Best Ways to Survive a Crypto Bear Market & Crypto Winter

Bitcoin fell below a previous cycle’s all-time-high price — $19,750 — for the first time in its history after it hit $18,750 in the early hours of June 18. Moreover, a number of analysts warn that the next bitcoin rally will not begin until 2024. We figured out how to act as an investor in a bearish trend in order to avoid panic and even make money. Let’s get started!

Clear Signs of a Bear Market

The crypto market cap has been declining since November last year, dropping by almost $870 million during this time. Is it a temporary correction or a protracted bearish trend, that is, another crypto winter? Well, the answer depends on the interpretation. 

There is no clear line between a correction within a trend and a bear market (that is, a change in trend). A fall in the price of an asset by more than 20% is considered the beginning of a bear market. But the high volatility in the crypto market has not been surprising for a long time, and the general direction of the trend is much more important here. If the prices of cryptocurrencies have temporarily fallen, but the conditions for growth continue to persist in the market, then analysts usually talk about a correction. 

If there are no more drivers for growth and the prices of digital assets continue to decline, this is a signal of the beginning of a bear market. The advantage of sellers over buyers also serves as such a signal, and cryptocurrency quotes are mainly traded between lines of simple moving averages (SMA).

Bitcoin price chart from November 2021

Read Next: Why Is Crypto Going Down: Key Crypto Crash Reasons to Know 2022

How to Survive a Bear Market? 

A bear market is not the end of investment opportunities. With a competent approach, you can earn even more than during periods of an uptrend in the crypto market. Therefore, we propose to recall the key rules of behavior in a downward market. Let’s consider them!

#1 No Time to Panic

Beware of FUD and FOMO. Recall that FUD is an acronym for ‘Fear, uncertainty, and doubt’. This is a manipulation in which negative information is spread about cryptocurrency to sow doubts about its future prospects. And FOMO is a syndrome of lost profits. The term stands for ‘Fear of Missing Out,’ which describes the condition in which a trader is afraid to miss a good opportunity to make a profit.

And always keep a cool head — this is pretty obvious, but important advice. Managing your emotions and making decisions with a calm head is one of the most important skills of any investor in a bear market. It sounds simple, but it is difficult to remain sensible when the asset falls by tens of percent — the desire to sell the coin at a loss is great. But remember: until the asset is sold, your losses (and profits) are only potential. Really powerful projects do not become weaker in a bear market — with a change in trend to a bullish one, their price is more likely to recover.

If you don’t know what to do when the crypto market crash, then often the best thing to do in such a situation is to do nothing and watch what happens. HODL (buying and holding a crypto-asset for a long period of time) still works great! In the 13 years of Bitcoin’s existence, not a single investor who has held the coin for more than 4 years has been in the red.

#2 Choose a Strategy & Stick to It 

Specific actions of an investor depend on a chosen strategy, willingness to take risks, and investment timeframes.

If you are a long-term investor, you should not be concerned about market fluctuations of tens of percent at all. The main strategy of a long-term investor is averaging, that is, the periodic purchase of an asset, regardless of its price. An investor still never knows whether the price of an asset has already reached the bottom or not. And if the uptrend continues for several years, it doesn’t matter how much you bought your bitcoins for — $35,000 or $40,000.

With short-term investments and day trading (trading during the day), a strategy is completely different — you need to catch every bounce and take profit at the first opportunity. The main thing here is not to miss the profit. At the same time, stop orders will help you not to lose more than the strategy allows. But this method is usually chosen by traders and professionals: we cannot recommend this approach to ordinary cryptocurrency investors. 

It is also important to remember that trading ideas designed for a bullish trend may not work for a bearish one. For example, during a coin rally, news of new partnerships or the activation of an important update can push quotes to new highs. But in a bear market, it is likely that investors may ignore such information. 

#3 Diversify Investment Portfolio 

In a bear market, predicting the most profitable assets or those that will fall in price less than others is much more difficult than in a bull market. The most important way to reduce risks is to diversify your investments and invest in several promising assets. Thus, if one part of cryptocurrencies decreases, then the other part can add in price and compensate for the losses.

It is optimal to keep 7–12 digital assets in a portfolio. If you buy more, all cryptocurrencies will become difficult to follow, and their profitability will decrease, but the risks will remain the same. For diversification, it is worth choosing assets from different sectors and on different consensus algorithms: for example, classic cryptocurrencies based on Proof-of-Work (BTC, LTC), coins of smart contract platforms (ETH, EOS, ADA), anonymous coins (XMR, DASH, ZEC), staking digital assets, as well as tokens from the DeFi and GameFi sectors.

#4 Do Not Invest in Highly Volatile Altcoins

In a downtrend, it is safer to minimize investments in highly volatile and speculative altcoins. Among them may be unpopular NFTs, meme coins, or tokens of very young projects. 

But at the same time, it is always worth keeping an eye on projects with actively developing ecosystems, as well as those that offer percentage returns, for example, from staking.

#5 Take Profit 

Profit-taking is a more difficult task than it seems. Greed can cause an investor to stay in a trade longer than their profit-taking level implies. In a bear market, you should be content with little. 

The best way to take profit is to use stablecoins — they allow you to avoid volatility and not pay a commission for withdrawing funds to fiat. Having investments in stablecoins will also make it easy to enter a trade if there is a profitable opportunity. 

#6 Use Staking & Other Ways of Passive Income 

In a bear market, it is difficult to capitalize on rising asset prices. For long-term investors, the way out will be to use additional ways of earning — such as staking, yield farming, liquidity pools, and airdrops. 

For example, staking coins such as ETH 2.0, BSC, SOL, ADA, AVAX, ALGO, DOT or MATIC can bring up to 20% per annum. 

When Will a Crypto Market Recover? 

It is likely that there will be no rapid growth in the crypto market in the next two years. Geopolitical risks remain in the world, inflation and coronavirus have not been defeated yet, and key interest rates of central banks around the world are rising. This will be a challenging time for everyone, especially for crypto investors. 

Back in February, Ethereum co-founder Vitalik Buterin warned about the beginning of the crypto winter. Du Jun, a co-founder of the Huobi crypto exchange, also announced the beginning of a bearish cycle, which, in his opinion, will last until the end of 2024:

Following this cycle, it won’t be until end of 2024 to beginning of 2025 that we can welcome next bull market on bitcoin.

Still, there are also alternative forecasts. According to popular bitcoin price valuation models, the first cryptocurrency has not yet reached its highs as part of a long-term uptrend. The PlanB analyst, author of a Stock-to-Flow model, believes that BTC will cost more than $100,000 in 2023. 

Conclusion

It is important to understand that even a prolonged bearish trend is not a disaster, but a normal state of the market. Cryptocurrencies will not disappear or depreciate, and a correction period is likely to be shorter than the previous one. If you are a long-term investor and confident in the potential of cryptocurrencies, a bear market is a great opportunity for you. 

The bearish trend is the best time to buy all leading cryptocurrencies at bargain prices. If you’re wondering where to buy some crypto, you should definitely think about doing it at Switchere. On our platform, you have an opportunity to buy all leading cryptocurrencies in the fastest and most convenient ways using any available payment method. Moreover, we offer some surprising bonuses! Users of our platform enjoy a 0% service fee for the first order.

How do you get through a bear market? Feel free to share your tips in the comments below!

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