The cryptocurrency market has recently experienced a whirlwind. For crypto investors, the past several months have been difficult. Both large and small portfolios have suffered losses due to the bear market, and an end to it doesn’t look imminent.
A Bearish phase can be a significant obstacle for traders and investors hoping to profit financially from the cryptocurrency market. When cryptocurrency prices plummet more than 20%, it is difficult to exit the bear market.
Traders struggle to maintain control of their emotions, mainly when the cryptocurrency market is in a negative slump, and the significant cryptos have seen their values fall by more than 70–90%.
Surviving the crypto bear market
If you’re feeling a twinge of the crypto bear market, you’re not alone. However, there are some things you can do to survive (and even thrive) in this challenging environment.
As the phrase indicates, “every cloud has a silver lining,” you may take advantage of the crypto bear market by using the following trading techniques:
1. Cost averaging in Dollars
On the price chart, you can see a large valley. You wait for a trend reversal for days, but the problem gets worse. When it seems like all you can do is watch your assets go down, you suddenly realize you have other options. You either have fiat money or stablecoins.
The market for digital assets is quite volatile. When bears are in control, it’s impossible to predict whether the price will fall much more or experience a relief bounce. You can employ a dollar-cost averaging method or DCA at this period. DCA assists you in spreading out your investments by making little investments.
Holders of blockchains like Cardano (ADA), Polkadot (DOT), Solana (SOL), and others can stake in the network.
Staking is locking up your cryptocurrency on a network to become a validator (and earn incentives) for verifying transactions on a specific blockchain. Staking enables passive income generation from your cryptocurrency holdings, which you may utilize to offset losses during a market downturn.
Your cryptos are locked up, as a result, preventing panic sales. However, locking up also reduces the cryptocurrency’s liquidity.
3. Liquidity mining and Yield farming
In yield farming, you, as a cryptocurrency owner, provide your coins to platforms for decentralized finance (Defi).
As a result, these platforms are more liquid, and you are a liquidity provider. A liquidity provider can receive incentives typically distributed from the network’s decentralized earnings on the forum.
4. Scalp Investing
In a negative decline, scalp trading is an excellent choice because of the extreme volatility of the cryptocurrency market.
Simply put, scalping is the short-term purchase and sale of cryptocurrencies to generate modest but consistent gains. Over time, these gains accumulate to produce a respectable return.
During the bear phase, you can scalp trade using one of the two methods—manual or automated.
Diversifying your portfolio is one of the best ways to survive a bear market when investing in cryptocurrency. Investing in various digital assets can protect you from the market’s volatility and reduce your overall risk.
It is difficult to predict which of the 17,000+ cryptocurrencies will recover quickly or see the most significant subsequent surge, just like it is impossible to anticipate when a bear market will end.
Using DCA for various crypto assets could entail making your transaction sizes even smaller, but you’ll lower your total risk as a result. Look for the previous all-time high, past results, and upcoming roadmap updates. A different way to diversify is to invest in different types of blockchain projects, such as those focusing on payments, storage, or smart contracts.
6. Hold on for dear life!
The cryptocurrency term “HODL,” which stands for “hold on for dear life,” is among the most well-known. In other words, don’t sell when prices are falling.
This may seem counterintuitive, but selling when everyone panics only leads to more losses. Holding onto your coins gives you a chance to profit when prices eventually rebound.
A genuine believer would never sell their tokens, even if the market tanked or became wildly unstable. HODLing develops into an ideological perspective on the long-term potential of cryptocurrencies, blockchain technology, and the communities that have sprung up around them.
7. Emotional Control
The best way to survive a crypto bear market is to take a break from actively trading. Crypto markets are highly fluctuating, and it’s easy to get caught up in the excitement of buying and selling.
But staying calm and focusing on your long-term goals is essential when prices fall. Also, it is important not to panic in a bear market. This can be difficult, but it is necessary to remember that markets always go through cycles. The current crypto bear market will eventually end, and the prices will start to rise again.
Just hold onto your crypto and ride out the storm. It’s frequently stated that patience is a virtue, which couldn’t be more true than in the realm of cryptocurrencies. The bear market of 2018 was tough on everyone, but those who held onto their coins and kept their faith in the technology survived and are now reaping the rewards.
The cryptocurrency market is highly unpredictable, so even though you might be disappointed if you didn’t get to purchase the dip this time, there will probably be another one soon.
Take gains, make sure you have money aside in case of crashes, and preserve your composure as the bear approach. It may seem simple, but a challenging skill to learn is taking profits.
In the belief that the asset will rise in value, greed frequently keeps you in a transaction past your take profit point. This increases the risk of losing money on the transaction, particularly if you don’t apply to stop losses. There are thousands of different cryptocurrencies, and it’s impossible to keep track of them.
Instead of trying to trade everything, focus on a handful of high-quality projects you believe in. Doing your research now will pay off and be prepared for a good turnaround in the market. And talking about being prepared, it’s important to track your own personal tax report on your crypto investments as well. And what better way than to start right here at KoinX and gather all your tax reports in a single place?