Learn from "bear market investing": identify the best opportunities and leverage the added value of a bull market

Original source: Pavel Paramonov X account

Written by: Pavel Paramonov

Compiled by: Deep Tide TechFlow

What can we learn from investing in a bear market? How can we truly benefit from investing in a bull market / pre-bull market?

1. First, there is less available capital in a bear market, which creates more opportunities for venture capital

Why is this good? In a bear market, while there is less available funding, it does not mean there is no funding at all. With limited capital, venture capital tends to find better projects rather than spreading money across dozens of startups.

Investors are more committed to supporting founders because not everyone can survive in a bear market. Additionally, in a bull market, tier-three and tier-four venture capitalists are almost impossible to become stakeholders in a good deal because they cannot compete with tier-one and tier-two firms like @polychain, @blockchaincap, @PanteraCapital, @variantfund, etc.

These top firms not only bring capital but also their expertise in various fields and their reputation. If a speculator sees a shiny tier-one or tier-two investor on the cap table, they will automatically be more interested in the project during a bull market.

In a bear market, you have to be more selective and focus on different factors. For example, @SignumCapital invested in @PolymerLabs in March 2022.

I am not saying Signum Capital is a bad venture capital firm, but honestly, they are not a tier-one or tier-two venture capital firm either.

It takes some research and talent to identify the best investment opportunities, but even if you are smart enough to recognize them, you may not get in. Why? Because you don't have the reputation yet. But this is possible in a bear market because bear markets often do not allow the best venture capitalists to get good deals due to different risk/reward ratios.

2. Second, builders are more committed, and this commitment cannot be faked or simulated

What I mean is to be more steadfast. Not everyone can survive in a bear market, so surviving requires exceptional talent and hard work. Builders understand that raising funds in a bear market is much harder. Very hard.

You must have a great idea, a great survival plan, a "Real Madrid" team, and you still need to maintain a low burn rate and a long runway. At this stage, efficiency and commitment levels are basically at their peak.

Builders are forced to make their products a huge success. As the old saying goes, "You must be hungry to achieve the greatest results." @monad_xyz is the best example, a truly foundational project with great mechanisms that fills every gap.

• Great team (former @jumptrading)
• Huge commitment (building during the bear market)
• Great marketing and content
• Great community-building strategy (@intern)
• @paradigm @cbventures @ElectricCapital @egirlcapital, @dragonflyxyz @shimacapital @placeholdervc

Due to their highest commitment during the bear market, they secured funding from @dragonflyxyz, @shimacapital, and @placeholdervc in their first round, and from @paradigm, @cbventures, @ElectricCapital, and @egirlcapital in their second round.

This was achieved while building one of the most well-known communities in the field, alongside @berachain.

However, I don't want to mention specific project names, but the things you can do in the pre-bull market phase are amazing. Basically, you can:

• Obtain a combination of three different modular solutions
• Combine them
• Write almost no lines of code
• Raise over $5 million, with a valuation of over $100 million

3. Investment plans in a bear market are often more attractive, not because of their duration

Some may ask why investment plans are more attractive in a bear market, while they are usually shorter in a bull market, allowing investors to sell at peaks. The reason lies in the timing.

Let's take 2022-2026 as an example. If you raise funds in 2022:

• Your TGE might be in 2024
• You release low circulation under relatively good market conditions
• You conduct daily/monthly/weekly unlocks
• You unlock most tokens during the pre-bull and bull market
• This allows for fair price discovery and some speculation

If you raise funds in 2024:

• Your TGE might be in 2025
• You set at least a 6-12 month lock-up period for investors
• Followed by a 12-24 month vesting
• 6-12 months later, this is the last phase of the bull market or even the beginning of the bear market
• The vesting period extends into 2026
• History shows this will be a bear market
• Selling is unattractive due to the lack of speculation

I am not saying this is completely unattractive; the timelines are just completely different.

How to combine the best advantages of both to make more accurate investments in a bull market?

A bull market is also a blessing. At this stage, there are very dedicated teams that have the right to choose the best stakeholders and gain the best "added value." You can raise a lot of capital to do good things for the industry. Great communities, opportunities, networks, and overall engagement are all higher.

For investors, whether liquid or illiquid assets: choose wisely, communicate with people, identify opportunities, be skeptical enough, but also open to new ideas, and see the future.

For developers: build great tools you want to use, not just build for the sake of building.

For speculators: keep speculating, identify the best opportunities. You cannot overestimate the importance of speculation in cryptocurrency.