Inthis episode of CRYPTO 101, Matthew discusses the recent bear market and how some traders are relishing in the opportunity to make money even when prices in the crypto markets are tumbling.
Who is Trader Cobb?
Trader Cobb is Craig Cobb’s online persona. Craig is the founder of tradercobb.com which is a training and education provider in various markets. He also runs a media company which delivers a podcast and Youtube show called ‘The Trader Cobb Crypto Show’. He has been trading for over 12 years now after investing on the advice of his dad at the age of 16. He thought he wanted to be a stock broker but quickly realised he was more interested in trading. He has built up experience in multiple markets including Forex, commodities, stocks and now cryptocurrency
“Literally, if the market moves I trade it.”
What is a Bear Market?
Cobb believes that any market, bear or bull, is just a market. A bear market can be identified by any number of different indicators. Some say a drop of 20% from all-time highs is a pretty reliable sign. However, for the sake of simplifying things, a bear market is when the price of a particular asset endures a sustained period of decline. Over the past year Bitcoin has obviously fallen from it’s all-time highs of near $20 000 USD to just about $3000 USD currently. Some might be panicking or attempting to “buy the dip” or “catch the bottom” at every move down. Trader Cobb has advice:
“There’s no positive outcome for pushing yourself too hard, it’s just not going to pay off. Think smart, be wise, be careful and don't pin yourself to one outcome.”
How Do Traders Make Money in a Bear Market?
The basic answer here is ‘short trading’. Trading short is a specific method of trading where you borrow and asset off a third party and immediately sell it at a particular price. However, now you have some cash or credit, but you owe the original asset back to the lender. A successful short trader then buys the asset back from the market at a cheaper price before returning it to the lender and pocketting the profits which are the difference in price between the sell and buy prices. Short trading only works when markets are going down.
Part of this is recognising that bear markets are just a natural part of market cycles.
“It’s about understanding where you are now. Don’t think too much about the future, plan for the future, but you can only execute where you are and as who you are now.”
So, Where is the Bottom?
One day the bull market will return. Trader Cobb recommends just observing the trend but again there is no point in hoping and waiting. It is about taking action now. That doesn't necessarily mean begin trading, it means taking advantage of this down time. One of the best ways you can do that is to continue your education in the space — learn about new projects or read up to better understand Bitcoin. In the market you can buy, sell, or do nothing. All are important decisions and can be utilized to better your position. Sometimes neither buying or selling and just sitting back to better yourself is the best thing you can do.
Where is the bottom? Nobody knows.
Final Advice?
Some thoughts Trader Cobb offers for those of us wanting to make the most of this bear market are:
“Don’t approach this space thinking about how much you can make, be thinking about how much you’re willing to lose”
“We are in the right place at the right time but it’s about what decisions we make at the right place and the right time”