Has the weather been strangely cold where you live? Unseasonably cold…given that we’re well into May at this point? It certainly is here in Maryland. Sure, it’ll get nice and balmy one afternoon – only for the chill to creep back in overnight. And that’s just how the crypto market has been. This “crypto winter” just won’t seem to end!
It can be clarifying, though, to call this situation what it is: a bear market.
As painful as they are, bear markets are survivable. Because bear markets have come (and gone) plenty of times over the years – so, there’s a playbook for them. And on the other side…there’s another bull market.
Some cryptos did not survive the bear market of 2017-2018. Plenty of them did. Just like the dot-com companies that got wiped off the map after the 2000 crash… While Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOG) went on to rule the world.
It’s sure looking like Terra (LUNA-USD) and TerraUSD (UST-USD) are going to fall into the “wiped off the map” category. The bleeding only got worse after I last wrote about them just 24 hours ago. It’s crazy to think how, just a couple months ago, LUNA was among the best performing of the crypto majors. The 19.5% yield you could get from its Anchor Protocol (ANC-USD) was often criticized as being unsustainable… But at least it was somewhere to turn during the crypto winter.
What 19.5% on a shaky DeFi platform was not is a long-term investment. At InvestorPlace, we are long-term investors. Sometimes, you’re going to miss a hot trending crypto like LUNA, because it hasn’t measured up to your long-term criteria. But at least if the thing goes to zero, you won’t be there. You will survive the bear so your portfolio can go on to thrive in the next bull.
That’s the topic at hand today. How should we be investing in this crypto bear market?
Our InvestorPlace Ultimate Crypto portfolio is built around a set of principles we call our Multifactor Altcoin Grading (MAG) System. It finds cryptos that show the classic signs of a tech investment with long-term potential: They provide a superior product or service in a large, growing marketplace, run by a strong management team.
There are 10 criteria in the MAG system, which uses proprietary algorithms and weightings to give its final verdict on a crypto. Here are some prime examples of these MAG criteria.
“What is the potential upside? What problem is the crypto trying to solve? What process is the crypto trying to improve?” These are the first questions our team asks at Ultimate Crypto.
“This leads to one of the most important factors — total addressable market (TAM). The TAM is a hot topic right now for stocks as well as cryptos, and for good reason. This factor determines the revenue and growth potential of the market the crypto is focusing on.
“One example of a crypto with a low TAM is Dentacoin, which was created for the global dental industry. That industry is not very big when compared to its peers, and growth in the sector is virtually non-existent. That’s why Dentacoin is down more than 95% from its 2018 high – and why it has a very low TAM.
“We also cross reference the crypto assets that are competing in the same space to determine which has the competitive advantage. This determines what coin is best positioned to gain market share in the future.”
“The success of a crypto relies on several factors, and one that is often overlooked is the strength of its community. The very decentralized nature of cryptos and their governance structure inherently rely on a strong and active community.
“The MAG System connects the dots between the strength of the social community and how it translates into the value of the crypto. It gathers key data from social media sites such as Github, Twitter, YouTube, Twitch, and others. We then analyze the data and look for trends to determine the final score.”
“The MAG System includes a comprehensive analysis of proven technical indicators that range from basic support/resistance to more complex indicators. This separates us from the pack as other crypto asset valuation models focus almost exclusively on fundamental analysis. By adding technical analysis into the mix, we are taking it a step further – which makes our system better able to determine when to buy and sell.
“Technical indicators will help us identify potential breakout levels as cryptos prepare for big moves to the upside. While fundamentals will determine the long-term potential of a crypto, the charts will be hugely helpful in telling us when to get in and when to get out.”
Technicals are, in fact, one of the most heavily weighted factors in the MAG system. They’re helping guide our overall crypto strategy, as I noted yesterday with Luke Lango’s commentary on $30,000 as the “line in the sand” for Bitcoin (BTC-USD). Holding that line and consolidating in the low $30,000s will provide support for BTC to power back to $60,000.
As for individual altcoins, Technicals – along with Social/Community and overall Opportunity scores – were some strong points that first attracted our analysts to The Sandbox (SAND-USD).
Seven months before Mark Zuckerberg made his big pitch that set off the metaverse craze, our Ultimate Crypto team added SAND to the portfolio. So, when that hype cycle pushed metaverse cryptos sky-high, they were able to cash in an 834% partial profit on SAND! And they’re still holding it for Ultimate Crypto, where it earns a strong MAG score to this day.
This is the difference that sticking with elite cryptos can make in a portfolio. If you don’t have the stomach to buy into this madness, that’s OK. But with these sorts of factors in mind, at least you’ll be able to justify what you own now… And keep your eye on the ball – so you don’t miss your next big trade.
On the date of publication, Ashley Cassell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. To have more news from The New Digital World sent to your inbox, click here to sign up for the newsletter.