Those generalizations might come out as harsh, but as the phrase goes, even a fool can profit in a bull market. How well you handle a bear market is the best indication of how skilled a trader you are. This well-accept axiom applies to all markets, not just the cryptocurrency market.
A bear market is what?
For those who are unaware, a bear market is best described as a protracted decline in asset prices that results in the value of your portfolio declines. In a bad market, the supply of an asset is often greater than the demand because a significant portion of investors starts selling off loss-making assets from their portfolio out of concern for additional price declines (known as “bears”).
bull market versus market
A bull market contrasts sharply with a bear market. A bull market occurs when the price of an asset or asset class rises steadily over time, which causes your portfolio’s value to increase.
Bull markets begin when investors have faith that prices will rise and the uptrend will last for a considerable amount of time. They begin acquiring and keeping the assets they believe will profit the most from the bull market in anticipation.
In other words, during a bull market, many investors are willing to purchase while few are willing to sell. As a result, the price begins to rise as the demand exceeds the supply. In this sense, predictions made by investors regarding optimistic market circumstances become self-fulfilling.
Here are a few details to keep in mind to better illustrate the dynamics of the bull and bear markets:
- Although there are some negative investors, by and large, investors remain fundamentally bullish. Long-term returns on investment (ROI) are typically positive for the majority of asset classes, including digital assets.
- In contrast to bull markets, bear markets often have a limited lifespan.
- A bear market is more challenging to invest in and navigate than a bull market since many assets lose value quickly and prices tend to become much more unpredictable.
Describe the crypto winter
In a crypto winter, price declines are frequently very sharp. For instance, during the most recent crypto winter, which believe to have occurred between the beginning of 2018 and the middle of 2020 (although estimates vary), bitcoin lost over 88% of its value relative to its then-all-time high price.
The larger cryptocurrency market also experienced the bitter cold of the previous winter in cryptocurrencies. In fact, many well-known coins experienced price decreases of up to 90%.
The best ways to weather a bitcoin bear market
So, if a crypto bear market is approaching, bitcoin’s price movement nearly always shows the earliest signals of it. Other cryptocurrencies simply support it, at least so far. And even in later cycles, when the market bounces back and eventually embarks on a fresh bull run, this finding still holds true.
As of the time of this writing, bitcoin has seen a string of losing weeks. Month over month, the alpha-crypto has lost close to a quarter of its value. And as usual, practically all of the main coins have done the same, including coins like Ethereum, Cardano, etc. Therefore, it would be reasonable to conclude that the market is currently in a bear market.
Therefore, the vast majority of analysts and industry insiders believe that holding and patiently waiting out the storm are the best strategies for surviving a bitcoin bear market. It’s important to keep a long-term perspective rather than succumbing to the impulse to sell in a panic. Furthermore, if you have little to no past trading experience, attempt to stay away from trading when the market is in a bearish phase.
Top 7 techniques to survive a bear market in cryptocurrencies
1. Remain composed and weigh your options.
Keep your cool and make an unbias assessment of the situation at all times, whether you view the bear market as a chance to purchase the dip or find declining cryptocurrency prices to be a little too stressful to handle. Especially if you’re trading, emotional decisions are the ones you’ll probably come to regret later.
Asking yourself why you initially decided to invest in cryptocurrency is a good place to start. Do you think cryptocurrency will succeed in the long run and wish to take advantage of the numerous chances it may present? Or are you merely looking to make a quick buck through short-term trading?
Your first step in figuring out how to avoid losing money in the bear market may be the answer to this question.
2. Avoid timing the bottom.
Nobody absolutely nobody can foresee the bottom. Even if you spend all your time reading technical and fundamental studies and listening to experts, you might still need to trust your instincts when trying to predict when the market will bottom out. You’ll probably also agree that when looking for solutions to get through a crypto bear market or worse, a crypto winter gut sentiments are not much of a choice.
You may purchase at a particular time at what seems to be the lowest price. However, the cost might decrease even further. And if it does drop, you’ll need to sell it once more to get another chance at spotting the elusive bottom.
