Right now cryptocurrency is in a bear market.
A bear market is when prices are down in the dumps. You are most likely down in your portfolio. All time highs seem out of reach and it’s a huge climb back to being in the green.
It’s the opposite of the bull market that everyone wants.
There is a phrase though. A bear market is where the wealth is made. If you want to be one of those that creates wealth during a bear market then you need to know how to navigate this market.
Here are 5 tips to help you take advantage of a crypto bear market.
Don’t Panic Sell
First thing inexperienced investors do when they see the price of their crypto going down is think about selling. They start to panic thinking that the price won’t ever go back up or that it will go to zero.
When too many people start panic selling the price goes down. That’s how markets crash in the first place. There are too many people selling and not enough people buying, so in order to sell your crypto, you have to sell it at a lower price. This happens over and over again until the chart looks like a meteor crashing straight into Earth.
Panic selling literally causes market crashes.
When many people panic sell, they are usually taking a loss. They sell because they believe that they will mitigate their loss if they get rid of it now while the price keeps going down. Or they think maybe later they can buy in at a cheaper price.
A good way to avoid panic selling is to rely on rational thinking instead of emotions. The crypto bear market will test your patience. Our emotions can sometimes lead us astray and that is especially true in investing. You may regret your emotional decision later down the road.
Remember if you are truly investing in crypto because you believe in its success, then the price shouldn’t matter at the moment. You are looking for a good return over the long term, not a get rich quick scheme.
You shouldn’t try to play the market because most of the time that will come back to bite you. Keep your head about you.
The DCA Strategy
Piggybacking on the rely on emotions, avoid trying to time the market. Instead, you should be dollar cost averaging (DCA).
DCA is when you make an investment over time in many different purchases regardless of the price. This should help mitigate any losses and, over time, keep your cost per coin down compared to the market.
For example, instead of spending $1,000 on Bitcoin at $22,000 right now, you would spend $200 each week for five weeks at varying prices.
Cryptocurrency is very volatile and DCAing helps prevent that. Your $1,000 investment could be $500 in a month, but spreading the investments out over time means that you could have taken less of a loss during that same time. DCA distributes the risk of crypto investing.
Here are some DCA strategies.
Build up your stash of Bitcoin and Ethereum because altcoins are extra risky during a bear market. Bitcoin and Ethereum have the highest chance of making it through the bear market, even if it takes a year or two.
If you are extra serious about investing in crypto you can try to get an extra income stream. Maybe Uber or a part-time, weekend job. If you believe crypto will truly get big, then this extra income can seriously help your future.
Don’t Try to Analyze the Market
Analyzing the market is literally impossible. No one can predict what will happen. Crypto is no different. It could fall tomorrow, it could pump tomorrow, and no matter what lines on the chart or patterns you think you see can change that.
Too many new investors will try to time the bottom. No one knows when that will be or what the bottom even is. Most likely what will happen is that you sell your coins at the wrong time, or don’t buy at the right time. You could think the price is at the bottom, buy in, and then wake up the next day at a loss.
Most coins won’t hit their all time highs again. There are a few reasons for this. They include no more funding, developers of the project get bored, or some new and shiny competing project comes along and people jump ship.
It’s important to keep up on your crypto investments. Researching your coin in the beginning is good, but things change, events happen, and you need to make sure that your crypto is still worth investing in.
Don’t think history is guaranteed to repeat itself. Just because Bitcoin pumps every time there is a
halving event, doesn’t guarantee that it will again.
If you take only one thing away from this, it’s that no one, absolutely no one, knows what will happen in the future. It’s best to do what you think is best for your portfolio.
Learn About Other Crypto Projects
During a bear market the prices are so low that it seems like anything and everything is on sale and it’s a great way to start to diversify your portfolio. However, like I’ve already mentioned, altcoins are a very risky buy during a bear market.
Many projects will die off during the bear market so it’s extra important to do research before investing in new projects. It’s also a great time to learn about the projects that you might have invested in without research. Doing research and learning about a project can make it easier to decide if it’s a good investment or not. Remember, we are thinking about the bull market in the future.
Spreading your investment over a few different projects can help reduce the risk of altcoin investments during a bear market. If you pick 5 different coins, maybe only 2 will make it to the next bull run, but that is better than picking one coin and watching it go to zero.
A bear market is a great way to build up your portfolio and get it ready for the next bull market.
One thing you do want to avoid is investing in
memecoins, at least during the bear market. Crypto is a volatile market, but memecoins take it to the next level, and are basically straight up gambling. They are not a good way to diversify your portfolio.
Stake with Safer Projects
Lastly, since we have a feeling that we are going to be in the bear market for a while, you might as well build up the coins that you have with staking. Staking is a little like earning interest on your crypto.
Stake with projects that may come out of the other end of the bear market. You can gain a lot of extra crypto that could be worth a lot more during the bull market. For example, you can
stake Cardano now, and accumulate while you wait the bear market out, and sell when the price rises again.
While prices are lower, you can slowly DCA into projects, which will also increase the amount of tokens you generate from staking.
One way to reduce the risk of holding on to cryptos that could go to zero any day is to hold and stake stablecoins. Stablecoins are pegged to a real world currency like the U.S. dollar and give low interest just for holding the coin. This is usually higher than what the bank is offering you. Avoid extremely high interest stablecoins, although tempting, it is unsustainable in the long run.
If you are interested you can check out the
best cryptocurrencies to stake this year (2022).
Summary
A bear market is when investors have less confidence in crypto, take their money out of the market, and prices drop. During a crypto bear market prices can be -50% to -90% of their all time highs.
Try not to panic sell your cryptocurrency. Instead of using emotions to trade, which could cause regret down the road, use rational thinking.
Don’t try to time the market. Use dollar cost averaging to make many smaller investments over time instead of one large purchase. This will help mitigate any loss and bring your cost per coin down.
Remember, that no one can predict the price of crypto and no one knows what or when the bottom is. It’s better to rely on your own instincts, instead of trying to time the market. It rarely works out in your favor. Stick to your own strategy.
A bear market is a great time to invest in other projects. Altcoins are very risky during a bear market so doing extra research is important. Be smart and don’t just toss your money into any project. You want to make sure your crypto is going to come out on the other side of this down market.
Staking will help you accumulate cryptocurrency during the bear market, so that you can sell when the price goes up during the bull market. The best part is you don’t have to do anything except hold the coin.
Now that you know how to take advantage of a crypto bear market, learn other
crypto investing tips.
