Since Bitcoin reached its all-time high (ATH) last November 2022, the market experienced a gradual downward trend that led to around 58% loss in its value, as of writing. There were factors that possibly affected the market, the US inflation, war in Ukraine, and more. As Bitcoin decreased, other altcoins followed, as well.
During a bear market, there are five things that an investor can do to make the most out of the situation. Here is the list that an investor can do: Invest in yourself, have a clear and long-term perspective, diversify investments across different crypto assets, buy the dip with dollar-cost averaging, and find projects with growing ecosystems and perks.
These are not financial advice and always do due diligence in research before investing in cryptocurrencies and making risks in trading.
What are the 5 things to do during bear market?
1. Invest in Yourself
Trading is exciting when everything goes up, which, of course, is also frightening at the same time. There are a lot of uncertainties especially when external factors affect the market, like inflation, political turmoil and war going on in a country that could possibly affect the global market. It is better to liquidate some of the assets in the portfolio and buy something that can help improve one’s self: physically, emotionally, socially, and mentally. For instance, buy a book that can be enjoyable or informative. Attend workshops that can hone another skill set for business or personal gain, or even in trading. For first-time traders, they can invest in educating themselves on chart reading to better understand the indicators available to analyze the market. Make time with the family by having movie dates, hiking together, or dining out as a family.
An individual’s mental health is very important in trading and it is best to find other ways to be productive.
2. Have a Clear and Long-Term Perspective
Now that the mind has relaxed after doing real-life activities, it is time to have a clearer perspective on investing in cryptocurrencies. Setting the mindset that the crypto market is volatile and avoiding being emotional in making decisions is key to a better investment.
Having a long-term perspective requires research on the currency that the investor wants to invest in as a long-term investment. Studying the developers behind the project, the factors that affect the market, and how the community thinks of the currency is essential to know if it is profitable in the long term. This means placing a capital investment that the investor is willing to let go without predicament.
3. Diversify Investments Across Different Crypto Assets
Diversifying investment is like putting eggs in different baskets instead of one. This means careful research on cryptocurrencies that can be placed on the portfolio. It can be composed of a huge portion of stablecoins to avoid huge losses and serve as a reservation for future investments, and small portions of different coins and tokens that can be invested both for long term and short term. Better invest in tokens that have good utilities and credible developers behind the project.
Diversifying investments can lessen the loss in a single one. If one currency goes down, while the other one goes higher, it lessens the loss. Stablecoins give investors the option to place their profit on without cashing out their assets and to avoid the possible loss because of the volatility of the market. Most recently, however, stablecoins may not be as stable as they may seem, choose the right stablecoin to avoid any sudden loss.
4. Buy the Dip with Dollar-cost Averaging (DCA)
Buying the dip with dollar-cost averaging (DCA) is one of the strategies of traders especially when the market is down.
What is Buy the Dip?
Buy the dip is a term used for investing in a stock or cryptocurrency. When it reaches its lowest point (dip) on the chart, at that point, it will be at its cheapest value (as they call it discounted price). Eventually, when the value of the asset rises, profit can be realized. Conversely, however, if the chart goes further down, that would lead to a loss.
What is Dollar-Cost Averaging?
In DCA, instead of going all-out initially, the investment is divided into portions depending on how many trenches the investor is willing to do. This method lessens the risk in trading and gives the trader more time to invest in other assets.
For instance, the investor has a capital of $5000.00. If the investor will invest it all, there is a huge risk of losing a lot when the market goes down. But if the investor is patient enough to wait and divides the capital into five portions, $1000.00 each, and puts each portion on the trenches of the chart, he lessens the risk of huge loss and has the time to check for other assets that are worth investing in.
5. Find Projects with Growing Ecosystems and Perks
While waiting for the next trench or dip, an investor can try to research projects with growing ecosystems and perks. These are cryptocurrencies that have utilities like staking. Staking is lending your invested crypto to the staking platform and based on the annual percentage rate (APR) of the staking platform, there is a certain amount of crypto gained in the process. There are locked and flexible staking. Locked staking is like time deposits, the investor will set a period of time when the platform will lock his investment and it will generate profit. While for flexible staking, the investor can take his investment out of staking anytime and take their profit along with it. Liquid staking is when investors lend their investment to a staking platform and their gain will be in a different cryptocurrency that can still be used within the project.
Other projects promote borrowing or lending of cryptocurrencies and airdrops to their community. Airdrops are free drops of certain cryptocurrencies, usually, there are procedures on how to get these airdrops
Should you buy in a bear market?
These five activities can help investors and crypto enthusiasts overcome the bear market. Equipping oneself with skills and strategies can be self-fulfilling and gives pleasure in seeing a few profits instead of just seeing their investment plummet down with the market. Learning to invest in themselves to bring a healthy mental state, learning to diversify, buying the dip properly, and investing in projects that have good ecosystems will benefit one’s self not just during the bear market but also when it transitions back to a bull run.
Editing by Michael Mislos
This article is published on BitPinas: Here are 5 Things to Do During Bear Market
Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.