Bitcoin and other cryptocurrencies experience lows and highs, just as stocks do. One familiar with the investment terms should be aware that the peaks and downs are called bull and bear market conditions. Although the market can be volatile this year, it may become exceptionally tough for making sound decisions for investors during different phases. Although both bull and bear market conditions are normal, a bear market seems to last longer during a financial year. Therefore, it becomes essential that traders and investors make the right choice during a crypto bear market.
According to an Economic Times article, “Crypto market is highly volatile but experts believe a disciplined investment strategy can yield solid returns in the long term.” We should prepare before investing in cryptocurrency since it is highly volatile and may enter a bear market soon. Usually, a bear market is defined as a negative return in the stock market when a commodity or share price falls below 20% from its recent high. In most cases, though, the price will fall before being bought back by investors, resulting in a bullish trend once again. With regards to cryptocurrency, we estimate that 2022 might be a highly unpredictable year and thus, investors and traders must follow the below-mentioned strategy in a bear market.
Avoid panic selling or over-accumulating
Panic selling is always bad for investors in the long run. This is due to the fact that people panic when they feel anxious or fearsome and as a result, they lead themselves to a dangerous situation. Whenever such a thing happens, it is seen that people start losing control and make emotional decisions that lack logic and common sense. Similarly, in the cryptocurrency realm, panic selling among traders and investors is considered a bad sign, especially when it is due to a widespread selloff out of fear, rumours or overreaction to a planned analysis.
Cryptocurrency investment must depend on sound and logical reasoning rather than emotions. For instance, bitcoin is taken as a digital gold whose value has surged high in recent years. Many people like investing in bitcoin to strengthen their purchasing power, especially during high inflation when the fiat currency tend to get devalued at a quick rate. If this is your logic behind investing in bitcoin, perhaps it may work well in the long run and you should avoid short selling out of panic unless bitcoin stops fulfilling its role.
Get involved with new projects
This is very important for crypto traders, especially when the market is bearish. Researching new projects like the ones building in decentralized finance or DAOs can be the best option for a bear market. You can easily join them and benefit from it. Though, you must emphasize its building strategy and understand the ecosystem underpinnings instead of going towards the hot picks of the day. Building and contributing can in fact advance the overall industry and people may gain high premiums due to the ecosystem. Joining new projects will also help you develop new relationships and educate you about how cryptocurrencies work better.
Stop overtrading
Emotions usually draw us away from robust decisions. Unfortunately, many investors deal with the market with emotions and lose most of the time. One of the consequences of emotional trading is overtrading which may take place due to investment thesis misreading, missing an opportunity or a wish to recoup past losses apart from many other reasons.
Whatever the case is, one thing is for sure emotional trading has always hindered the decision-making process in the long run. You must understand that market never care about your emotion and so must you. The charts are nothing but only a visual representation of data and it is you who must interpret the information appropriately rather than thriving emotional analysis. If you could manage your emotions well, you can make profits in the bear market too by jumping in and out of trades strategically.
Purchase good cryptocurrencies
If you want to buy any cryptocurrency that will be profitable in the long run, the bear market could well be the ideal moment to do it. But the problem with a bear market is that you never know how long the decline will extend or how much prices will fall. As a result, you sometimes run the danger of buying something too soon or missing the chance to raise a wise purchase entirely.
To make profits from good cryptocurrencies in a bear market, you will need to exercise patience because it will be a risky investment. You can overcome this problem by investing a certain sum at regular intervals during this phase, regardless of which direction the cryptocurrency market is heading. This tactic is known as Dollar Cost averaging.
Portfolio diversification
For traders and investors dealing in one kind of cryptocurrency, a bear market can prove a good time to start experimenting with new ones. Not all cryptocurrency declines at the same time. So, start researching another investment opportunity during a dip to build a diversified portfolio.
Consider Ape funding in a bear market
Aping or ape funding in cryptocurrency means a situation where a trader or crypto buyer invests in a token just after the crypto project has launched without making an appropriate study. This usually happens when investors fear missing out on important projects as they fear losing potential profits if they miss buying opportunities.
Aping is a slang term in crypto which was first coined in 2020 during the launch of an unannounced crypto token. The launch aimed to benefit traders who bought the project tokens within a short time period just after the launch. When the story about the launch spread over the media, traders became fascinated to involve themselves in aping. However, many traders have made massive losses too due to aping and thus, we recommend investing just a small amount which is negligible as compared to your overall cryptocurrency investment. This way, you will not lose an opportunity nor shall you lose significantly that may impact your cryptocurrency trading fund.