The crypto market is highly volatile and could easily make significant moves in either the upward or downward direction. A crypto bear market, also known as crypto winter, is characterized by prolonged negative price actions. The emotions in a bear market are pessimistic; investors, especially newbies, are filled with fear, uncertainties, and doubt.
In traditional financial markets, the bear market is defined to be accompanied by a 20% fall in the prices of assets or from the assets’ recent highs. A crypto bear market begins with a demand-supply imbalance where selling outweighs demand; most market participants fall on the sell side resulting in significant declines that fail to recover in a short time. Technically, the crypto bear market reflects a series of lower lows and lower highs on a more extended timeframe.
‘Bear market’ is a crypto term that explains the activity of the Bear in swiping downwards with their claws. Therefore, the market is now seen to have a continuous downward price trend. Crypto bear markets are cyclical; they set in at certain times in the market. However, how long or the depth of the decline can only be predicted or estimated. External factors often influencing crypto bear markets include economic factors, investor psychology, and news or events.
The bear market often represents a dreaded period when more losses than profits are made, truly, most market experts still make profits from shorting the market. Nonetheless, a few steps can be taken to minimize the potential losses of the bear market.
4 Ways to Survive the Bear Market
An informed crypto trader or investor has less FOMO tendencies. Gaining crypto education is a way of doing your own research (DYOR). Due diligence on crypto assets and the market generally during a downturn is a more profitable way to carry out a fundamental analysis because the market is less noisy and projects with actual use cases become apparent.
Gaining more crypto education in a bear market allows one to stay ahead of the market. A better understanding of the market in a bear market sets participants up for the next bull run and positions them to maximize the market.
Educational resources on CryptoTVplus and Earnathon are an excellent way to start. Learning never ends. Readers are leaders. The saying ‘bear markets are for builders’ applies here too. Learn before you earn.
Dollar-cost averaging (DCA) is an investment strategy in which assets are purchased at certain prices as the asset price falls for some selected amount in dollars. The plan is based on the belief that prices will eventually pick up and trend upward over time. When this investment approach is mastered, the investor’s buy price becomes averaged over time, and ultimately grows beyond the support price. One can then benefit from buying the dip when the market bounces back. Bear markets are, however, also a good time to buy crypto assets at the lowest prices. In the long run, DCA is more productive than attempting to time the market.
When the bear market would end is unusually unpredictable. Therefore, every attempt on the market should be based on a plan or strategy that has a longer time-bound and while not disregarding short-term opportunities. Making a long-term plan unaffected by short-term market volatility helps prevent buying assets without long-term value or running out of funds for purchasing valuable ones.
Thinking long term helps sieve projects with short-term utility while going for projects with longer market potential—hedge on assets with proven market activity. The events of a bear market can stir strong emotions, especially among crypto market newbies. Long-term plans through the dips and peaks have proven to be a profitable trading strategy.
Diversify your Portfolio
The prices of assets decline during bear markets but at different percentages. The effects of bear markets might be less severe for investors whose portfolios contain various assets. Therefore, diversifying your portfolio ensures that an investor has a mix of assets during a bear run. As a result, the portfolio’s overall losses could be minimized.
Diversifying your portfolio can be something other than holding numerous uncalculated assets. But choose a few good assets based on your analysis, and keep a percentage of the assets selected instead of going all in on one. However, from time to time, evaluate the assets in your portfolio.
Other things to do in a crypto bear market include
- Get a job if you can. The 2017/2018 Bear market took quite a time before the market recovered.
- Convert your crypto to less volatile assets like stablecoins.
- Take some time off the chart.
- Do not FOMO.
- Follow your risk management plan but be flexible.
- Consider trading types and markets that let you earn despite a bear market like the futures market. However, ensure to have a mastery of the market.
A bear market may cause things to slow down. However, it is still crucial to be active. The strategies highlighted in this article may assist you in surviving the bear market and positioning yourself better for the bull run. But ultimately, you will have to do more.
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