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How to manage your crypto portfolio in a bear market

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After reaching an all-time high of $64,863 in April 2021, bitcoin experienced a sharp drop trading close to $30,000. The prices of other crypto assets (altcoins) also plummeted and the entire cryptocurrency market began to consolidate downwards. Such sharp declines may be typical to those who have been participating in digital currency markets for a while, but for new entrants, the shocks can catch them off guard, causing many to panic sell – potentially resulting in significant losses.

Huge market swing are common in digital currency markets since crypto trading is generally volatile. For this reason, people looking to buy bitcoin in South Africa or any other country should always bear that in mind. What’s important however, is that traders can still make profits even when the market is in a downtrend. But before we explore how, we need to define what a bear market is.

What is a bear market?

Markets generally have three main movements. Upwards, downwards or sideways. When a market is on an upward trajectory this is referred to as a ‘bull market’ and when the market is on a downward trend, that is what is referred to as a ‘bear market’. When the market is not experiencing noteworthy price swings, the market is said to be moving sideways.

During a bear market, it’s not unusual to witness assets prices decline over a sustained period. When this happens investor sentiment tends to turn pessimistic but what most people don’t realize is that for seasoned investors, this is generally a good time to take positions and accumulate assets at low prices. The old adage ‘buy low, sell high’ means that smart money buys when its bearish and sells when sentiment is too bullish and there’s euphoria or irrational exuberance in the market. With the proper risk mitigation, a bear market can be a blessing in disguise for any trader or investor. 

How to manage your portfolio in a market downtrend

There are several ways investors can take advantage of a bear market and set themselves up to profit when the market reverses and turns bullish. For traders, there are even opportunities to still make profits even as the market continues to fall. Below are some of the ways investors and traders can take advantage of a bear market scenario:

  • Taking Short Positions

Taking short positions or shorting is basically the opposite of when you buy bitcoin or any other crypto asset with the hope that the value will appreciate. Short selling is a strategy where the trader enters a market position hoping that the value of the asset drops below their entry price. In short selling, you are basically borrowing the cryptocurrency you want to short with the aim of settling the debt when the price drops. The reason traders short is that they typically don’t have the funds to buy the asset that they can then sell at a profit, thus, they are ‘short’.

There are several exchanges that allow you to carry out this strategy. The process involves borrowing the crypto assets you intend to short from the exchange and selling them for a stable crypto asset or fiat currency at the going rate. After closing the position, you’d then wait for the price to drop to buy back the same number of coins you owe but at a discount. This would enable you to settle your debt and keep the profit made as a result of the price difference. It’s akin to an inflationary strategy that allows a debtor to pay a lender back with money that is worth less than it was when they originally borrowed it. The downside with taking this approach is that if things don’t go according to plan i.e. the crypto asset prices shoot up instead, you stand to lose your funds in the process.

  • Swing Trading

Swing trading is a strategy that involves trying to predict the price movement of an asset within a specific period, usually a few days or weeks. Even as the market seemingly moves in a general direction, there will always be subtle price movements forming highs and lows. The swing trading strategy involves predicting these small price fluctuations. Implementing this strategy requires carefully studying the market and involves some technical analysis to help you make the right prediction so that you can enter a trade at the right time. The process involves making a prediction based on analysis, entering a position (long or short), and taking your profit if the market goes as predicted. So even in a bearish, traders can take advantage of the slight upward and even downward swings.

  • HODLing

HODL which is short for ‘hold on for dear life’ involves holding on to a digital currency despite the price action. This strategy is very common with long-term investors who understand that the crypto markets can be highly volatile and trading in and out of positions or trying to time the market can be a lot riskier than simply holding the asset over a longer period. Historically, the market has always corrected and even if prices have dropped significantly, over time the likelihood that the market will recover is always fairly high meaning that the lost gains can always be recouped and profits can even be made as long as the asset holder doesn’t sell when the market is down.

Conclusion

Traders and investors need not panic during a bearish trend or when crypto asset prices crash. There are also several strategies that can be employed to reduce the effect of a market dip on a portfolio including moving assets into stable coins such as USDT or USDC which are pegged 1:1 to the dollar. This also gives an investor or trader liquidity to re-enter positions a lower prices meaning that they get more crypto assets for their money. However, while this can be a good move as far as minimizing portfolio losses, if the market experiences a flash crash and rebounds almost immediately one can also miss the opportunity to buy back into the market before asset prices start rising which can mean paying even higher prices for the same assets. This is why most seasoned investors simply recommend the buy and hold strategy to novice traders and investors.

