Finding Value In A Recession: Thoughts On The “Crypto Winter”

By Dina Sam’an

Every four years, the market goes through bull and bear cycles. We think it might be different “this time,” but apparently, it’s not. This is Bitcoin’s fourth cycle. In 2012, prices dropped around 90%, and then in 2015 and 2019, it dropped over 80%. In this cycle, we are currently at a 70% drawdown from the all-time high price. So for Bitcoin, this is business as usual. However, this is the first time crypto has experienced an economic recession.

Bitcoin, the world’s first cryptocurrency, was born out of the wreckage of the 2008/2009 financial crisis. In fact, on Bitcoin’s genesis block (its first block), Satoshi Nakamoto engraved the following line: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” The headline, forever engraved on the Bitcoin blockchain, serves as a reminder that Bitcoin was created in response to irresponsible central bank money printing. If the money printing during the last economic crisis was the appetizer, the money printing during the COVID-19 crisis was the main course.

In response to the COVID-19 pandemic, central bankers across the world increased the money supply at an unprecedented rate. This massive capital injection drove the US stock market to all-time highs at a time when the economy was at a complete standstill, and we were all locked down at home! Now, the US Federal Reserve is stuck between a rock and a hard place. After increasing the M2 money supply by 40% in response to COVID-19, inflation is at its highest level in 40 years.

A recent article in the Financial Times showed the number of emerging and developed economies experiencing inflation of 5% or more is skyrocketing. To reduce inflation, the Fed cannot increase supply, so they have to reduce demand. Reducing demand means a recession. If we look at some leading blue-chip stocks, the last six months have seen Shopify stock lose 75% of its value, Netflix is down over 70%, Meta is down 50%, and Tesla and Amazon are down 40%. The list goes on and on. Yet, through this bear market, Bitcoin remains the best-performing asset in the world since the COVID-19 pandemic, growing by over 300%.

Historically, however, a surprising number of successful businesses were launched during a recession. Consider Uber and Airbnb. Both companies were launched during the last recession in 2008/2009. Go back a little further, and you’ll find plenty more examples. Apple, Slack, WhatsApp, Pinterest, General Motors, IBM, Groupon, Instagram, and many more were launched during economic recessions. Whatever the sector, history clearly demonstrates that adverse market conditions are not a barrier to innovation. Even Disney was launched in 1929, the year of the Great Depression!

In contrast, bull market startups tend to see their valuations rise rapidly, enabling them to expand operations at an equally brisk pace. When –inevitably– a market downturn does occur, these are the firms that must resort to extreme measures like mass layoffs or seeking bailouts. As a startup, we at CoinMENA need to adapt to the new realities of the market. Our goal remains to grow our user base and continue to develop new products that enhance our users’ experience. We are particularly excited about our recently obtained provisional license from Dubai’s Virtual Assets Regulatory Authority, as it gives our users and investors regulatory clarity, which is extremely important for our long-term plans.

The economic conditions are not ideal, but history has shown us that “bear markets” are also “build markets.” It is still very early days for crypto as an industry, and there is a lot of value to be captured. I’m convinced that those who survive these turbulent times will emerge stronger than ever.

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5 Ways to Prepare for a Recession

By Equifax

What is a recession?

A recession occurs when a region’s economy declines over several months or even years. During these periods, the region’s gross domestic product (GDP), or the total value of the goods and services it produces, drops. At the same time, dramatic changes may occur in the price of commodities like oil or gas. Previously profitable industries may suddenly become less valuable. Consumers may see increased inflation or higher-than-normal levels of unemployment. As a result, consumer confidence also suffers, meaning that people may be less willing to spend money than they would usually.

In 2008, for example, Americans experienced a significant recession following the sudden collapse of the U.S. housing market. More recently, the COVID-19/Coronavirus pandemic caused major losses in daily business and employment across multiple industries including, hospitality, retail and tourism. As a result, the U.S. faced a short recession during the early months of 2020.

What happens in a recession?

During periods of recession, companies make fewer sales, and economic growth stalls or becomes nonexistent.

To cut rising costs, organizations may be forced to lay off large portions of their staff, resulting in widespread unemployment. At the same time, hiring slows down, making it difficult for the newly unemployed to find another job.

Investments like stocks and real estate tend to lose money, meaning that retirement and other savings accounts can suffer. Lenders may also respond to the increased financial uncertainty by raising their lending requirements, making it much more difficult for people to qualify for new credit accounts.

Recessions are an unavoidable part of any economy. But you can weather the storm by anticipating challenges early and preparing for the future. With that in mind, here are five essential steps to help you plan for uncertain times.

