I say or write “timing the market is a fool’s errand”™ so often I’ve started trademarking it. It’s almost impossible to predict the bottom of any market. And crypto markets are much more difficult to predict than others. The crypto markets have been stuck in neutral for extended periods of time this year — including right now. That doesn’t mean the bear market is over, though. We might have hit rock bottom. Or, more likely, bad economic news will drive the markets down even further. Regardless, the crypto markets won’t turn around until investor confidence returns.
That’s why dollar cost averaging into a position in a bear market is critical. As the market goes down, your effective purchase price goes down as well. So when the market does turn around, you already own assets that will (hopefully) take off. And you won’t have to worry about buying into the top of the market.
But even with dollar cost averaging, we shouldn’t ignore market conditions. Sometimes it’s important to move with some urgency — even in the middle of a bear market. And I believe that’s the case with this month’s recommendation.
I’ve been waiting for months to suggest investing in Chainlink (LINK). Chainlink is one of my favorite crypto projects. It integrates the future — a (more) decentralized digital ecosystem — with the world we live in today.
Chainlink is what’s known as an “oracle” blockchain. Oracle chains take data or information that exists outside of the blockchain ecosystem and move it onto the blockchain. Chainlink’s partnership with AccuWeather illustrates the potential of oracle chains.
AccuWeather is one of the largest weather data and forecasting providers. According to Forbes, $100 million is a “conservative estimate” of its annual revenues. The company combines a database of more than 190 forecasting models with terabytes of weather data to create and transmit weather information for consumers and businesses alike. Microsoft, Foursquare and Plume Labs are some of AccuWeather’s business customers.
Last December, AccuWeather launched its first Chainlink node in an effort to leverage its weather data business. The node allows AccuWeather to broadcast its weather data into the blockchain universe. That means smart contracts can now use Accuweather data for all sorts of purposes.
Just imagine you’re a commodities trader. And AccuWeather sends out an alert about an unusual weather pattern. You could set up a smart contract in advance that triggers a trade that takes advantage of a frost that would kill crops or an unusually long growing season that would yield a bumper crop. The possibilities are endless.
The Associated Press has signed up to use Chainlink to transmit “U.S. (political) race calls, economic data, sports game outcomes and business financials.”
AP expects the data to be used to “automate key processes that happen on-chain, including informing markets of election race calls, triggering an on-chain trade when a company’s quarterly financials are released, or augmenting the appearance of non-fungible tokens based on real-world events.”
Last month, Chainlink unveiled a new partnership with SWIFT that will further integrate crypto into the traditional finance system. The SWIFT system is the primary network used to move money across international borders. It’s like a routing number for international banks. For example, if you want to move money from a bank in Germany to a bank in the U.S., you’ll need to know both the SWIFT codes and account numbers for the different banks involved in order to complete the transaction. SWIFT wants Chainlink to connect traditional finance institutions to the entire crypto ecosystem to facilitate a whole new world of transactions and trades.
If all of this sounds far-fetched to you, think again. More than 1,500 projects use Chainlink now, according to Chainlink Ecosystem. And Chainlink is already being used to provide data for a significant chunk of the DeFi (decentralized finance) ecosystem. Chainlink’s Total Value Secured (TVS) is currently $11.14 billion, according to DefiLlama.
TVS is a DeFi metric that measures how much money locked away in smart contracts relies on data provided by an oracle network like Chainlink. As of this writing, $11.14 billion could eventually change hands because of the data feeds that run on Chainlink. That makes Chainlink the market leader in the oracle space. Additionally, Chainlink says its data shows the network has already enabled more than $6 trillion in transactions this year.
So far, the value of Chainlink’s $3.47 billion market cap doesn’t reflect the network’s importance in the crypto ecosystem. That’s why Chainlink is working toward launching a staking mechanism that would incentivize and reward people for participating in the system.
But what really makes Chainlink worth investing in — besides the fact that I believe it’s undervalued — is that key indicators suggest LINK is set to rally.
Whales have bought up more than $300 million worth of LINK recently. That typically indicates a price rise is on the way. In fact, as I’m writing this, LINK is up more than 9% over the last 48 hours.
Like I said earlier, timing the market is a fool’s errand.™ But not responding to market conditions doesn’t make sense either. That’s why I believe this is a good spot to hop in and buy some LINK. You can purchase LINK on Coinbase.
Rules of the Road
Investing in a bear market is tricky. It is likely that the market will go down further from here. But it’s important to be opportunistic. So if you have capital to invest — and you’re psychologically and emotionally willing to enter what promises to be a highly volatile market — here are some guidelines to follow.
- Do not invest money you can’t afford to lose. The markets are in for a rough ride. And if you can’t afford to lose the money, don’t risk it.
- Focus on projects with strong use cases.
- Look for teams or communities that are active and committed to their projects.
- Always enter a position using dollar cost averaging. That means buying a small amount each week rather than buying your entire position at once. That way, if prices continue to fall, you lower your overall acquisition cost.
- Don’t try to time the market perfectly. Nobody can. And I believe this bear market will be around for several months. So if you want to wait, that’s perfectly okay. But when you do invest, make sure you utilize dollar cost averaging to buy into the market.
- Diversify your crypto portfolio. From a percentage standpoint, bitcoin and ethereum should be the biggest investments in your crypto portfolio. But you need exposure to a much broader and more diverse set of coins to take advantage of the full upside of the crypto markets. Bear markets are a good time to diversify your portfolio and increase exposure to different crypto sectors.
Remember, investing in crypto is risky. Investing in a crypto bear market carries even more risk. Less than 5% of your overall portfolio should be invested in crypto. That said, I believe LINK provides an attractive risk-reward ratio.