NEST Roundtable 5：Investment strategy in crypto bear market
Participants:
Anthony: Executive director of Zonff Partners
Michel: CEO & co-founder of Mean Finance
Cyrus: BD of ONTO Wallet
Alan: Ambassador of Metascan
Ricky: CTO of NEST
Poseidon: Founding Partner of Outliers Fund
Bill: BD Manager of Souffl3
Alex: CEO of CoWSwap
Johnny: Research of Huobi Research
Conference recording：https://twitter.com/NEST_Protocol/status/1574383332950876160
Introduction of yourself and your project
Cyrus: ONTO Wallet is a Dapp-based web3 wallet that allow users to manage their digital identity, data, and assets etc. all in one wallet. ONTO Wallet empowers users to operate in the web3 world and offer cross-chain services.
Anthony: Zonff is an asset management fund, so we both do first market and secondary market, and we invest in a seed to late-stage technology companies across the crypto cutting-edge technology.
Michel: Main Finance is a protocol that is bringing real time payment streaming to dapps and applications. We have our payment streaming technology that powers things like.
Payroll, investing contracts, real time finance, invoice, pay as you X types business model.
Poseidon: Outliers Fund has been doing what you invest in for over 6 years. Six years ago, when I was a student at MIT, I actually started outlier as a student loan special interest group for the intersection between Internet and computing. Back then in 2016 there was twenty students from our group that syndicate 2,000,000 and nominate me to be a GP and we co evaluate over 880 projects on Ethereum decentralized smart contracts.
Bill: Souffl3 is an NFT trading market. The project was started in early August and has been able to achieve rapid growth since the launch. We were able to do that because we continuously try to embrace what we do: the next generation of the smart trading NFT marketplace aggregator, meaning that would be aggregating NFTs across the chain. We also include many smart trading functionalities
Alex: CoWSwap is the first trading interface built on top of Gnosis Protocol. It allows anyone to buy and sell tokens using a cashless experience and the cool thing is that instead of sending a regular transaction like in other Dexes like Uniswap or aggregators like 1 inch, the way we work is CoWSwap collects your signed orders and then it has a competition of chains for people to settle your orders in a way that you are aggregated to all on-chain liquidity sources.
Johnny: I’m from Huobi Research and I’m currently doing research into DeFi and also SocialFi. And, I do some quantitative analysis on crypto and equity market correlation, and also, I pay attention to market liquidity issues.
From what you have seen, what was the market trend in the past two years? And why was that?
Michel: I think it’s not surprising to anybody that we’ve been hitting the peak bull season somewhere in November, December last year, in 2021, and since then we’ve been in a pretty bad bear market. Reason might be the cyclical nature of the macroeconomic conditions. We were effectively on a 2 1/2-year cycles, like 2017, 2019, and then 2021 cycles.
We had a lot of on chain activity that came very hot after COVID. From last December when it was pretty clear the monetary policy was going to affect institutional investors a little bit harder than that it was thought about. People started retracting their balance sheets and that had an equal or not bigger impact on crypto than it did on the equity side, and that’s kind of like a trickle in the bear market that we’re currently in. It was further accelerated by all of the happenings that ensued. Now we are kind of like going back to fundamentals and I think this is the season for building and making preparation for next bull market.
Cyrus: Wallet has been developed a lot in the past two years, including integrating the blockchains depths and also integrates money oracles to improve user experience. So it would be interesting to see the future trend in wallet aspect.
Bill: As we are a NFT marketplace, I’ll share the trend in the NFT market for that matter. Generally speaking, in 2021 there was still hype then down towards earlier 2022 there’s a landslide. People get a doubling down effect on this because not only the token price are falling, but also the price of the NFT denominated in the token is following simultaneously, so you get doubling down effect from that. But we continuously to see projects thriving, and it is still the mainstream. Also, we see more and more trends in the market where traditional companies’ additionally application scenarios are unlocked.
Most recently, one interesting topic is how people were having a debate around the flexible royalties.
In general, there’s some volatility on the pricing, but the mainstream is still there, and there’s additional application scenarios unlocked.
Poseidon: From 2016 to 2018, we realized that the decentralized services platform applications are those that lose us money. On the flip side, our biggest win all come from infrastructure level research innovations, including layer one protocols, layer two solutions, centralized and decentralized exchange. Then 2020 to 2021, it’s very obvious that tailored applications become one of the bottlenecks for many layer one blockchain protocols for them to tell a new story, strike a new high, no matter on their token price or their underlying user consensus.
