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How To Come Out A Winner From A Bear Market?

When a bear market starts, many retail investors panic, feeling their investments have failed. This especially happens because many people don’t realize that bear markets are just a regular – and even healthy – phase of the markets’ cycles, and they don’t mean a permanent collapse.

The current bear market is consistent with a wider downtrend affecting the financial markets in general. This is mainly caused by the efforts of several governments to compact the high inflation rates seen in most of the developed economies after the end of the covid-related economic constraints. As central banks and other financial authorities are taking measures to slow down economic growth, such as regularly raising interest rates, fewer funds are available for investing. Being classified by many as high-risk assets, many investors react to these efforts by moving their resources from crypto to low-risk assets, like real estate and gold.

But cryptocurrencies are not the only asset class suffering from this bear market. Technology companies’ stocks are facing a similar drop in prices, like Meta Platforms Inc. (mother company of Facebook, Instagram, and WhatsApp), whose stock lost almost 60% of its value since the beginning of 2022 (almost the same as Bitcoin). Just like all the traders that went through several bear markets before, it doesn’t mean your trading journey ends here, but you only need to tweak your style a little.

The key to navigating a bear market with the least losses, or even with a win, is the angle from which you look at it. While some see it as a risk or a problem that needs to be solved, many others see it as an opportunity and fertile soil to make even more successful investments.

Here are a few thoughts and strategies that you need to keep in mind when managing your crypto investments during a bear market:

Don’t Panic

Someone bought 1 Bitcoin at $10,000, waited for a year or so, and then sold it for a whopping $57,000. Sounds like a great investment plan, right? Well, this person had to sit tight and hold on to their Bitcoin when it lost almost half of its value, going as low as $5,017, before seeing their investment paying off and making a profit of more than 470%. 

When a bear market hits, it’s the long-term investments that we worry about the most. But they’re long-term investments for a good reason; we choose them based on how we think they’ll do in the next couple of years, not what they can make in a span of a month or two. 

No matter how well-knit is your investment plan, you won’t help but feel that you’re about to lose the money you’ve invested in one cryptocurrency or another, with an urge to sell and limit your losses. But if you look at any price chart, it’s never a straight line up or down, whether it’s a day or five-year chart. So stick to your investment plan and targets, and give the assets you invested in the time you were willing to give in the first place. 

Always remember the golden rule: Unless you sell, your asset value is fluctuating, but you’re not losing.

Invest strategically

Short-term investments are obviously a bit risky during a bear market. Cryptocurrencies are highly affected by sentiment and can move really quickly. The best thing to do to protect yourself from losses is to focus on your long-term investments.

Keep an eye on the projects you think will make it big in the future and take the lessons you learned to build a more solid portfolio. A bear market is an opportunity to diversify and expand your portfolio for a lower cost.

One famous strategy that is worth considering during a bear market is dollar cost averaging. It’s simply investing the same amount of money in the same asset regularly. For instance, invest $100 weekly in Ethereum, Bitcoin, XRP, or whatever asset you believe will be a winner in a year or more, no matter the price. This way you’d accumulate more of this asset, and the actual price you’d pay for your assets is the average of the prices you bought at every time.

And if you’re not into waiting, you can try what’s widely known as scalping, which is making minor profits from the marginal daily price changes. This way you’d be making little profits – or losses – every day, but in the long run your profits would accumulate. 

If you decide to go scalping, make sure you set orders in advance for your targeted profits, as the fast movement of the market might result in missing the mark. You can use BitOasis Pro’s different types of orders to plan your trading ahead.

Expand your knowledge

The one investment that can never go wrong is knowledge, so add more knowledge to your investment portfolio.

As markets are much calmer during bearish runs, it’s good to invest some of your time – and money if necessary – in expanding your knowledge. Whether it’s about crypto projects, blockchain technology, or trading in general, binge-reading during a bear market will arm you with the information and skills that’ll make you a better investor, even when the bear market is over.

Additionally, keeping an eye out for the news and latest updates about different crypto projects will help you evaluate their tokens better. Most crypto projects teams don’t care much about the prices, and keep developing their projects and even setting more ambitious goals. Following the news will help you know how well each project is achieving its goals or bearing the competition, thus how trustworthy is each project.

Finally, always remember that there is no one-size-fits-all in crypto. Each investor is a unique case, and your investment decisions should match your case. Always do the needed research, and invest the funds you can afford to lose or have to wait for a while before you can use again.