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Everyone feels like they have mastered the art of investing and trading in the crypto market until a bear market happens.
When the crypto market crashes, most of the strategies you used during the bullish trend will have to be modified — At least the way you make your investments will change.
As someone who may or may nit have the necessary knowledge of a crypto bear market, seeing people make a lot of profit during that period can be confusing. Aas a crypto trader or investor, how long a bear market lasts should not be your problem. Rather, you should be concerned about what to do during the market crash.
We have covered below everything you need to know about a crypto bear market and different strategies to ensure you preserve your wealth from loss and possibly make profits during this time.
According to crypto experts, a bear market is that period in the crypto market when the price of cryptocurrencies drops by more than 20% after recent highs and remains like that for a long period.
Although synonymous with crypto winter, the bear market is different from that — A crypto winter is less defined than the bear market. A crypto bear market has specific metrics that determine the bears’ season, so if assets are not down by more than 20%, there’s no bear market.
The bull market mostly shows green while the bear market thrives in showing reds. This year 2022 have had crypto traders/investors witness a very bad market crash. Earlier in the year, Investors and traders had high hopes for crypto with many predicting a $100,000 price target for 1 bitcoin.
Despite the chaos in the market, having extensive knowledge of managing and surviving a crypto bear market is necessary.
Here are five things to do should do whenever there’s a crypto bear market:
Staying calm during a bear market can be a factor that will save you from making silly mistakes during that season. One of the major reasons why investors and traders lose a lot of money during the bear market is because they are not always calm both in their thought process and investment strategies.
They are often engrossed with the idea of selling all their assets that they forget there’s life after the bear market. When you are calm during the bear season, it helps you to make decisions that will not harm your portfolio. Staying calm is a bear market strategy that will help you detect when there’s an opportunity in the market and when there’s none.
Emotions do not control a calm trader — During a crypto bear market, the primary emotion among traders is fear. Calmness removes fear when you are making trading and investment decisions.
Dollar-cost Averaging is one of the best crypto bear market strategies, which can help you minimise the number of losses you suffer. You can invest even during a crypto bear market as a professional crypto trader or investor.
With dollar-cost averaging, you set out the amount of money you will invest in the crypto market within a specified period. For instance, if you have about $120,000 to invest in the crypto market in a year, you can break it down to $10,000 monthly.
The major advantage you get from this bear market strategy is maximising your profits and minimising the loss you suffer. It would be more of a disaster when you invest $120,000 and suffer a loss than $10,000.
During the bear season, bitcoin can rise a little before dipping massively so you can utilise this opportunity to short-sell cryptocurrencies.
Shorting cryptocurrencies simply means selling a cryptocurrency to buy them back at a lower price. So during a crypto market, you can easily sell a cryptocurrency when they experience a little bullish trend and buy back when it dips.
Generally, one should not make the mistake of having one cryptocurrency in their whole crypto portfolio as It may be disastrous.
During the bear market, it is a general idea that you don’t invest your funds in one particular cryptocurrency; a major dip might happen to such a coin, and you will run into losses. This was the case of those that invested in LUNA and FTT this year 2022.
Let’s say you want to diversify about $100,000 for instance to invest during the bear market. Instead of buying only bitcoin with such an amount of money, you can allocate $40,000 to bitcoin, $30,000 to Ethereum, $20,000 to Binance coin, and the rest of the money goes to other cryptocurrencies.
Except for those who focus mainly on day trading, thinking long-term might change your perception towards crypto bear markets.
Most times, the bear market is when the crypto market is going through many corrections and will still yield so many profits when the bull season returns.
So as someone who is investing in the crypto market, thinking long-term will help you buy the dip instead of fearing your losses. Even while thinking long term, ensure to carry out proper research before investing in any cryptocurrency.
Ensuring you’re using a safe exchange that is transparent and regulated is very important. Without regulation, many ill managed exchanges tend to run away with people’s hard earned money like the case of the FTX downfall. This is why we suggest a licensed and leading social crypto trading platform like BingX.
A crypto bear market is a season in the crypto market that every trader does not wish to experience. However, certain strategies can help reduce losses.
The first thing is to remain calm; panicking during a bear market can increase the chances of making more mistakes. However, some bear market strategies, such as dollar-cost averaging and portfolio diversification, can help you go through a bear market with minimal loss.
This is why you should use BingX, the world leading social trading crypto exchange to do these.
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