Introduction
Let's not mix words here folks, the path of the current economy looks like shit. Where to begin? Inflation, supply chain inadequacies, stocks declining (900 point fall in DOW yesterday), Fed intervention, and to top it off now negative quarterly economic growth (can you say the 'R' word?). Not a pretty picture moving forward at all.
And the cryptosphere is not immune to negative outlooks either. "The absence of the Tether premium in Asia and the flattish perpetual contract premiums signal a lack of demand from retail traders right as the total crypto market capitalization struggles to sustain the $1.75 trillion support" [Pechman, M. 2 key metrics point toward further downside for the entire crypto market. (Accessed April 30, 2022)]. Yup more pain expected here too.
Leads one to ask the question the Rolling Stones posed in 'Street Fighting Man': "But what can a poor boy do" [Rolling Stones. Street Fighting Man Lyrics. (Accessed April 30, 2022)]. Well the 'Stones' answer was to "sing for a rock n roll band" [Id]. But I don't think that answer works for the hard working hodler of crypto who is looking to keep their head above water and maybe make a couple of bucks in a bear market.
Well, never fear, what follows are three relatively safe vehicles to employ for investing in a bear market by the typical crypto hodler.
Cryptocurrency Lending
Things looking economically negative, why not turn to one of the oldest financial mechanisms around? Just ask Shylock, turn to 'Lending' [see, Nagoda, K. DeFi, Crypto Lending, and the Need for Decentralized Credit Ratings. (Accessed April 30, 2022)].
Since the true take off of the DeFi sector in 2020, crypto hodlers opportunities and choices of where to lend their tokens has expanded exponentially. Sure, there are the blue-chip platforms (e.g. Aave, Compound, Maker, etc.) out there offering reasonable returns on stablecoin investments. But, with some diligent research, a hodler can find a lesser known reputable platform offering higher returns in an attempt to attract liquidity.
It is also worthy to note that 'Crypto Lending' is starting to invade the more traditional areas of finance. Key in this area is real estate and real estate mortgages. Specifically, making significant advancements in this realm are several experimental cryptocurrency-based mortgage and listing platforms. "Platforms like Vesta Equity and the newly launched USDC.homes offer crypto holders the opportunity to collateralize their assets to obtain a mortgage or lend them out to aspiring home buyers in exchange for long-term yield" [Finneseth, J. Here are 3 ways hodlers can profit during bull and bear markets. (Accessed April 30, 2022)].
Reasonable Yields Available with 'Stablecoin Farming'
Irrespective of whether the market is bull or bear, to function appropriately, all DeFi platforms need liquidity. And recently, a great deal of attention has been directed toward the importance of the role of stablecoins in aiding the system to grow and mature as well as to remain liquid across the board.
It is a well established given that the cryptocurrency markets are highly volatile which can exacerbate losses in a bear market. However, farming stablecoins provides a safer mechanism to invest in a bear market, mitigating the potential downside risk and loss of making the investment in Bitcoin or other Altcoins. Why? Well, "stablecoins are pegged to the value of the dollar, or a commodity, which makes them a lot less volatile than other trading pairs" [Jones, C. How yield farming on decentralized exchanges can become less risky. (Accessed April 30, 2022)].
"Platforms like Curve Finance, Beefy Finance and Trader Joe offer yield on stablecoin liquidity pools, and rates can reach as high as 20% APY" [Finneseth, supra].
Currently in the news, is the new offering by PolyCub [Cub Finance], to wit: its pHBD-USDC Stablecoin Farm. Provably sustainable and backed by a seasoned, respected and trustworthy team, the PolyCub pHBD-USDC farm is presently returning an APR of 37.53%. Clearly, a fantastic return for investing loss resistant stablecoins, especially in a bear market.
No-Loss Token Offerings
With a no-loss token offering we first find that they are not exclusive to stablecoins. The best way to understand what a no-loss token offering is is to think of the parachain auctions going on in the Polkadot ecosystem. Therein, interested investors can lock either their DOT or KSM tokens for a specific period of time representing a collateral backing for the subject project. Once the lock-up period expires, the investor not only receives their pro-rata share in the new project, but they also receive their initial contribution, in full.
There does exist considerable risk in putting crypto into no-loss token offerings as the lock up period deprives the investor of the ability to liquidate should the price of the locked token fall precipitously. In other words, the investor's risk is the loss of the ability to mitigate loss in a period of falling prices. However, if the invested asset leans to be more price stable, the aforementioned risk is reduced and this mechanism is a good way to invest in a bear market.
"No loss token offerings give long-term crypto holders a chance to earn tokens for newly launched protocols in exchange for yield and a choice of what token they would like to accumulate as a reward" [Id].
Final Thoughts
So even though the bulls have departed the markets, there is no reason for investors to stop investing. As presented above, there exists relatively safe ways to invest cryptocurrency, even when the markets have given way to the bears.