If you have been following the crypto market recently, the whole market is experiencing double-digit losses where Bitcoin (BTC) dropped to under $20,000 in June 2022, which is the lowest since 2020.
Most new people holding crypto investments are discouraged and confused. However, this is not the end of the crypto market. Who would have believed if someone told BTC would cross $50K a few years ago? This is just an indication that the crypto market is volatile and will recover eventually.
So, if you are wondering what to do in a Crypto Bear Market, this article will guide you on what to do in this bear market.
Reinvest the dip via dollar-cost averaging
DCA or Dollar-Cost Averaging is yet another method of investment strategy in the Cryptosphere where investors purchase an asset or a group of assets at a regular interval irrespective of the price. Usually, the DCA method works better over a long period as it increases the chance for the value to go up. However, please note that the DCA method of investment doesn’t save you from a declining investment but helps you cut down the losses incurred.
Re-entry into the market via indicators
This point is for you if you are a step above a newbie who can read charts. Reading chart is an art, and with the help of that, one can make a lot of money and lose if a mistake is made.
Here are some good examples of basic chart indicators that can facilitate your cryptocurrency trade better in a bear market
– Linear Regression Channel :
The Linear Regression Channel is a three-line indicator that highlights the high, low and the middle of a chart that helps to identify & analyze the upper and lower limits of the current market trend.
– Fear and Greed
The Fear and Greed index is an indicator that uses the traders’ sentiment value to measure the market’s state. This indicator generates a number from 1 to 100 where the lower part of the score means the fear index is high, meaning the people are panic selling causing the price to drop.
When the charts are on the higher part, it means the people are greedily buying due to any market factors be it a piece of news or a new update, or anything. Naturally, this drives the price up for the asset. – Simple and exponential moving averages
Exponential Moving Average (EMA) and Simple Moving Average (SMA) is a chart measuring trend that helps to identify the direction over a period of time. The SMA & EMA have their own way of viewing the charts but to put it simply, the SMA is the average price of a security for a specific period of time and calculates the data. In contrast, the EMA on the other hand, gives more weight to the current data.The difference between SMA & EMA is the scale of sensitivity each of the indication method shows to the data used in its calculation.
While this is a gist of the basic indication methods, there are several other methods and ways to read charts. But you get the point, a basic idea of reading charts and predicting can help to recover a small percentage or large percentage of losses incurred in the bear market.
Diversify Investment Options
This is the simplest way to take the next move in a bear market.
There’s no prediction game here, but spreading out your investment across the multiple Cryptocurrency options can help you recover the best. But here, there’s no guessing game as there are over 17,000+ cryptocurrencies to choose from and we cannot exactly predict which is going to recover the fast or go the other way round. But there are a few ways with ways you can find the right cryptocurrency to purchase.
– Previous All-Time-Highs: The ATH or All-time high of a cryptocurrency can help you get a picture of the cryptocurrency and show the true potential very easily.
– Previous Performance: Just like previous ATHs, the past performance of the cryptocurrency can help you with a clearer picture of how well the currency recovered during the previous crash or it will also give a vision of how well the cryptocurrency sustains during the normal or worse days.
– Roadmap & Updates: Every cryptocurrency has its own roadmap, similarly a promising roadmap with good future development can play a major part in an assets recovery. This can be an indirect way of predicting the future and analysing the recovery of a cryptocurrency in the case of a bear market.
Investing in infrastructure for the next bull market
There are experts sharing different theories about the Crypto bear market, the fear index is scaling fast making people take impromptu decisions. But if you look at the longer scale, the cryptocurrency tokens are nothing different from the NASDAQ stocks, they both have a strong correlation and the fundamentals remain the same.
While the traditional stock relies on the day-to-day happenings, crypto on the other hand is dependent on the technology, the development and its roadmap. The bearish market is yet another market cycle phase and won’t be a permanent run. During the previous bear market, there were lots of companies that didn’t bother and kept building during the bear market. They ended up emerging stronger than most of the other crypto space companies out there.
So, if you see any crypto companies pushing stronger updates during a bear market like the one we are experiencing right now, then use it as an opportunity to invest in them as they show one of the hardest signs that other cryptocurrency companies try to show.
Look for Opportunities and good deals
Professionals take both bear and the bull markets as a good opportunity to make a huge sum of money. There are ways and strategies to bank a profit if it is used at the right time and at the right place. This not only requires tremendous knowledge but also discipline, focus and the strength to take advantage of the fear & greed of other people.
There are different ways to bank during a bear market –
– Short Positions: Shorting positions basically mean you borrow the shares and sell them before they fall even more. If the price of the share drops as you anticipated, you can buy them back at a lower cost and cover the short position and profit from the difference.
– Put Option trading: This type of options trade allows the trader to sell the stock at a particular at on a future date. The value of the put stock increases as the price of the underlying stock falls. If the value of the stock falls below the put price, you can sell the stock at a higher price or sell the option itself for a profit.
These are just a few ways to bank during a bear market. There are lots of other concepts and theories that have to be practiced over time.
While there are many things you are processing during a bear market, staying calm can help you take some unwanted decisions that might be regretful if made. While making money can be a good motivator, doing anything within a limit is the right way.
Making a quick buck in a single trade can seem easy to one person who’s an expert. But mastering that art takes time. When newbies try to replicate the same and get greedy hoping to profit out the maximum, the risk also increases as they are simply trading without any idea in a volatile market.
Just think of this as the last time when the crypto crash happened, when it happened it went all the way down but recovered even stronger. This is meant to happen and will happen even in the future, so be prepared for it and trade safely.