Furthermore, companies operating in the crypto tend to offer more incentives during bear market periods in an effort to retain users and as a way to continue spurring the adoption of blockchain-based technologies. In the recent bear market, Remitano for instance, decided to introduce its native token RENEC as a way to reduce transaction fees for users and ensure secure and swift transactions. The peer-to-peer exchange even introduced an incentive scheme where users of their platform can get free tokens via the mobile application.

 

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Investment

Releaf secures $4.2 million in seed funding and grants to drive industrialisation of food processing in Africa

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Releaf co-Founders (Image: Supplied)

Releaf, an agtech start-up that develops proprietary hardware and software solutions that makes African farmers and food factories more efficient and profitable, has raised $2.7 million seed funding in a round led by Samurai Incubate Africa, Future Africa and Consonance Investment Managers with participation from Stephen Pagliuca, Chairman of Bain Capital and Justin Kan (Twitch). Releaf also secured $1.5 million in grants from The Challenge Fund for Youth Employment (CFYE) and USAID.

The seed funding will enable the development of industrial food processing technology in Nigeria’s smallholder-driven Oil Palm sector while the grant will enable Releaf to provide working capital and other value-added services for smallholders and small-scale processors. Grant funding will support the training, recruitment and retention of more women and youth in Nigeria Oil Palm sector through the creation of both digital and technical jobs.

Nigeria’s oil palm industry is dominated by smallholder farmers, with 80 percent of local market share. However, production rates are low because many still rely on ineffective processes for de-shelling, including the use of rocks and inappropriate hardware. These ineffective processes also lead to low quality palm kernels which are largely unfit as input for high quality vegetable oil manufacturing. As a result, food factories are unable to purchase these raw materials and operate significantly under capacity. On average, food factories have 3X more installed capacity than utilization, which impacts the cost of food and hampers further investment into processing capacity.

Releaf acts as a bridge between smallholder farmers and food manufacturing companies with its proprietary patent-pending machinery, Kraken. Kraken can process any quality of palm nut into premium quality (95 percent purity) inputs for food factories. Releaf’s software connects the start-up to more than 2,000 smallholder farmers, ensuring consistent, large-scale supply. While palm kernel oil production is not foreign to Nigeria, Releaf’s technology and scale means it can process 500 tonnes of palm nuts per week. The software offerings also allow the start-up to receive inbound supply requests from farmers via USSD, provide working capital financing as well as collect proprietary data on supply availability.

Speaking about the new funding, Ikenna Nzewi, CEO and co-founder of Releaf, said, “our mandate is to industrialize Africa’s food processing industry. This round of funding enables us to develop and prove our technology with smallholder farmers in the oil palm sector. Given Nigerians spend ~60 percent of their income on food and Africa’s population is set to increase by 100,000 people per day over the next three decades, we’re presented with an incredible opportunity to feed more people, reduce consumer costs, and supply the fastest-growing food market in the world. Releaf is committed to harnessing technology to accelerate the economic wealth of rural, agrarian societies throughout the Continent. We firmly believe that a robust real economy is the foundation for long-lasting and shared prosperity for Africans and are excited to deepen partnerships with like-minded organizations, governments, and firms.”

This new funding will enable better productivity and accelerate the eradication of the menial and archaic processes that are prevalent across Nigeria’s oil palm sector and the agriculture sector as a whole. It will also enable Releaf to drive more value and profitability across the oil palm value chain, as well as support direct and ancillary job creation in the farming communities of South and Eastern Nigeria.

Rena Yoneyama, Managing Partner at Samurai Incubate Africa who led the round commented, “Releaf’s novel approach to operating within the value chain with proprietary technology set it aside from many agtech startups we have spoken to. We believe the firm’s thesis on decentralizing food processing would have a strong match with Africa’s economic development landscape for the next few decades. Ikenna and Uzo are the perfect founders to disrupt this market in Nigeria and beyond. We are thrilled to back them as they innovate in providing both agro-processing and financial services to rural communities and farmers.”

Iyin Aboyeji, General Partner at Future.Africa noted, “more than 50% of the goods in supermarkets globally contain glycerine – an extract made from palm oil – a cash crop that is passed down from generation to generation. The team at Releaf is building the agro-allied industry of the future from the ground up starting with palm oil which they have developed novel technology to aggregate, deshell and process into critical ingredients like vegetable oil and glycerine. Future Africa is delighted to back Releaf to build the future of modern agriculture”

Dr. Nneka Enwonwu, Country Relationship Manager, from The Challenge Fund for Youth Employment (CFYE) said, “We are thrilled to partner with Releaf on their mission to improve efficiency and profitability for farmers and food factories in Africa. The founders’ vision and the team’s enthusiasm gave us confidence that Releaf will deliver real value for rural communities and create digital/technical jobs for women and youth. We are looking forward to their results and success over the coming years and continuing to support their work.”

