The bear market can be very stressful for even the most seasoned and experienced traders and investors. Dips are not alien to the crypto markets, and as matter of a fact it is an inevitable reality of investing but it doesn’t always need to be as dreadful as it sounds.
As good investment opportunities lie in both bull markets and bear markets, if planned right, a crypto bear market can sometimes offer good entry points into the market with fewer risks, bigger rewards, and ‘dip-buying’ possibilities. That being said, having a good trading strategy, as well as preparation, will dictate your survival rate in a bear market.
In this article, we’ll help you understand what a crypto bear market is, how to identify it, and we’ll list the things you might want to do – and the things you ought to avoid doing in order to survive it until the bear transforms into a bull!
What Is A Crypto Bear Market?
Simply put, a bear market occurs when the prices of crypto-assets continue to fall for an extended period of time and is characterized by dips by at least 20% from recent highs.
As you might know, a perfect storm of bad news, that you can find more about them here, took its toll on the markets resulting in the global crypto market value dropping over 60% from its all-time high of $3 trillion to $1.25 trillion at press time. Bitcoin (BTC), the most valuable cryptocurrency by market capitalization, was down 56% from its all-time high in November of last year.
How To Survive the Almighty Crypto Bear Market?
Regardless of how bloody red your crypto portfolio looks this week, here are a few tips on how to survive the “Crypto winter”.
- Stick to Your Trading Plan
Remember that you should trade, not gamble with your hard-earned money! Although the waiting and uncertainty factors are present in both trading and gambling, as both place a wager and wait for the results of it, a plan makes a world of difference. In this critical cycle of the crypto market, we advise you to stick to your original trading strategy. Grab the chance to revisit your goals and risk tolerance. Also, make sure to implement a good exit strategy or one to stop loss, and believe it or not this can turn the bulk of profit into grave losses.
Although it’s challenging, it might be a good idea to learn more about the markets and projects, which leads us to our next tip!
- Do Your Proper Research
Our motto is to do your own research, therefore you might want to learn a few facts about any coin before putting it on your balance sheet. Instead of buying under the influence of family or YouTube videos, read what the White Paper promises, including the overall market cap of the coin, the project behind the coin, its use cases, the reputation of the developers and team, the underlying technology, and the timeline or roadmap. This will help you keep calm throughout the unexpected market turmoil and prepare you to absorb a lot of volatility.
- Don’t Cave In to FOMO or FUD and Avoid Knee-Jerk Reactions
A good trader should know when to HODL, when to buy, and most importantly when to sell! While trading in bull markets it’s super easy to forget how gruesome it is to see your crypto lose value. But remember: Bear markets don’t last. In decentralized asset investment like crypto, it’s you, and only you, who is responsible for your money so be aware that panicking will cost you a lot of money.
- Diversify, Diversify and Diversify
This tip might sound very risky, but of course, there is no “one size fits all” advice when it comes to investing in crypto, but don’t put all your eggs in one basket will always be a good one. Considering the fact that all the major crypto indexes are just below the all-time highs, this might be a good buying opportunity to diversify your portfolio.
- Buy the Dip
Every trader must benefit from such ebbs and flows of the market. You might want to hunt out undervalued coins. But be careful while doing this, the most common pitfall for newcomers is purchasing cryptocurrency with funds they cannot afford to lose. Another common blunder is purchasing high and selling low when you should do the opposite which is to buy crypto when the market is in a downtrend, and cash out those gains when the coin hits an all-time high.