With the current situation in economics, many traders, investors, and usual crypto owners have a lot to worry about. Crypto prices (especially BTC) crashing, stocks falling, and an all-around recession is hitting us hard. In situations like this, the main issue turns from ‘how to make a profit’ to ‘how do I survive in this environment’. To help you, we’ve compiled the list of main advice on how to overcome a Bear Market situation to be able to recoup your losses later on.
What is Bear Market?
Let’s ascertain what Bear Market means. Usually, it is a term for the time when market share prices are falling, prompting brokers to sell. It may happen for a lot of reasons, including, as we can see, drastic oil prices drop and international pandemics. A bull market, in contrast, is a time when market share prices begin to rise, encouraging people to buy them.
As you can guess, bear market is a time of pessimism, losses, and tough decisions. It is crucial to build a working loss prevention strategy to stay afloat. After you’ve secured your financial stability, you can try to get some profit as well. After all, bad times can’t prevent you from trying to get something right.
Crypto Bulls and Bears
Now, let’s take a closer look at the examples of bearish and bullish behavior from the king of crypto: Bitcoin. As you probably know, BTC lived through three distinct periods of its price rising and falling, only to rise again. We’ll use graphics for better visualization of the topic.
The first period of the Bitcoin bull market began back in 2017, where its price rose to a whopping $17,000 per 1 BTC. It was a great time for crypto, as the interest in it (and the number of users along with the coin prices) rose to the new heights. However, it didn’t last, peaking in December.
Next came the first BTC bear market period, with its price crashing down to almost $3,000 during the second half of December 2017, all of 2018, and up to April 2019.
After that, came the second bull run of Bitcoin that lasted up until March 2020, with its price reaching more than $12,000 at its peak.
And, now we are going to the second bear period of BTC, with it crashing down to $6,457 at the end of March 2020. Though it seems that its price is going up again, and BTC will go for the third bull run sooner rather than later.
As you can see, the waves of the bull and bear market closely resemble a W-X-Y price correction model that was drawn up. It seems that BTC is past the correction period now, and its price would be able to enter a stable growth once again. We’ll see whether that happens soon or not.
How to Survive Cryptocurrency Bear Market
With technicalities out of the way, it is time to see what you can do to mitigate your losses during the bear market period. While at least some losses would be unavoidable, you can do something to ensure that they wouldn’t be crippling. Let’s dive into those anti-crisis measures and advice.
Don’t Invest More Than You Can Afford
It is good advice to follow no matter what the situation is on the market right now. After all, investment is a high-risk venture, and so far, nobody can predict what will happen. The current situation is a good example of such an unpredicted factor that threw everything into chaos. Every investor should appoint this rule as the cornerstone of their strategies and calculate losses that they can afford.
Sometimes some deals are just too good to pass. It would be risky, but it will all be with it in the end, wouldn’t it? Well, it depends on whether or not you will rebound if that deal falls through in the end. If you are sure that you can rebound after that, then there would be no reason not to try. Always be ready, and have a comfortable financial safety net ready at all times. It becomes even more important in times like this when BTC, stocks, and shares are crashing, and the world’s economy is in recession.
Try Long-Term Investment
While usual profit from short-term investments (except day trading options, of course) is rarely available during bear market periods, there are other ways to ensure your financial stability. Long-term investments are one of these ways. After all, the bear market wouldn’t continue forever, so it would be a good idea to look into what profit you can turn after weathering the storm. Long-term planning will allow you to recoup your losses easier after the bear market period ends.
While buying assets like this may lead to short-term losses, you will have a better position later on, allowing you to invest more during the upcoming bull market. To help you decide what cryptos have the best chances to rise in price in a year or so, we have a special category “Price Predictions” that you can find on our blog. These materials may help you when you create your investing strategy for the future.
BTC Futures are a Good Idea
Futures (r futures contracts) are an agreement to trade some assets in the future upon the already agreed price. As you can guess, this is also a way to play a long game.
You don’t have to invest now and suffer losses while waiting for the asset to grow. Instead, you agree on the price you are going to buy/sell and the date of the transaction. You can hold onto your crypto and sell it later. You’ll get the profit from the deal, as the price will remain the same no matter how much BTC drops.
The main drawback would be the fact that BTC price could rise further than what you’ve agreed upon. This risk could be easily offset by researching current price predictions and completing an overall crypto market research. With the right data, you can be sure that you wouldn’t miss out on the potential profit.
In the case of a mistake, the fact that you are safeguarding your assets from severe losses is well worth minor profit cuts. As long as you are using a trustworthy platform to trade your futures, you can be well assured that you will be able to gain something even during the cryptocurrency (BTC, fr example) crashing all around.
Diversify Your Portfolio
As you might already know, in the investment sphere, ‘portfolio’ means what assets you have, be it in coins, tokens, or something else entirely. Investing in a few different cryptos is a good investing strategy, as it allows you to minimize losses and risks should anything happen. For example, if you’ve invested in Bitcoins, Ethereum, and Litecoins, you are less likely to lose most of the investment.
Diversification means that instead of investing your money in just one coin and being dependent on its price changes, you invest a lesser amount of money simultaneously in various coins. Sure, it can decrease your profits, but it will also mitigate your losses should something happen with one of the coins. It might also be a good idea to put some of your money in coins with lower volatility. They don’t promise a lot of profit, but you can hold them if your other coins’ prices begin to drop.
Short-selling, or ‘Shorting’, is a method of trading on predicting when the market assets will drop in price and playing on that. It worked pretty well for some people on the usual asset market, and it still works for crypto enthusiasts and traders.
The method consists of selling assets that are not yours but rather borrowed. To do that, you can use CFDs (Contracts for Difference), derivatives, or crypto margin exchanges. If the price of the crypto asset goes down, and their position goes up, then traders can buy it much cheaper, making a profit in the process.
It can also be used for hedging and minimizing your losses. In case if you own a large amount of one asset, like BTC, for example, you can open a short-trade position and decrease its volatility, lowering the amount of the lost dollars up to 50%. It is a good way to do damage control in the current BTC price crashing event.
And if you want to quickly exchange or buy/sell your crypto, you can always do that via Changelly.
Don’t panic. Keeping a cool head and planning ahead will make getting through these times much easier. Make your strategies, keep a close eye on the market’s situation and predictions, and have a financial safety net to keep you afloat. And stay safe and take care of yourself. We’ll see you next post!