How to live through a crypto bear market
By: Team Giottus
It would be an understatement to say that the crypto sector has seen many unexpected turns in 2022.
Like the stock market, the cryptocurrency market has its own share of crests and troughs, known as the bull and the bear markets, respectively. The crypto markets are a highly volatile space at any time of the year and can be extremely challenging for investors to navigate successfully.
A bull market occurs when securities are on the rise whereas a bear market is characterized by negative returns and a decline in stock or commodity prices of at least 20% from recent highs. Bear markets frequently coincide with poor investor mood and dwindling economic prospects. Negative investor sentiment and dimming economic prospects typically coexist with bear markets.
The tendencies in cryptocurrency are never certain. In the crypto domain, both bullish and bearish markets are quite frequent.
Consider Bitcoin, for example. The prices have come down by roughly 30% since May, dropping to less than $20,00, despite appearing to be on an upward trajectory recently and reaching over $68,000 in November 2021.
However, even in a bear market like we are in right now, you can benefit from your bitcoin portfolio if you play your cards well. Here are some measures you can take as a cryptocurrency investor in the event of a bear market.
Buy the dip utilizing dollar-cost averaging
Dollar-cost averaging can be easily termed as one of the best investment methods to use during a bear market.
One beneficial thing you can do in a bear market is to buy the dip. By this, the purchasers can make a tidy profit out of it when prices return to their earlier highs. While buying the dip can be done in a single transaction, dollar-cost averaging is the most advised course of action. This involves dividing your reserve funds into smaller chunks and engaging in a number of trades over time.
It is extremely difficult to predict when an asset reaches its lowest price before reversal. Hence, it usually makes more sense to buy a small quantity of it and wait to see if the asset’s price falls anymore. If it does, make a few additional purchases, and so on. By doing this, you will often get far better outcomes than if you had put all of your money into one trade.
Invest in a diverse crypto portfolio
Do not put all your eggs in one basket. This well-known phrase can be
applied in all investment strategies because it simply means to spread your chances of returns among a diverse class of assets rather than just one. This can ensure that if one falls, the others can still help. This might entail making your trade sizes even smaller, but as a result, you’ll lower your overall risk.
Similar to how it’s practically impossible to anticipate when a bear market will end, it’s also hard to predict which of the 200-plus cryptocurrencies will recover the quickest or see the biggest surge. To choose which assets should be invested in, one must stay on top of their research.
Spend your time researching
Investors tend to concentrate on the price declines when considering how and when to buy in a bear market. It is common to ponder the instability in the bearish trends. Instead, adequate research must be done during this period of learning about different cryptocurrencies.
Only through comprehensive study, you can hit the target in trading crypto. You must be well informed on developments and trends in the cryptocurrency market as a proactive investor. Additionally, you should be capable of handling any impending tribulations in the cryptocurrency market.
Always keep a close eye on the market and use reliable sources for research. It is the best method for protecting your crypto asset investments.
The ideal time to add some long-term crypto investments to your investment portfolio might be during a bear market. Focus on long-term investments while prices are low because short-term investments are less likely to be profitable in any case.
Making prudent investments with an eye on long-term crypto wealth management could prove to be beneficial for your future.
Experts recommend keeping your cryptocurrency investments under only 5 percent of your entire portfolio. As long as your crypto investments do not interfere with your other financial goals and you’ve only invested what you’re willing to lose, you’re good to go.