  1. Take stock of your financial priorities
    One of the hardest parts of a recession is not knowing what comes next, and when things will get better. That’s why it’s important to be clear about where you stand financially. Ask yourself these key questions as you take stock of your financial situation.
    • How much cash do I have on hand?
    • How much cash can I get my hands on quickly, if I need it?
    • How much debt do I currently have (credit cards, student loans, etc.)?
    • What are my basic monthly living expenses, including food, shelter, health insurance, transportation and childcare?
    • Do you have any major life events coming up with significant expenses attached (for example, weddings, a baby or retirement)?
      Now is the time to understand what you’re spending today and to anticipate your needs over the next six months. If you’re well-prepared for a recession, a job loss or other financial hurdle, you’ll have an emergency fund that covers three to six months of living expenses (and hopefully a healthy nest egg for retirement).

      If you don’t have at least three to six months of basic expenses in cash, then set that as your financial goal. Start by developing a basic understanding of how you are spending your money and building a budget.

      To start building a budget, figure out your total household income from all sources, including you, your spouse/partner and any side hustles that bring cash into the household. You should also include income from investments and any other sources, such as child support.

      Next, list your monthly expenses, including your rent or mortgage payments, utilities, groceries, pharmaceutical and medical needs, childcare costs, home and auto maintenance, debt payments and insurance premiums, as well as any other regular expenses, including those you only pay annually. Add everything up to understand whether you’re spending more, less or roughly the same as your take-home pay each month.

      Finally, prioritize your essential expenses and make sure you identify the minimum you can spend in a given month to get by — just in case you or your spouse/partner experiences a job loss.

      Your budget may need to adapt in preparation for a recession, and that’s okay. Try to cut down on non-essential spendings, like entertainment, cable and clothing. While it’s unrealistic to think you can cut out all discretionary spending, it’s important to separate wants and needs. Look for areas where you may have overspent. Try to figure out why that happened. You might not have extra money right now to put toward your retirement or a down payment, which is all right for the short term.

      Once you get in the habit of reviewing your finances and looking for problem areas, you’re off to a great start.
  2. Focus on debt repayment if you’re able
    You might be worried about paying off outstanding debts in the coming months, like credit card bills, utilities or student loans. If you experience a loss of income, you might have to forego paying one or more of these bills, so it’s important to understand which bills you need to pay.

    After all, if you lose income, you may not be able to pay every bill on time or in full every month. And, that will have a direct impact on your credit scores.

    Normally it’s important to do whatever you can to keep your credit scores intact, but during a recession that may not be possible. Therefore, you should prioritize how you pay your bills, so your available cash covers as many debts as you’re able.
    1. Make sure you pay your rent or mortgage on time and in full. You don’t want to face foreclosure or eviction.
    2. Make your car payment, especially if you need a car to get to work.
    3. If you’re facing an income reduction, contact your student debt lender and ask for a hardship application, which may buy you a few months where you don’t have to make a payment.
    4. Make at least your minimum payment on your credit card. If that’s not possible, contact your credit card company and try to work out a payment plan. (Just know that the creditor will likely freeze your accounts, which will prohibit you from making additional purchases with the card.)
    5. Continue to keep up with your medical debts if you can, however, do so after other debts are met first. If your health insurance is offered through your employer, you will continue to receive health insurance coverage even if your medical bills mount. If you buy your own health insurance, whether you’re self-employed or for any other reason, be sure you pay your premium on time so your policy isn’t canceled.
      Remember, if you’re falling behind, reach out to your creditors and ask for hardship concessions. This might include making interest-only payments on your debt or putting payments into forbearance.

      You can also check out your local bank or credit union for a personal loan. There are online lenders as well, and your employer may offer a short-term loan program in times of trouble.

      If you’re making your payments on time, you can also ask your credit card company or any other lender about lowering your interest rates. A significant number of major utility providers offer programs that might allow you to pay your bills at a later date or provide other hardship assistance. You’ll never know what agreement you and your creditor can reach if you don’t ask.
  3. Consider your career opportunities, both now and in the future
    Recessions often result in high levels of unemployment. So, it’s important to consider how tough economic times could affect your career and have a backup plan should you face a layoff.

    Start by refreshing connections within your professional network. Be sure to consider not only your coworkers but also any connections you have outside of your current employer. Having established relationships at a variety of organizations can give you a huge leg up in the job market. You might consider reaching out to your network via social media or offering to meet up in person for coffee.

    It may also help to update your resume and other job-hunting tools ahead of time. As you review your past work experience, look for any gaps. Are there places where you could pursue continuing education or additional training? Expanding your skill set is one of the best ways to invest in yourself as an employee. This is true even if you’re able to keep your position during a recession.

    For some workers worried about a layoff, it may be beneficial to pick up a side gig such as freelancing or working for a rideshare application. Having an extra stream of income can not only help in the event of a layoff but can make it easier to build your emergency savings while you’re still employed.
  4. Try to bolster your emergency fund ahead of time.
    Even if job cuts or layoffs are looming, put as much cash into your emergency fund as possible. You’ll need every bit of it when the income stops flowing. Give up all the extras, including takeout and delivery.

