We know that it’s quite challenging to make money from the crypto space these days, as the crypto world is very polarized right now.
According to the Indian Express, on 18 May 2022, reported that the stablecoin TerraUSD, along with its sister currency Luna dipped by 80%. The news rattled the entire crypto market. Terra and Luna are no more valuable, leaving investors speechless. So, for the stablecoins these days, we can say that the small dips can turn into big worries.
But every problem has a solution. To be even more optimistic, every problem has SEVERAL POSSIBLE solutions!
Are we in a bear market? Let’s find out in this blog what a bear market means and how this impacts you when you follow some actionable steps. You can take fair advantage of this volatile yet competent crypto bear market opportunity.
What is a Bear Market?
A bear market occurs when the prices in a market decline by over 20%. It often goes along with negative investor sentiment and declining economic possibilities.
We know that a bear market is where the stock prices fall, encouraging sales. At the same time, one can never be sure of the bearish trends in crypto. Not even when people tell you to look at metrics, fundamentals, and charts, such as Cup and Handle pattern or Death Cross. But it doesn’t matter what they say, the world’s first decentralized cryptocurrency Bitcoin is exactly where it should be.
Being in the double-digit loss in percentages, the crypto market recently left many investors stressed out, significantly when Bitcoin dipped below US$ 30,000 on 9 May 2022. It happened back in July 2021.
But apart from crying in the corner, here are the things we encourage you to do when facing the bear market.
5 Strategies to Follow in a Crypto Bear Market
The bear market trading strategies will equip you with better ideas of what to expect in a bear market. You will also prepare for any market turndown.
- Use Dollar Cost Averaging (DCA) and buy the dip
- Short Selling when a certain crypto price is down
- Invest your time in research
- Don’t Be Anxious About Selling
- Diversify your investments across various crypto assets
1. Use Dollar-Cost Averaging (DCA) to Buy the Crypto Dip
The Crypto trade has wronged many traders when it turns volatile. Potential investors practice holding back some flat currency or stablecoins. While others have expandable capital in their bank accounts. Such investors can “buy the dip.”
Buying the dip means the act of buying a certain amount of cryptocurrency whenever the market experiences a significant bearish correction. The dip has always benefited crypto investors, so it is a good strategy.
Crypto bear market predictions say that the times of outstanding losses, inflation, downturn, or war, are when investors should use the principle of buying the dip. Dip buyers buy currencies at a discount and reap the fruits later on with the rise in prices.
The single trade buying the dip is followed by the most successful strategy known as “dollar-cost averaging” (DCA). It means you divide your reserve funds into smaller proportions and trade with them in the future.
An example is, suppose you have US$ 2000 in your savings. It would be nice if you break up this reserve amount into five tranches of US$ 400 or 10 tranches of US$ 200. You can trade using these smaller amounts and stay safer!
It’s hard to predict when a digital asset reaches its lowest price before reversing. So, we recommend that you save your money by not spending it all at once. It is beneficial to buy a small amount and check if the asset works. If you win it, go for a bit more and keep moving on.
You might have heard the famous saying; Do not put all your eggs in one basket. In terms of all your investments, it’s the same situation.
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2. Short Selling When a Certain Crypto Price is Down
Short selling means selling an asset at a high price with the intention of rebuying it later at a low price. This short-term selling helps crypto traders make big profits in the long term when their sold assets decrease in value. It makes rebuying currencies easier even for beginners at crypto trading.
Like all other trades, crypto traders mostly wish to buy an asset at a low cost to sell it at a higher price. But with crypto short-selling techniques, it’s simply the complete opposite. Shorting enables you to make money even when the market is down.
What actually happens is that you will have to borrow a certain cryptocurrency at the current market price and sell it immediately. Now you have earned the big value. When the prices fall, you again buy the currency at the lower market rates that have just changed.
Return the borrowed price to your broker. You now end up with a profit that is the difference between the old market value (your selling price) and the new market value (your buying price).