DeFi, GameFi, SocialFi, NFT, metaverse, DAOs are some hot topics. And I would encourage all the founders and startup builders to think about how you can generate user consensus by leveraging the existing platforms and tools that you can access.
Anthony: Actually, we have seen a big cycle — a very big bull market and then a big drop. The bull market started from the COVID-19, when fed’s monetary policy is printing money. Then we see a lot of capital coming in the crypto world, so we’re seeing crypto as an alternative asset and want to allocate some funding into it. Many people begin to talk about the DeFi world, NFT, crypto etc., not just the BTC, ETH. Then we experienced LUNA crash and Tesla sold most of their bitcoin, and so the bitcoin drops more than the stock index in the United States.
Alex: The bad thing is that the bear market has taken away the users, but the good thing is that we have enough time to develop pieces of protocol and fundamentals as fast and robust as possible.
Johnny: I think we should keep more cash in hand. And if we really have to put something into investment, I’ll just consider going short, because I’m thinking that equities and also crypto are going to see lower low and since market liquidity is running short. The market is going to exert more downward pressure, but it doesn’t mean that we will have to lose hope or lose faith. We can go long again, just after some time. So right now, I’m still looking for some interesting projects that are going to explode in the future.
From your opinion, what the market trend will be in the future 2 years?
Michel: DeFi went through DeFi summer and since in 2017 it’s been following a fairly rigorous or similar market cycle like other sectors. I don’t think that we are special anyway. And we’re still pretty early in the in the bear cycle, so we have probably another year and a half or so ahead of us before we can start to see the green tickers on a daily basis again. And I foresee that fresh blood will not come in and to recover all the losses until after the spring of 2024.
Anthony: Again, I think there will be more application scenarios for the future two years, and I think the very important thing is how the market precision the bitcoin. For now, I think the performance of crypto world is still in a very strong correlation with the traditional finance world, and we still think Bitcoin is like a stock, a digital gold. I will still think bitcoin is a risky asset, like tech stocks and also, we should keep monitoring the monetary policy and monitoring the inflation, interest rate changes etc. By the end of 2024 or the beginning of the 2025, there could possibly some potential for big bull market coming back again and so before that I would suggest staying conservative and move step by step.
Cyrus: We will just provide more functionalities to our users and follow the trend.
Can you share how do you do the investment in crypto world?
Michel: We have two primarily strategies. Conceptually speaking we’re talking about the same thing — how do you manage risk and how do you keep more of what you have or grow it faster when the inflation or any kind of monetary policy might be deflating it. We try to keep ourselves fairly risk averse. Most of the diversification that we do with our own token we do in the form of partnerships and mutually diversifying partner protocols treasuries with our own.
Cyrus: I’m just investing in BTC and ETH for stable investment.
Johnny: I think for investment, we just put it in in three ways — short-term, medium-term, and long-term trading. For long term trading, I do not think it’s a good time to enter, so I’ll just hash my position and use a delta neutral strategy. And I’ll go short for short term depend on mean-reversion and do daily trading using the indicators.
What is the investment strategy you recommend in the current market? What kind of projects you will not suggest investing? Or what kind of investment strategy you will not suggest using?
Anthony: I will also split the investment period to long term and medium-to-short term, and I think the basic rule is like as for now we better like lower down the trading frequency and also lower down the trading size. Protect the principle is the most important until the market is better. Now is a good time to learn. Also, the BTC, ETH etc. are cheap, so you could buy a little, but do not put all your money in.
Alex: My suggestion is to be careful because you are likely to lose.
Bill: There’s always the risk of having the project rug or soft rug, so what I want to say is that first of all you need to take your time to gradually get to know the team before you do any investment, or anything concrete in terms of collaboration or partnership. You should also have several rounds of discussions to make sure that both parties are accountable. Also, you could understand their roadmaps and their vision as they build up their project to understand their rationale.
Johnny: I’m not suggesting you adopt any financial advice. Now I’m just looking for some protocols that are still building despite the bear market, so I’ll consider this bear market as a workshop. and I’m definitely going to pay more attention to those who have consistent revenue and upgrade.
In the end
It is a great discussion on Investment strategy in crypto bear market, we will have our 6th NEST Roundtable (Twitter Space) on Oct 3rd, and discuss “How to deal with the risks in bearish market and in general?” Please follow our twitter feeds and don’t miss out.
