Bear markets always cause a lot of panic among investors, especially new ones and especially in crypto. There can be real cause to worry, but ultimately it shouldn’t mean the end of your crypto portfolio.
This 2022 bear market may even be considered the worst one yet, but it’s not the first and it won’t be the last.
In this article, we’ll go through a few ways to help you weather an ongoing crypto bear market.
- A crypto bear market is when crypto asset prices are falling
- Staying calm can help ensure your longevity in the crypto market
- Diversify your crypto portfolio and minimize exposure to volatile crypto assets
- Dollar-cost-averaging and crypto staking are worthwhile
- As devastating as crypto bear markets are, they do end
What’s a Bear Market?
At the risk of stating the obvious, a bear market is a period when asset prices are falling. In the crypto space, a bear market is characterized by a price fall of 20% or more coming from previous highs.
I think it’s based on this sentiment:
The bear saves for the winter and waits for spring, the bull charges ahead. Also, the bear swipes its paws downward to attack, while the bull thrusts its horns upward.
A bear market represents a negative market trend. Most traders intend to purchase assets during a bear market, especially during rock bottom. However, it can be impossible to know when this actually is.
Many traders will also avoid investing in crypto assets during a bear market due to the fear that more bad news may be on the way. A lot of investors will even sell their crypto holdings out of panic, further increasing the bear market downward trend.
If you are worried about losing money on an investment, the only way to absolutely guarantee that you do, is to sell it for less than you paid. If it seems obvious just give that some thought. Unless you need the money for something else or you have a genuine fear that the asset will go to zero, you can also wait for the market to recover.
Trying to buy or re-buy assets at the bottom is no easier than trying to sell them at the top.
The things can cause a bear market include war, political crises, pandemics, inflation, and economic downturn.
Welcome to 2022.
Some of the indicators of an emerging bear market include:
- Low trading volume:
Most people are holding their assets instead of trading them due to uncertainty in the market.
- Negative Sentiments:
Huge corporations talking negatively about crypto assets, creating uncertainty about them.
- Regulatory intervention:
Governments ban and restrict crypto transactions or mining, causing widespread uncertainty.
Bear Market vs. Bull Market
A Bull market is the opposite of a Bear market. Here are a few key differences side by side:
|Investors lack confidence in the market
|Investors are often overconfident
|Less buying and more selling
|More buying and less selling
|More investors exiting the market
|More investors entering the market
|Less demand despite a strong supply of crypto assets
|More demand despite a weak supply of crypto assets
8 Ways to Survive a Crypto Bear Market
Emotional trading leads to regrettable decisions. Regardless of the market movement (positive or negative) you never want emotions dictating your next trading move.
If you’re experiencing a bear run, the fear of losing more than you can handle (or everything) can easily lead to opting out of your current situation. It is especially worse if you’ve lost money before in a similar situation.
One of the best ways to survive the ongoing (2022) crypto bear market is to stay calm and keep your emotions in check.
If it’s your first crypto bear market experience, rest assured that there have been bear markets before and savvy crypto investors have survived them. Many of them have made most of their gains during the downturns because the prices are discounted.
Don’t be in rush to sell your crypto. However, if your particular situation dictates that it’s time to sell or opt-out, don’t hesitate.
Just stay calm continue to study the market trend.
Don’t try to time the exact bottom
A bear market presents different opportunities for different traders. If you can afford to, it’s often the best time to buy an asset.
Of course the problem with buying crypto during a bear run is to guess exactly what and when to buy. It’s human nature; most people will try to time the very bottom of an asset to buy it. Everyone wants to get in or back in at the point where the price cannot depreciate anymore. Good luck with that btw.
Of course, a few traders have been lucky enough to pull this off, but most of the time it’s a combination of luck and/or persistence.
Timing any market, in general, is next to impossible. Considering the more extreme volatility of the crypto market, knowing when to buy or sell an asset, regardless of “expert” opinions, is even harder.
Bottom line: Time in the market, not timing the market.
Diversify your crypto portfolio
Diversifying your crypto portfolio means investing in more than one cryptocurrency. There are thousands of cryptocurrencies in existence with many promising ones that may just be getting started.
Being a maximalist is surprisingly common, especially in the Bit in one crypto coin has its disadvantages, one of which is a heavy loss coin community.
Bitcoin “Maxis” are a subset of crypto investors/enthusiasts known for their hard-line and inflexible position that Bitcoin and only Bitcoin matters. They believe that only BTC will ultimately survive and are willing to attack anyone on twitter who thinks otherwise.
— The Verge (@verge) April 28, 2022
This seems unwise. Consider that 1 BTC at the beginning of 2022 was worth more than $45,000 USD. Halfway through the same year, it was trading below $20,000. Now of course many assets have performed similarly or worse but some of them have done better.
Investing in a variety of cryptos (that you’ve carefully researched) and believe in in the ling term can reduce the severity of losses incurred in a bear market.
While there is a possibility of all your diversified crypto assets crashing, the possibility of experiencing devastating losses is considerably low.
Minimize exposure to the most volatile cryptocurrencies
True, investing in a portfolio of cryptocurrencies is a good way to mitigate some risk. However, you may want to consider letting go of some of the most volatile cryptocurrencies. These are usually the smaller altcoins that lose value quickly and may not survive the bear market.
Major cryptocurrencies like Bitcoin and Ethereum are often more stable and resilient than many smaller altcoins.
Besides minimizing losses by disposing of altcoins you can consider investing in Stablecoins. Stablecoins, unlike regular crypto coins, do not get affected by sudden crypto market movements. Pegged to fiat currencies, Stablecoins offer a great way to survive a crypto bear market.
