4 Ways to Survive a Crypto Bear Market

4 Ways to Survive a Crypto Bear Market

The crypto market has been in a bear phase since 2022 and has witnessed several catastrophic incidents, including the FTX collapse and, most recently, the SEC lawsuit against Binance and Coinbase.  

It can be challenging to maintain a profitable portfolio or make a profit during a bear market, so in this article, we have shared four practical ways to survive a crypto bear market.

What is a bear market in crypto?

A bear market in crypto is a market phase where the value/price of cryptocurrencies starts to dip or fall over an extended period.

In a bear market, people tend to sell more than they buy to reduce the impact of their losses, leading to an overall decline in the value of cryptocurrencies.

Bear markets are sometimes referred to as "dips'. A market is said to be in its bearish phase when the prices of assets have seen a 20% decline or more from recent highs.

What can cause a bear market?

A market is said to be in its bearish phase when the prices of assets have seen a 20% decline or more from recent highs. This market phase can be caused by the following:

1. Negative speculations

There is a saying that when one person sees a tiger in the neighbourhood, it is a rumour, but when three or more people see it, it is the truth.

Speculations and sentiments affect the financial and crypto market to a considerable extent.

If many influential people begin to predict a fall in the economy or prices, it reduces the confidence of other asset holders. With this in mind, most traders would start selling off the crypto they're holding to prevent as much loss as possible. This, of course, negatively impacts the market and makes the price of assets fall further.

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2. Reduced confidence

A bear market is usually close by when investors lose confidence in their assets due to news of an impending economic meltdown or a widespread disaster like the COVID-19 pandemic.

Reduced confidence pushes crypto holders to sell their assets to avoid or cut down on any losses, as nobody knows when the market will bounce back.

3. Economic crises

This goes without saying. Businesses halt when there is a pandemic or war, and the employment rate reduces. Cashflow also decreases, and consequently, the economy takes a hit.

When this happens, it's only natural that asset holders rush to sell their holdings at low prices to cut back on losses or further decline.

4. Higher supply and lower demand

After the agents listed above have taken their toll on the market, a general decrease in the prices of crypto assets happens. Since sellers are more than buyers, the prices keep going lower.

Until the significant cause is lifted or resolved, the market may remain in the bear phase for a long time.

How to survive a crypto bear market; 4 practical strategies for traders

It is impossible to completely beat a bear market unless you have a supernatural sense of prediction, incredible luck or an understanding of market trends beyond even Jeff Bezos or Warren Buffet.

However, there are practical strategies you can apply to keep your crypto portfolio alive till the next bull market. The following are 4 practical strategies traders can use to survive a crypto bear market:

1.  Use Dollar-cost averaging (DCA)

Dollar-cost averaging means buying a particular amount of crypto regularly, regardless of the market's direction. This strategy allows you to increase the quantity of crypto in your portfolio, particularly when market prices are lower.

As time passes, dollar cost averaging reduces the average price you pay for each amount of crypto bought.

A bear market is still an opportunity to profit. Look at dollar cost averaging as storing crypto so you can sell at a profit when a bull market comes, or crypto prices increase.

Read more about Dollar Cost Averaging Here.

2. Spread your portfolio but be careful when buying high-risk coins and tokens

There are many solid cryptocurrencies worth investing in, with high potential for returns. Conversely, there are other low-quality scam cryptos that are a waste of time and money.

In trying to spread out and diversify your crypto investments, always do your research, particularly in a bear market where bad faith actors are looking for ways to defraud traders.

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3. Always control your emotions and take everything you see with a pinch of salt

Crypto trading can be challenging on its own, and when you add a bear market, it can feel overwhelming. Maintaining control over your emotions will help keep you from panicking and making poor trading decisions.

Always take crypto news and discussions on social media with a grain of salt. It can be easy to give into fear, uncertainty and doubt (FUD), especially when it's spread on platforms like Twitter or Discord. Avoid being easily swayed by negative or even positive news, information or hot tips.

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4. Stay focused on your long-term trading goals

Your reasons for investing in cryptocurrency are personal, and so are your goals. Hence, ups and downs in the market should not be a reason to abandon your long-term goals.

In a bear market, always remember these goals and consistently evaluate if they still stand.

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Final Word

The market will always go through cycles of ups and downs, bear markets and bull runs, and so on. You can't control the market, but you can manage your trading choices and actions. Diversify your portfolio, use dollar cost averaging, be practical and stay committed to your long-term trading goals.

Disclaimer: This article was written by the writer to provide guidance and understanding of cryptocurrency trading. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.