Many people fear getting into crypto when the market goes down. But chances are you still might want to invest in a bear market. Let’s see how to do it in a proper way.
This might be the toughest year for crypto ever. Authorities are watching closely to regulate cryptocurrency just as fiat money. The ongoing war in Ukraine is causing markets to flop. Bitcoin struggles to return to previous high price levels.
Bulls have stepped away, bears are on march. How to invest in a bear market to keep your investment safe?
Let’s break down some of the investment strategies that are perfectly suitable for a bear market. They will help you keep your money safe and profit in the long term.
What is a bear market?
First of all, let’s take a look at the idea of a “bear market” in general.
The term was born on Wall Street back in the early days of the stock market. Bulls were those traders who pushed the prices up, bears were those who were afraid and pulled the prices down.
So hundred years later we use the term “bear market” to describe a timeframe when most of the assets in that market fall consistently. It could be weeks or months, but sometimes it takes years.
The crypto market is rather dynamic. So when prices keep falling for over two months, the market may be considered a “bear market.”
Basically, it means that people are selling assets more than buying them.
That’s a market stress. People lack faith in the near future of their assets. That’s why they are trying to get rid of them.
Why may it seem a bad idea to invest in the bear market?
Well, it might seem a bad idea to invest in a bear market because it is often surrounded by pessimism and negative investor sentiment. If everybody is pessimistic, it takes courage to go against the market.
But long term investors usually take advantage of the overall pessimism because they know that to invest in a bear market is a great idea.
Basically, you can leverage bear markets for long-term portfolio gains. If you invest wisely you can make a bear market a great starting platform for future success.
How to invest in a bear market for crypto profit
We’ve come up with a few rules that will help you use bear market investment for your future profits.
These rules are quite simple and do not require any special financial knowledge or expensive investment software.
Don’t be shy to invest in stablecoins
If you want your portfolio to be secure you should pay attention to stablecoins – the tokens pegged to real world assets like US Dollar (USDT, USDC) or gold. Yes, there are stablecoins which allow you to buy actual gold, but keep it as tokens in your crypto wallet.
Stablecoins are much less volatile than other crypto coins. Basically, you are just investing in US Dollars or gold, but in a digital form.
Investing a part of your portfolio in stablecoins is a good way to make sure you retain wealth if the crypto market falls down. The bear market can mean a very disturbing time .But having a significant part of your portfolio in stablecoins will help you hold your assets while you wait for the market to recover.
Use dollar-Cost averaging to invest in the bear market
Don’t be shy of doing dollar-cost averaging. This strategy requires you to break up any reserve funds you currently have into smaller portions, then use those funds to make lots of trades at regular intervals.
So as the price of the cryptocurrency you are interested in goes lower you keep buying small portions of it. Thus your portfolio is increasing but the average fiat money cost of that crypto for you is lowering.
When the crypto goes up later you will gain more profits in a dollar-cost, because basically you have already reduced the impact of volatility on your portfolio.
Try staking
Through crypto staking, you can earn rewards while just holding tokens. Your cryptocurrency is working for you, while you earn passive income.
Staking is quite common for many cryptocurrencies on almost all prominent crypto exchanges. When you stake some coins, this coin’s blockchain uses them for transaction validation or encryption processes.
Your reward for staking can basically compensate for falling prices of your coins, quite a nice way to invest in the bear market. At least, partially.
Buy the dip
There is a more bold strategy you can try. It is called “buy the dip.” This way to invest in the bear market brings more risks but can be rather profitable if you do it right. Or simply get lucky enough.
For example, if you really believe that Bitcoin has a bright future then the current bear market is the best time for this strategy. Buy when prices are dipping to their lowest point. And gain profit when the prices go up. Of course, there is always a risk of buying the dip before it actually dips even more.
But that’s the crypto market, nobody knows what tomorrow brings.
Buying the dip is one of the most popular ways to invest in the bear market, especially for Bitcoin. But you must understand the risks. And you must be a long term investor. Because the “buy the dip” strategy simply doesn’t work for short periods of time.
Diversify your crypto portfolio
This strategy is a must when you want to invest in the bear market.
No matter how bold you are as an investor, diversifying your portfolio is crucial. This is a well known fact for a hundred years that the traditional stock market exists.
Don’t put all your eggs in one basket. Instead, invest in different crypto assets in the bear market. If some of them eventually disappoint you, others might be able to compensate for those losses.
If you invested in several cryptocurrencies, you are less likely to take a big hit by a single coin losing all of its value because of a market scandal or a hack, or a scam.
Diversifying portfolio is one of those strategies you can effectively use no matter what current market conditions might be.
There are different theories about what an ideal crypto portfolio looks like. Some analysts advise to keep half of your crypto portfolio in Bitcoin, while the other half in stablecoins. BTC will guarantee long term profits, and stablecoins are there to keep your wealth preserved.
Others prefer to divide their crypto portfolio into more parts, to include altcoins such as Ether, Cardano, Solana etc.
What strategy to choose for the bear market is up to you. Just remember, your portfolio should always be diversified.
How to invest in the bear market – key takeaways
- When the bear market comes, make sure to diversify your portfolio
- Invest in stablecoins and use dollar-cost averaging
- Bear market is a great time to try the “buy the dip” strategy, but do it with caution
- During the bear market you might want to try staking strategy to protect yourself from substantial losses.
Sources: Investopedia, Bankrate, NiceHash
Disclaimer: The opinion expressed here is not an investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of cryptolife.report. Every investment involves risk, so you should always perform your own research prior to making important decisions. We do not recommend investing money you cannot afford to lose.