Stake Cryptos that you plan to HODL
Staking is a popular way of passively earning from your crypto funds. It involves committing your cryptocurrencies to a platform to help with its functions. You earn through staking rewards.
Crypto staking allows you to earn from your crypto funds without the worry of market movements. It is a great crypto investment strategy that can help with surviving the crypto bear market.
It is worth noting that not all crypto platforms offer crypto staking services. Also, not all cryptocurrencies can be staked. You can only benefit from crypto staking if you own a crypto coin that can be staked.
Some of the best cryptocurrencies to stake include ATOM (Cosmos), MATIC (Polygon), XTZ (Tezos), DOT (Polkadot), and ETH2 (Ethereum 2.0).
Different crypto staking platforms offer staking services with different requirements. Some platforms will lock up users’ crypto funds during the staking period while others like Lido won’t. When locked up, crypto funds are no longer accessible to be sold or traded at any time.
Dollar-Cost-Averaging is another great crypto investment strategy to help you survive the crypto bear market. It involves buying small amounts of crypto assets over a period of time regardless of the price.
DCA, like crypto staking, is a long-term crypto investment strategy that eliminates the fear and worry of treading through crypto bear markets. It not only reduces risks that come with one-time investments but also eliminates the emotional buying and selling of crypto assets.
Considering the volatility of the crypto market, DCA helps you stick to your crypto investment strategy for as long as you wish. DCA can be applied manually or automatically through certain crypto exchanges like Binance, Coinbase, and Gemini.
Move your Crypto off Custodial Exchanges
Custodial crypto exchanges offer a great entry point into the crypto space. However, they are not the best places to keep your crypto funds during a bear market.
A crypto bear market can have different effects on different sectors of the crypto space. It can even lead to the collapse of a crypto exchange. The last thing you want is a crypto exchange going down with your funds.
The biggest disadvantage of custodial crypto exchanges is they own your private keys, which gives them control over customer’s funds. They can easily pause withdrawals and/or deny access.
To ease the stress of living through a crypto bear market, consider taking your funds out of a custodial crypto exchange. There are many non-custodial crypto wallets that can safely store your crypto funds. You can also opt for a good hardware wallet.
— MoonShotUK (Aka Wolf of APE street) XRP AMC GME (@MoonShotUK) May 23, 2022
Bottom line: Not your keys, not your coins.
Learn how to store your crypto securely.
Invest in Yourself
Staring at the price of a crypto asset waiting for it to (hopefully) start appreciating is a great way to drive yourself crazy. The last thing you want is your emotions getting the better of you.
Take some time to do other activities besides obsessing over your crypto assets. Some time off of crypto trading can help you approach your current situation from a different angle. Learn different trading strategies, how to read crypto charts, set up a cold storage wallet, and/or dollar cost average what you can afford to while the prices are lower.
You can also review other cryptocurrencies that might have been more or less affected by the bear market and see if they can fit in your portfolio.
The idea here is to detach yourself from the entire bear market experience to avoid making investment decisions that might not work in your favor, especially if you are a long-term crypto investor.
Bottom line: Invest your time and energy, not only your money.
How long the ongoing (2022) crypto bear market will last is anyone’s guess. However, according to this article on Forbes, some top investors, think it could last two or more years.
A brief history of crypto bear markets
The 2022 crypto bear market is not the first crypto bear market.
The first major Bitcoin bear market was in 2012, three years after its launch. A major reason behind Bitcoin’s bear run was a series of hacks, which created uncertainty around the digital coin. This lasted six months from January 11 and July 11, 2012.
BTC dropped from a high of $7.08 to a low of $4.22.
The second Bitcoin bear market also took place in 2012, shortly after the first one. A series of lawsuits from previous exchange hacks shone a negative light on the crypto space, thus the bear market. The bear market lasted between August 7 and December 6, 2012. Bitcoin’s price dropped from $13.35 to $8.4.
The third Bitcoin bear market lasted between November 29, 2013, and January 7, 2015. We saw Bitcoin’s price drop from a high of $1,149 to a low of $197.24.
Compared to previous Bitcoin bear markets, and according to many experts, the ongoing Bitcoin bear market may be the worst.
A recent Glassnode Insight Report claims the crypto bear market might become the worst on record.
As devastating as the 2022 crypto bear market has been and continues to be, it will hopefully not be the end of your crypto investment.
There are many ways you to survive the current bear market.
Stay calm. Don’t let your emotions get the better of you and lead you into regrettable trading decisions.
Don’t try to time the bottom. This point is for those trying to enter the market as cheaply as possible. Timing the bottom is one of the hardest things even for pro traders.
Rebalance. Spread your losses across a few more stable cryptos. Diversify your crypto portfolio. If you already have several crypto coins in your investment basket you might want to consider disposing of the most volatile ones.
When in doubt zoom out. Prices are down but over a few months or even years they are looking a lot better. Think about the future and the big picture.
Staking and Dollar-cost Averaging are two good ways to help you survive and even prosper in the crypto space when things are down.
Hang in there.
As devastating as the 2022 crypto bear market may have been and continues to be to so many crypto investors, it should not be the end of your crypto investment.
There are many ways you can use to try and survive the current bear market. Firstly, stay calm. Don’t let your emotions get the better of you and lead you into regrettable trading decisions. Secondly, don’t try to time the bottom. This point is for those trying to enter the market as cheaply as possible. Timing the bottom is one of the hardest things even for pro traders.
Thirdly, you want to spread your losses across several crypto coins. Diversify your crypto portfolio. If you already have several crypto coins in your investment basket you might want to consider disposing of the most volatile ones. Staking and dollar-cost averaging are also other great ways to help you survive the crypto space. Hang in there.