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CEO Corner

Graça Machel Trust Appoints Melizsa Mugyenyi as New Chief Executive Officer

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Graça Machel Trust New CEO, Ms. Melizsa Mugyenyi (Image: Supplied)

Board of Trustees of the Graça Machel Trust, announces that Ms. Melizsa Mugyenyi has been appointed as the new Chief Executive Officer (CEO) and commences her tenure in this leadership role as of September 6, 2021.

A Ugandan by birth, and residing in Kenya currently, Ms. Mugyenyi brings to the Graça Machel Trust an impressive range of executive management and strategic partnership building skills, as well as extensive experience working in multi-country settings. We look forward to her leadership to expand our Pan African programming, nurture our diverse women’s empowerment Networks, and develop the necessary relationships to fortify our resource base and long-term sustainability.

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Ms. Mugyenyi will spearhead the conceptualization and implementation of a bold new Strategic Plan for our institution and take our work of social and economic transformation to greater scale and impact. The Board has every confidence in Ms. Mugyenyi and her ability to effectively steer our organization, in conjunction with our staff and stakeholders, to augment our impact on the African continent and expand our thought leadership globally.

“We are grateful to Dr. Shungu Gwarinda, who steadfastly served as our Interim CEO, driving us forward with a determined focus on advancing the rights of Africa’s women and children, and strengthening our institution and Networks during this interim period.  Dr. Gwarinda will be actively supporting this management transition and will resume concentrating her leadership in her substantive role as Director of Programmes.  We are grateful for her invaluable contributions to further the mission of the Graça Machel Trust”. said Mrs. Graҫa Machel, Founder and Chairperson of the Graҫa Machel Trust

To our valued partners, both current and future, we look forward to positively transforming the lives of Africa’s women and children together with you as we enter this exciting new chapter of our institution’s journey.

 

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Press Release

Pezesha Raises Seven-figure Seed Extension from GreenHouse Capital to Fuel Expansion of its Embedded Credit Infrastructure across Africa

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Pezesha team (Image: Supplied)

Pezesha, a pan-African fintech company building scalable lending infrastructure for SMEs and institutions, today announced the close of a seven-figure growth funding round led by GreenHouse Capital (GHC). In addition to GHC’s investment, Pezesha received on-lending liquidity support from GHC’s sister company Venture Garden Group (VGG). These financing milestones will support Pezesha’s continued growth across Africa and its mission to expand access to affordable working capital for SMEs.

Pezesha is solving Africa’s $82 billion working capital and trade finance access problems by enabling non-traditional finance institutions to offer working capital to SMEs using Pezesha’s lending infrastructure. The company has built robust APIs to originate quality SMEs and original credit scoring models that allow capital to flow efficiently and productively. Pezesha’s new partnership with VGG will expand the capital available for Pezesha and its institutional partners to lend to SMEs. Pezesha previously raised capital from Consonance and Seedstars.

Hilda Moraa, CEO and Founder of Pezesha, commented, “we are delighted to have GreenHouse Capital join the Pezesha family. We are aligned in vision as well as our commitment to solving the working capital challenges that are preventing African SMEs from achieving their full growth potential. GHC’s investment will catapult our growth by enabling us to scale our existing partnerships with the likes of Twiga Foods, Jumia, Marketforce, and Popote Pay, among others. More so, the investment will unlock our vision of building the operating system to power embedded finance in Africa”

Ruby Nimkar, Principal at GreenHouse Capital, added, “Pezesha is breaking down barriers to SME financing by taking an ecosystem approach to the problem of access to capital. Their embedded finance model is truly groundbreaking, and we have full confidence in Hilda and her talented team to take their model into new markets and continuously close the SME financing gap across Africa.”

Bunmi Akinyemiju, CEO of Venture Garden Group, commented, “Pezesha’s innovative model is driving capital to the African SMEs that need it the most. We are excited to be partnering with them to expand their access to funds that they can use for their on-lending liquidity.”

Pezesha has scaled its lending infrastructure in Kenya, Ghana, and Nigeria and is planning to launch in Uganda in September of 2021.

 

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