How To Survive a Crypto Bear Market
6 mins read
10 mths ago
The recent bear market that crypto investors are experiencing in 2022 is no longer something new, even to the average person. The pioneer cryptocurrency, bitcoin, went down to more than 50 per cent of its all-time high. Alts were also affected severely, with as many of them as Terra trading below $1.
What is a Crypto Bear Market?
A crypto bear market is a situation where the market is experiencing a decline in trade movements. It also signifies a period where most people are selling off an asset or assets in the market.
This is usually a result of FUD (Fear, Uncertainty and Doubt) in the market.
The reverse is called the bull market, which indicates an upward appreciation or trend in the crypto market. It also comes where more buyers are in the market, possibly due to optimism.
With what is happening in the market today, many who have been in the crypto space for a long time doubt whether the bull market will be seen in 2022. This has been deepened significantly after over $45 Billion was estimated to be lost in the recent LUNA and UST crash.
However, does this mean that the market won't recover? It will; the first thing is not to panic.
The crypto bear market can be survived with the proper steps and principles as discussed below;
1. Avoid Panic Selling or Buying:
It is common to have panic as a default response during any situation of unrest or uncertainty. However, you will be better positioned to make the right decision if you avoid panic responses in these situations.
As we'll see soon, there are other factors we'll discuss that will help you make wiser decisions during times like this. The cryptocurrency market or any cannot be timed accurately, just predictions in most cases.
Before making a buy or sell decision, understanding what is going on and why things the cryptocurrency is dropping is what differentiates two people buying and selling a particular cryptocurrency in a bear market.
2. Use This Time To Research About Cryptocurrency:
The bear market always offers the opportunity to buy good crypto projects at a lower price than they would be in normal market conditions. When you buy a cryptocurrency, you're investing in a company in the blockchain space. Rather than research the company and see if its business model is solid, many bet on luck into projects at a risky stage of their operation, hoping to become millionaires overnight.
3. Play The Long Term Game:
Especially for the newbies, most people lose interest once the crypto bull market is over. These are not the characteristics of those with a long-term perspective of the crypto market.
Cryptocurrency is a digital asset that depreciates and appreciates. Those who made the most significant success in the crypto space are not the ones who quit during a bear market but those who built up their portfolio when the market was down.
4. Make Use Of The DCA (dollar-cost averaging) Approach:
Experienced crypto investors use this approach whenever the market is down in the red. This is an investment strategy whereby crypto traders budget the amount to be invested in the bear market and then make the investment in bits until the money is fully invested.
In other words, assuming that a crypto investor has $2000 to invest in a bear market, he can split it into $50 and invest them bit by bit. This is a good strategy because the market is highly volatile, and a crypto bull market can return at any moment.
This allows you not to lose all your investment to the bear market, and at the same time, you are ready if the candles turn green.
5. Avoid Shorting The Market:
Some crypto investors become so pessimistic when the market is down, forgetting that there is always the return of a crypto bull market. In a bid to remain cautious, many of them continue to predict that the market will continue to go down.
Shorting bitcoin or the entire market is predicting that the market will continue falling because such is happening at a particular time.
As an investor, shorting the market is a bad strategy and can make you lose opportunities others may jump into. Taking such as risk is treated with caution even among experienced traders.
6. Try Staking:
During the bear market, crypto investors are usually lost on the next step to generate money. Crypto staking is locking up your cryptocurrencies for a while in a blockchain. This is not like the traditional financial institutions where you keep cash and do not earn passively.
Staking is an excellent way to increase exposure to a platform or asset you strongly believe in while earning extra interest.
7. Diversify Your Investments:
The cryptocurrency market, just like the tech space, is vast. When you buy cryptocurrency, you are actually investing in a project, just like purchasing a Facebook stock or Apple Stock.
With diversification, the key is to understand that it is only on rare and challenging occasions that the whole crypto market gets into a bear situation. Rather than have all your investments in one aspect of crypto blockchain, you can invest some in crypto blockchains and companies building games, healthcare solutions, NFT marketplaces etc.
This enables you to balance out short term value depreciation in investments, as seen in bear markets.
8. Do Not Leave Coins On Exchange:
As you wait for the crypto bull market to return, don't make the mistake of leaving your cryptocurrencies on just any exchange. There have been cases where crypto exchanges folded up during a bear market. Instances such as Cryptopia and QuadrigaCX. You can leave some funds in your crypto wallet address and keep some in cold wallets, so your cryptocurrencies are safe.
Since the inception of cryptocurrency, the market has always experienced turbulence from time to time. In this period, investors usually make the most mistakes, and some build up vast amounts of money during the next bull run. What usually differentiates the losers from the winners is the actions they take. While many people act without proper guidance, the market winners stake their crypto, use the dollar-cost averaging strategy, play the long-term game, and more.
Disclaimer: This article is meant to provide general guidance and understanding of cryptocurrency and the Blockchain network. It’s not an exhaustive list and should not be taken as financial advice. Yellow Card Academy is not responsible for your investment decisions.