Since its emergence in 2009, the Bitcoin and cryptocurrency markets have witnessed numerous cycles of expansion and contraction, occurring within the broader and enduring patterns recognized as bull and Bear Market. While it remains a fact that each downturn has so far been succeeded by a resurgence and substantial expansion, these phases of decline can induce anxiety and prove challenging for both seasoned traders and newcomers.
In this discussion, we explore five approaches that you may consider adopting when faced with a bear market, aiming to preserve the worth of your portfolio, steer clear of emotional trading, and maintain a peaceful night’s sleep.
Top 5 Bear Market Survival Tactics
#1 – Don’t fall for FOMO or FUD
Staying up to date with the latest news and developments in the cryptocurrency market is critical, but having too much information can be detrimental. This is especially true during a bear market, when it’s all too tempting to be swayed by your gut feeling and make rash trades.
▪️ FOMO (fear of missing out) and FUD (fear, uncertainty, and doubt) are prominent phrases in the crypto realm, and they can have a greater influence on our buying and selling decisions than many of us would like to admit.
▪️ FUD typically refers to a negative market mood that is brought on by a rumor, unfavorable news item, or a well-known individual voicing concerns about a specific market or asset. This can have a negative impact on the price since traders sell their shares in anticipation of further price declines.
FOMO, on the other hand, refers to a trader’s proclivity to get carried away with wishful thinking after seeing favorable market movements or news, sometimes neglecting fundamental signs in a rush to board the next rocket ship to the moon.
Remember that no one can foretell the future, and no single person’s advice is better than your own research and conclusions. Influencers and publications may have a vested interest in spreading FUD or FOMO in order to move markets in a specific direction in some situations.
#2 – Set Specific Objectives, Diversify, and Only Trade Within Your Means
You should never invest more than you can afford to lose, no matter how sure you are in an investment. The last thing anyone wants is to be stuck on an emotional rollercoaster while hoping for positive market action while the value of their portfolio gradually declines.
▪️ To diversify their portfolio, most astute investors hold a variety of assets over time, ranging from alternative cryptocurrencies to stock market index funds.
▪️ It’s commonly remarked that cryptocurrency never sleeps. To combat the volatility of cryptocurrency markets, crypto investors should plan their trading tactics and, if feasible, their entry and exit positions ahead of time.
▪️ Even if you had complete access to all relevant information, a black swan occurrence, hack, or tweet from a high-profile individual may cause prices to plummet. This is why it is critical to plan ahead and take action to reduce your losses if a dramatic crash occurs.
▪️ Fixed tactics such as dollar-cost averaging (the process of purchasing or selling modest sums at regular periods) could let a cryptocurrency buyer fully avoid trading with their emotions or having to stare at the charts 24/7.
Keep in mind that it is quite easy to get carried away when investing in volatile assets such as cryptocurrencies. Trading may be a high-risk activity, particularly in a bear market, and investors should set goals that balance minimizing potential losses with maximizing potential gains.
#3 – Long-Term Thinking & HODLing
While the saying “it’s not a loss until you sell” is only partially correct, it has some weight. If the value of your assets has decreased since you purchased them – known as unrealized losses – they are only realized when they are sold for less than their purchase price.
▪️ Bitcoin has continuously trended upwards in the long run throughout the years. Even if prices are decreasing as a result of a temporary market correction or a protracted bear market, history teaches that prices will eventually recover owing to economic causes such as scarcity.
Many individuals assume that the scarcity of cryptocurrencies like Bitcoin will lead their prices to climb over time. Negative price movement can be considered transient if your investing period is longer (years rather than weeks or months).
▪️ Long-term holding has shown to be a successful approach, with Bitcoin emerging as maybe the most successful large asset of the last decade.
Remember that in countries like the United States, holding cryptocurrencies for extended periods of time might be advantageous in terms of taxation. Holding for a year or more, for example, maybe more advantageous than selling in the short term.
#4 – Prepare to Ride Out the Downturn or Enjoy Profits
Converting some of your volatile crypto holdings for more stable assets is one of the best solutions for avoiding crypto volatility and safeguarding yourself during a market dip. In a cryptocurrency bull market, this can assist an investor ‘lock in’ their balance and lower their risk and need to actively manage their portfolio and stress levels.
▪️ Stablecoins, such as USDC, seek to retain their value at a fixed price — and by turning a portion of your portfolio into stable-value assets, you reduce your exposure to price volatility during market downturns.
▪️ But keep in mind that selling everything at once, known as capitulation, can easily result in crypto investors losing out if the market unexpectedly recovers. This is why it is critical to plan out what degree of profit and loss you are comfortable with before you are forced to make decisions under duress.
Remember: Many investors today choose to switch in and out of solid assets as part of a bigger withdrawal and buy-back strategy, which can help them gradually expand their portfolios if the time is right. This is not easy, and even the most experienced investors frequently fail to time their entrances and exits.
#5 – Consider the Possibilities
Even when the crypto markets are in decline, there are chances to be found if you know where to search. Where others perceive a dark and bleak crypto winter, astute investors see a new window of opportunity to acquire their preferred assets at a discount and profit.
▪️ “Buying the dip” is a common strategy for traders who feel priced out of earlier gains to enter or enhance their positions in the market.
▪️ During a bear market, the market will have tiny peaks and valleys as it moves. Traders who have practiced their technical analysis skills can gain here by predicting these short-term swings and capitalizing on them by buying the lows and selling the highs.
▪️ Short selling, or wagering that the value of an asset will fall, may also be a profitable strategy during dips.
▪️ Activities such as staking and DeFi yield farming can help level out returns and ensure that your actual crypto balance is always growing, even during a weak market or downtrend.
▪️ Dollar-cost averaging works whether markets are up or down if you believe an asset will eventually be worth more! During downturns, you actually receive more crypto for your dollar.
Remember: These actions (with the possible exception of DCA) are not for the faint of heart, and may result in big losses — or, at the very least, significantly increase the amount of time you spend staring at anxious price charts.
In the unpredictable world of cryptocurrency markets, surviving a bear market demands a strategic mindset. FOMO and FUD can sway even seasoned traders, but relying on sound research over hype is essential. Diversifying wisely and trading within your means mitigate risk.
Apart from that, long-term holding, like Bitcoin’s historic success, can prove fruitful. Furthermore, bear markets unveil opportunities, from buying the dip to short selling and DeFi strategies. While these strategies carry risks, they offer chances to thrive even in a crypto winter. A calm and informed approach remains your best ally.
To learn more about surviving strategies in the Bear Market, go check out SunCrypto Academy.
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