3. Average cost per dollar (DCA)
The finest technique, known as dollar-cost averaging (DCA), is one that has consistently produce excellent results, even in the worst bear markets. It is a straightforward but long-term strategy in which you keep making incremental purchases of an item over time, regardless of price, in modest sums.
A DCA program, for instance, would have you invest, say, $50 in bitcoin every week as opposed to $200 all at once. To adapt to your changing needs, you might occasionally adjust your DCA schedule.
4. Think about staking
Staking appears to be a viable technique to generate passive income from your cryptocurrency holdings when things go rough in a bear market for cryptocurrencies and your portfolio starts losing value left and right. The act of locking up your funds on a proof-of-stake (PoS) blockchain for a set amount of time in exchange for rewards is known as staking.
If you want to learn more about staking cryptocurrency, this comprehensive guide is a fantastic place to start for people who are not in the know. The best thing about staking is that it makes your wallet bigger even during a bear market. In this manner, you will have more money to start with when the bull market returns.
5. Do not short in a bear market for cryptocurrency
Shorting strategy uses by traders to gain from declining cryptocurrency values. In a bear market with frequent price reductions, it should make it ideally a good fit.
The majority of specialists, however, will caution you against shorting bitcoin and other cryptocurrencies because doing so could result in limitless losses or the liquidation of your position. This is a fundamental issue with shorting, and no amount of practice can shield you from the jarring surprises that await you when things go wrong.
With shorting, it’s quite the opposite. The most you could possibly make from shorting a coin at $100 is $100. However, if the crypto price starts to rise and the rally persists, your losses could continue to grow indefinitely. Additionally, if you short utilizing margin, you will be responsible for continuing to pay interest fees on top of the initial loss for as long as you decide to maintain the position.
6. Analyze the market’s state as it stands today with care
In the middle of the current negative trend as of mid-2022, bitcoin appears to have found significant support close to around $30,000. Given that several significant institutional investors purchased within this region, this support is anticipated to hold the line for some time.
The majority of new buyers who likely purchased around the peak have already sold most of their cryptocurrency amid fear, anxiety, and doubt, according to other indicators (FUD). Their withdrawal from the market at this time can help to keep cryptocurrency prices stable.
7. Do not leave your cryptocurrency on exchanges
Not your keys, not your coins, as the saying goes. This holds true for just about any situation involving a centralized, custodial cryptocurrency exchange. However, during a tumultuous bear market, the chances of losing your money in these exchanges forever increase.
Think about the potential consequences of a sudden market crash. The market would lose billions of dollars, leading to the bankruptcy of numerous exchanges.
Is there a crypto winter?
According to a significant digital asset manager, the crypto winter may continue for another 250 days. Cryptocurrency prices have increased, but according to digital asset management Grayscale, the bear market might continue for another 250 days. Crypto has had a difficult month.
Does the price of cryptocurrency always decline over the winter?
Crypto winters frequently include sharp drops in price, followed by protracted periods of weak pricing and limited trading activity. According to tracker CoinMarketCap, a downturn that started in 2018 reduced the market value of all crypto assets by as much as 88%. They have decreased by as much as 68% this time.
What time did crypto winter begin?
However, many in the industry still recall the “crypto winter,” which occurred from the beginning of 2018 and the middle of 2020, when prices fell and stayed down and much of the innovation in cryptocurrencies came to an end.
Can we expect a crypto market crash?
Numerous analysts claim that another crypto winter is already taking hold. Due to a market crash, job losses, and the ongoing liquidity crisis in the cryptocurrency business, analysts predict that the price of cryptocurrencies will remain low for the foreseeable future, similar to how it was between the beginning of 2018 and the middle of 2020.
Will bitcoin prices keep declining?
Both a decline and further price growth are equally possible for bitcoin. More volatility is expected in the cryptocurrency market in the future, which long-term investors will have to continue coping with, according to analysts.