What should you do if the crypto market is down? 7 ways to survive in the crypto bear season
Have you ever considered your plan of action in the event that cryptocurrency prices began to decline? You may fidget or follow the herd in believing that crypto is coming to an end. These significant price cuts are not a recent occurrence. In all financial markets, they exist. After a protracted rally, the market frequently starts to relax at this point. Here’s an overview of the factors that led to these severe recessions, sometimes known as bear markets, as well as suggestions for surviving them.
What Is a Crypto Bear Market?
A market sell-off, known as a bear market in the cryptocurrency space, is defined by a sharp decline in price over an extended period of time. When supply outpaces demand, prices decline, and investor confidence declines as a result.
An investor who is a bear has a negative view and anticipates a further market downturn. For novice traders, especially those with little or no expertise, bear markets can be challenging.
Bear markets exist in traditional markets as well, including stocks, bonds, FX, equities, and real estate. Bear markets in cryptocurrencies are typically more erratic than those in conventional markets. This might be because the cryptocurrency industry is even more recent and less developed than the traditional market.
A bear market happens when market prices continue to drop over time. Historically, it has been justified by a price decline of at least 20% from the security’s most recent high.
Bear markets can refer to specific assets as well as general market drops like those seen in the bitcoin market. For instance, a bear market for cryptocurrencies could develop if the price of Bitcoin drops for several months, as it is now.
Although price reductions can be intimidating, especially for new customers, there is a chance in the current market downturn. These are the top seven suggestions for maximising bear market periods.
What Are The Causes And Features Of the Crypto Bear Market?
A bear market may endure for many months or only a short while. For a variety of causes, investors begin to lose faith in their investments and start selling their holdings. The return on an investor’s investment will increase if the asset’s price decreases.
The crypto bear market’s origin remains a mystery. However, it was influenced by elements like low trading volumes, unfavourable attitudes, governmental sanctions, and regulatory limitations.
A bearish cryptocurrency market is frequently characterised by social media posts criticising cryptocurrencies and by a supply that is greater than demand. Additionally, conventional finance is denigrated. Prices of cryptocurrencies continue to drop as a result of investors losing faith in them.
7 Ways To Survive In The Bear Crypto Market
1. Do Not Get Emotional
A bear market in cryptocurrencies can be seen as a chance to purchase tokens at a discount, or you may feel uneasy as the price lowers. However, it’s crucial to maintain composure and refrain from acting on impulse. Choosing emotionally can result in regret.
Investors’ patience and perseverance are put to the test during a down market. Some people might even stop using cryptocurrency. Bear markets do not endure forever; keep that in mind. Often, the subsequent bull market outperforms the down market. You must manage your trading psyche and prevent fear and doubt from taking over.
2. Use Dollar Cost Averaging To Your Advantage
Don’t invest all of your money at once; instead, invest little by little over time. Profit from market downturns without putting a lot of money at risk. For instance, you may put aside $166 every month if your objective is to invest $2000 in Bitcoin (BTC). You might also divide it into daily and weekly posts.
You can avoid the hassle of locating the best deal or trying to time the market. The greatest method to begin investing steadily and regularly is through DCA. Additionally, it guards against the impulse to consume everything at once.
3. Buy The Dip
You must shop cheaply to purchase dips in order to benefit from the price reduction. This is so that additional profit chances will become available when the price eventually rises.
During a bear market, buying on the dips is fairly usual, but it’s vital to avoid buying too soon. It is better to purchase after the majority of investors have sold their holdings due to fear, as opposed to purchasing too soon. It can be controlled by action.
4. Understand That Crypto Market Is Cyclical
Bulls typically follow bears, according to the historical price movements of the bitcoin market.
The cryptocurrency market cycle is typically divided into four stages: accumulation, price growth (bull market), price drop (bear market), and circulation.
The beginning of the majority of market cycles is accumulation. After the cycle has ended, it starts before sellers leave the market and prices start to normalise. Due to the lack of interest in the market at this point, market volumes are normally below average. Because of this, no distinct trend develops, and the asset often trades in a small range.
The market is surging and pushing prices higher during the markup period, often known as a bull market. New groups of market participants frequently enter the market during the markup phase. At the start of this stage, there is typically a significant increase in volume.
After the bull market, some buyers will eventually become sellers. In this stage of the sales process, buyers and sellers are thought to be equally balanced. For the majority of market participants, a bear market or bear market can be the most tumultuous stage. It is a time marked by market angst as the outlook darkens, starting at the distribution stage when supply exceeds demand.
In other words, the market has been experiencing ups and downs repeatedly over time, and traders anticipate a bull market to follow this bear market.
5. Diversify Your Crypto Portfolio
To protect against volatility, it is crucial to diversify your portfolio. Your portfolio should be diversified among several crypto assets. Another way to earn cryptocurrency is by staking. Staking is a simple method of increasing your portfolio. You are shielded from daily pricing changes. Stablecoin investment is another wise move. Although stablecoins don’t typically generate large profits, investing in them is a smart move. You can take part in the projects being run by the burgeoning crypto community. Take into account initiatives that can generate revenue through staking, lending, and airdrops.
6. Find The Best Entry
You can locate entry points into bear markets by using a combination of indicators and tools. This strategy is great for traders who want to turn a profit rapidly.
Indicators that aid in locating crucial market points include the Fibonacci Retracement, Average True Range, and Relative Strength Index. You can use the line tool or rectangle to create significant prices in order to plan your investment in the event of a bull market.
7. Do Not Be Influenced By External Voices
In a market that is blossoming with so much commentary and analysis from investors, professionals, and cryptocurrency celebrities, it can be challenging to remain calm. Your choices at this time might have an impact on your long-term performance. Be careful what you read or listen to because it might influence your decisions negatively.
We advise against checking asset prices daily in order to maintain your calmness. No easy task, this. However, continual attention to cryptocurrency prices may lead you to make judgments based more on emotion than logic.
Remember why you bought cryptocurrency, right? Keep in mind that even difficult periods pass quickly. You must maintain your composure if you want to succeed in the long run.
Don’t forget to exercise, pick up new talents, test out fresh approaches to trading cryptocurrencies and up your crypto game.
The Crypto Market’s Future Looks Bright
Even while things may slow down during a bad market, it’s crucial to remain proactive through DCA or by gradually educating yourself on various facets of cryptocurrency. These are the pillars that will support your success throughout the next bull run. As the phrase goes, a bull market offers quick money, but a bear market with low buy prices is where wealth is created.
Bear markets come with significant hazards. Bear markets that are effectively managed lay a great foundation for success in the ensuing bull market. Patience and careful planning are needed.
Money losses are never enjoyable. There’s no need to lose money or choose poorly during a down market. Effective portfolio management is possible.
Despite the market’s turbulence, cryptocurrencies are moving toward mass use. In the upcoming years, it is anticipated that the number of employment accessible in the blockchain industry will increase. Crypto will persist, in my opinion.