Here is an example:
Here is an example. Consider you have decided to short 5 Bitcoins. At present, the market price of BTC is US$ 60,000 each. It will land a net worth of US$ 300,000. You will borrow 5 Bitcoins from your broker at this current market rate. Later, if the market moves as expected, and a single BTC’s price falls to $50,000, it will be US$ 250,000.
So now you will buy at this current price and pay it back to the broker. You earn a profit of US$ 50,000 because the previous market price (US$ 300,000) minus the current market price (US$ 250,000) equals (US$ 50,000).
3. Invest Your Time in Research
While thinking about how to invest in a bear market, we usually focus on the prices dipping. It’s a common trait of investors to ponder the instability in the bearish trends. You should use this time to research. Invest your valuable time in learning about anyone’s cryptocurrency or many cryptocurrencies. The results will surprise you!
If you want to cover a crypto section first, you are good to go. Or if you can search for more investment skills to manage your digital assets risk-free in the future.
Still indecisive about what to do in a bear market? Consider having comprehensive research on making money in a bear market before diving into the crypto bear market.
You can also learn about crypto investments as your passive income source. Even if the prices fail, you can be hopeful that your crypto assets are earning returns of over 5% annually. If you have a proportion of reserved cryptocurrency, it contributes to network security and steady returns payments.
Only methodical and thorough research will make you hit the target in trading crypto. Remember that the sites driven by self-interest or obscure sites will only mislead you, and you will be frustrated. So, you should do your own research (DYOR) rightfully beforehand.
As an investor, you must be proactive in knowing about the crypto market changes and trends. You should also be competent enough to be able to face all upcoming challenges in the crypto trade. Always rely on credible sources and track the market regularly. It is the best way to secure your crypto investments.
4. Don’t Be Anxious About Selling
It is not easy to manage your emotions during bear market executions. The experts say that it is the most challenging thing when moving ahead with trading professionally. It is impossible for individuals who do not have a grip on their emotions to get benefits from their investments.
Being humans, you desperately want to reduce your losses when struck with a huge dip in price. But doing so will not earn any profit in the long run. You should relax and recall why you invested in crypto in the first place. You are definitely looking forward to improving your life by earning more and doing more savings.
You can make a huge difference in profits by vivid foreseeing and effective planning. Earning profits is also a hard thing to master. You can get affected by greed, and your expectations may rise to higher levels. It increases your trade risk, primarily when you don’t set stop losses.
Analyze why prices have fallen, dig deeper into the reasons, and develop your own solutions. Ask yourself if your older findings align with the new market requirements or not. Re-strategize for a big game.
5. Diversify Your Investments Across Various Crypto Assets
There happen to be over 17,000 cryptocurrencies on the market. No one can accurately predict which of the cryptocurrencies will recover sooner or rank highest. It is also hard to narrate how long the crypto bear market will last.
You can use DCA for a variety of different crypto assets. You might have to reduce your trade sizes which will also reduce the overall risk for your business. It is not recommended that you select any cryptocurrency and invest in it. You will spend enough time learning which one will work best for you.
Seek out the following:
1. The All-Time High Aspect
There is no assurance that any crypto will return to its All-Time High. However, it can provide guidance about an asset’s potential.
2. The Performance
Observe the asset’s price history. You can use tools like TradingView to see how efficiently it recovered during critical times. Does it align with other currencies in the market, or does it stand alone to outperform other assets? Past performance of the currency is not a guarantee for a bright future; still, you get a fair idea of the current market stats.
3. Emerging Roadmaps
To recover an assert smartly is implementing a major update or roadmap execution. The upcoming roadmap announcements include rebranding, a new partnership, or the launch of a mainnet.
The Bottom Line
We discussed in this blog what to expect in the crypto bear market in 2022. Use these useful strategies to avoid resentment. Ensure you take profits, keep some capital to face crashes, and stay calm during tough times.
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