5 Tips On How To Survive In The Crypto Bear Market
A crypto bear market phase can be a significant obstacle for traders and investors hoping to profit financially from the cryptocurrency market. When you look at the figures on the chart as a cryptocurrency trader, you can feel your investments losing value. You’re only thinking of one thing: how do crypto bear market investors make money out of this?
Bear Market Survival Tips! 🐻
The bear market is busy and scary, but they are a natural part of the market cycle and are needed for continuous price increases.
Here are some solid tips to survive. 🧵👇
— Alt Crypto Gems (@AltCryptoGems) July 31, 2022
Traders struggle to maintain control of their emotions, particularly at this time when the cryptocurrency market is in a negative slump, and the major cryptos have seen their prices fall by more than 70–90%. When cryptocurrency prices are plummeting more than 20% (yup! ), it is difficult to exit the bear market. At that point, a downturn is formally regarded as the crypto bear market period. As they say, “every cloud has a silver lining,” you can take advantage of the bear market by using the following trading techniques:
1. Price Averaging
On the price chart, you can see a large valley. You wait for a trend reversal for days, but the problem only gets worse. When it seems like all you can do is watch your investments go down, you suddenly realize you have other options. You either have fiat money or stablecoins.
The market for digital assets is very erratic. When bears are in control, it’s impossible to predict whether the price will fall much further or experience a relief bounce. You can employ a dollar-cost averaging method or DCA during this time. DCA assists you in spreading out your investments by making little investments.
You can purchase a particular cryptocurrency or a number of them when the price reaches your aim by dividing your funds, let’s say Rs. 50000, into smaller groups of Rs. 1000. You can choose specific times of the day or week to buy the dip, as opposed to using up all of your money at once. You can use the allocated funds to purchase the cryptocurrencies if the price falls further in the future so that when it does, you can benefit greatly.
2. Portfolio Diversification
Although his company recently made an indirect investment, Warren Buffet may refer to Bitcoin as “rat poison squared.” However, he advises that diversification is still important to take into account. “Diversification is defense against ignorance,” he claims. If you are knowledgeable, it doesn’t make much sense.
Diversification reduces the risk associated with your investment portfolio. You supposedly put all of your money into the biggest cryptocurrency in the world after seeing Bitcoin’s phenomenal development. Now that we are in a slump, you can experience losses.
Instead, you can divide your money among other cryptocurrencies so that you can still make money if any of their prices increase or decrease. Diversification reduces your risks and ensures a certain level of returns even if there are no bearish forces at play in the market.
One cannot be certain about the nature of cryptocurrencies and their price trend. The market trades more than 17,000 different cryptocurrencies. In order to diversify your portfolio and reduce loss, you must thoroughly research the market before selecting your selection of cryptocurrencies. The potential development of cryptocurrency, price fluctuation in the past, and the highest price the cryptocurrency has ever been traded at are a few things to consider while choosing your basket.
Holders of blockchains like Cardano (ADA), Polkadot (DOT), Solana (SOL), and others can stake in the network. Staking entails locking up your cryptocurrency on a network in order to become a validator (and earn incentives for validating transactions on a specific blockchain).
Proof of stake (PoS)-based cryptocurrencies enable staking on their platforms. Similar to how miners validate transactions in the Proof of Work (PoW) consensus, transactions are validated on the network using the PoS process. You receive brand-new tokens wherever a blockchain block is validated.
Staking enables passive income generation from your cryptocurrency holdings, which you can utilize to offset losses during a market downturn. Your cryptos are locked up, as a result, preventing panic sales. However, locking up reduces the cryptocurrency’s liquidity.
You can choose liquidity staking if you wish to keep your holdings liquid while you stake them. You can earn a derivative token by liquid staking your cryptocurrency. Platforms like Lido Finance facilitate decentralized liquid staking. When the price of cryptocurrency increases, you can utilize these derivative tokens to either sell them on decentralized finance (DeFi) platforms to earn more tokens or sell them on the open market.
4. Harvesting Yields and Mining Liquidity
In yield farming, you, as a cryptocurrency owner, give your coins to platforms for decentralized finance (Defi). As a result, these platforms are more liquid, and you are a liquidity provider. On the platform, a liquidity provider can earn rewards that are typically distributed from the platform’s decentralized earnings.
For instance, you might deposit your cryptocurrency in Uniswap, one of the major DEXs. You can start receiving incentives after you deposit your cryptocurrencies in the Uniswap Liquidity Pool, making you a liquidity provider. In addition to the benefits, Uniswap also provides you with free UNI tokens, which are network-native tokens. Liquidity mining is the name given to this idea.
Both strategies can help you make up for your losses during a bad market by generating passive income and free tokens.
Also, read – Top 10 Types Of NFTs Ruling The Digital Market
5. Scalp Trading
Simply put, scalping is the short-term purchase and sale of cryptocurrencies in order to generate modest but consistent profits. Over time, these gains accumulate to produce a respectable return. In a bearish decline, scalp trading is an excellent choice due to the extreme volatility of the cryptocurrency market.
During the crypto bear market phase, you can scalp trade using one of the two methods—manual or automated. In order to locate openings and closings when manually scalping, you must thoroughly examine the market utilizing real-time research. When using automated scalping, you can create a special trading plan based on your analysis and lower your trading risk even though you are not actively monitoring the market.
The market has crashed due to internal and external issues like the breakdown of major crypto blockchains and macroeconomic factors such as rising inflation rates and tighter laws around the crypto sector. There are currently no obvious indicators of a market recovery. Although not all-inclusive, the methods described above can be a surefire way to make money even when the market is declining.