    While tapping into your emergency fund is never a decision you should make lightly, losing a job or being forced to live on a reduced salary certainly qualifies as a good reason to use some of the cash you’ve put away. However, it’s important to rebuild your emergency fund as soon as your financial situation is more stable. Otherwise, when the next emergency hits, you might have to make tough decisions, like withdrawing money from your retirement account or applying for a home equity line of credit.

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7 Ways to Recession-Proof Your Life


Do you worry about how a potential recession or economic slowdown might affect you and your finances? Assuming that you have some time to prepare, you can put your fears to rest because there are many everyday habits the average person can implement to protect themselves ahead of time from the sting of a recession, or even make it so its effects aren’t felt at all. As the recession hits, these tools can help you get through it in one piece financially.

Have an Emergency Fund

If you have plenty of cash lying around in a high-interest, Federal Deposit Insurance Corporation (FDIC)-insured account, not only will your money retain its full value in times of market turmoil, it will also be extremely liquid, giving you easy access to funds if you lose your job or are forced to take a pay cut.

Also, if you have your own cash, you will be less dependent on borrowing to cover unexpected costs or the loss of a job. Credit availability tends to dry up quickly when a recession hits. Once these things happen, use your emergency fund to cover necessary expenses, but keep your budget tight on discretionary spending in favor of making that emergency fund last and restoring it ASAP. 

Live Within Your Means

If you make it a habit to live within your means each and every day during the good times, you are less likely to go into debt when gas or food prices go up and more likely to adjust your spending in other areas to compensate. Debt begets more debt when you can’t pay it off right away—if you think gas prices are high, wait until you’re paying 29.99% annual percentage rate (APR) on them by fueling up on credit card.

To take this principle to the next level, if you have a spouse and are a two-income family, see how close you can get to living off of only one spouse’s income. In good times, this tactic will allow you to save incredible amounts of money—how quickly could you pay off your mortgage or how much earlier could you retire if you had an extra $40,000 a year to save?

In bad times, if one spouse gets laid off, you’ll be okay because you’ll already be used to living on one income. Adding to your savings will stop temporarily, but your day-to-day frugal spending life style can continue as normal.

Have Additional Income

Even if you have a great full-time job, it’s not a bad idea to have a source of extra income on the side, whether it’s some consulting work or selling collectibles on eBay. With job security so nonexistent these days, more jobs mean more job security. Diversifying your streams of income is at least as important as diversifying your investments.

Once a recession hits, if you lose one stream of income, at least you still have the other one. You may not be making as much money as you were before, but every little bit helps. You may even come out the other end of the recession with a growing new business as the economy turns up.

Invest for the Long Term

So what if a drop in the market brings your investments down 15%? If you don’t sell, you won’t lose anything. The market is cyclical, and in the long run, you’ll have plenty of opportunities to sell high. In fact, if you buy when the market’s down, you might thank yourself later.

That being said, as you near retirement age, you should make sure you have enough money in liquid, low-risk investments to retire on time and give the stock portion of your portfolio time to recover. Remember, you don’t need all of your retirement money at 65—just a portion of it. It might be a bear market when you’re 65, but it could be a bull by the time you’re 70.

Be Real About Risk Tolerance

Yes, investing gurus say that people in certain age brackets should have their portfolios allocated a certain way, but if you can’t sleep at night when your investments are down 15% for the year and the year isn’t even over, you may need to change your asset allocation. Investments are supposed to provide you with a sense of financial security, not a sense of panic.

But wait—don’t sell anything while the market is down, or you’ll set those paper losses in stone. When market conditions improve is the time to trade in some of your stocks for bonds, or trade in some of your risky small-cap stocks for less volatile blue-chip stocks.

If you have extra cash available and want to adjust your asset allocation while the market is down, you may even be able to profit from infusing money into temporarily low-priced stocks with long-term value. Buy low so that you can sell stocks high later or hold on to them for the long run.

Be careful not to overestimate your risk tolerance, as that will cause you to make poor investment decisions. Even if you’re at an age where you’re “supposed to” have 80% in stocks and 20% in bonds, you’ll never see the returns that investment advisors intend if you sell when the market is down. These asset allocation suggestions are meant for people who can hang on for the ride.

Diversify Your Investments

If you don’t have all of your money in one place, your paper losses should be mitigated, making it less difficult emotionally to ride out the dips in the market. If you own a home and have a savings account, you’ve already got a start: you have some money in real estate and some money in cash.

In particular, try to build a portfolio of investment pairs that aren’t strongly correlated, meaning that when one is up, the other is down, and vice versa (like stocks and bonds). This also means that you should consider asset classes and stocks in businesses that are unrelated to your primary occupation or income stream.

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