focus on projects with strong use cases.
- Look for teams or communities that are active and committed to their projects.
- Always enter a position using dollar cost averaging. That means buying a small amount each week rather than buying your entire position at once. That way, if prices continue to fall, you lower your overall acquisition cost.
- Don’t try to time the market perfectly. Nobody can. And I believe this bear market will be around for several months. So if you want to wait, that’s perfectly okay. But when you do invest, make sure you utilize dollar cost averaging to buy into the market.
- Diversify your crypto portfolio. From a percentage standpoint, bitcoin and ethereum should be the biggest investments in your crypto portfolio. But you need exposure to a much broader and more diverse set of coins to take advantage of the full upside of the crypto markets. Bear markets are a good time to diversify your portfolio and increase exposure to different crypto sectors.
Helping Crypto Get Along
Imagine a world where you couldn’t send an email from an iPhone to an Android phone, or from an Apple laptop to a Windows PC. Or a world where you couldn’t call someone using AT&T because you used Verizon. Or a world where your radiologist couldn’t send X-ray images to your orthopedic doctor because they’re on “different systems.” (Actually, you don’t really have to imagine that last world. We already live in it.)
That is what crypto and blockchain technology looks like today. Different crypto networks don’t talk to each other. Networks that don’t talk to each other can’t work together. And the result is an extremely fractured and inefficient system.
Polkadot is trying to fix this problem. Polkadot is an interoperability chain. Interoperability chains allow different blockchain networks to communicate with each other. But Polkadot takes it a step further.
Polkadot allows data AND assets to flow between blockchain networks. It’s the superhighway for crypto. In the future, if you have an Ethereum smart contract that needs to communicate with a Solana smart contract to initiate a bitcoin payment, Polkadot’s technology could help facilitate that.
Polkadot has plenty of competitors in the interoperability space, including Cosmos and Stargate Finance. But I don’t believe this is a winner-take-all-market. There’s room for multiple strong players. And Polkadot is a strong player.
DOT has the 11th largest market cap in crypto, according to CoinMarketCap. One of its founders, Gavin Wood, is also one of Ethereum’s co-founders. And it has a strong developer community — only Ethereum has more developers working on it.
Deutsche Telekom (essentially T-Mobile) has invested in Polkadot. And its investment is very unique. Deutsche Telekom didn’t invest via its venture or investment arms. It invested via its business unit. AND it’s providing technology for Polkadot validation nodes.
The strong developer community and the involvement of Wood and Deutsche Telekom suggest that Polkadot is an infrastructure play that has staying power. That’s critically important in a bear market.
Just as important, Polkadot is the first interoperability coin in the First Stage Investor portfolio. Adding an interoperability coin diversifies the portfolio nicely. Buying into the market while it’s falling is tricky. But if you dollar cost average into your position, you should still be buying at a relatively low price. That combined with Polkadot’s staying power makes DOT an intriguing investment opportunity.
Remember, investing in crypto is risky. Investing in a crypto bear market carries even more risk. Less than 5% of your overall portfolio should be invested in crypto. That said, I believe Polkadot provides an attractive risk-reward ratio.
Editor’s note: KingsCrowd investment analyst Yasmin Sharbaf contributed to this report.