Markets always undergo corrections after a massive bull run — and can eventually enter a bear market. A crypto bear market is when cryptocurrency prices fall into a strong market downtrend. Prices drop and stay lower for some time. And negative sentiments, such as fear, uncertainty, and doubt (FUD), take over the market.
On December 4th, Bitcoin crashed down below $47K, leading many to ask if a bear market has begun. While we can’t predict the future with 100% accuracy, we at Zenfuse can say that you should know how to navigate a bear market. Because if you have a strategy, the next bear market won’t all be doom and gloom.
A bear market doesn’t mean we have no chance to make money. It just shifts the window of opportunities. As a crypto trader, preparation gives you the best chance to not only navigate and survive a bear market, but also capitalize on discount prices, make money off volatility, and strengthen your portfolio.
In this article, we will discuss some strategies you can take during a bear market to protect your assets, minimize losses, and even achieve gains.
Seize the Buying Opportunity
Bear markets are no doubt hard times for crypto investors. But hard times bring opportunities. As the legendary investor Warren Buffet has said, “be fearful when others are greedy, and greedy when others are fearful.”
So, don’t panic too much when the price starts to bearish. It can be seen as an opportunity to buy at a discount and increase profits when you cash out during a bull run.
For instance, it certainly was a more profitable trade to buy Bitcoin on 7 December 2018 at $3320 USD than on 7 Dec 2021 at $51K USD.
Buying during a bear market can work wonders for your portfolio. This strategy of buying low price coins may allow you to earn significant amounts of return over the long-term (which the price history of BTC shows).
If you’d like to know when greed or fear has overtaken a market, use tools like the Crypto Fear & Greed Index and Zenfuse. Our APl will provide technical analysis, news updates, and more to show you when there’s extreme fear (a potential buying opportunity) and Greed (when the market is perhaps due for a correction).
Try to Earn Profit with Bitcoin DCA
Dollar-cost averaging (DCA) is buying something at fixed intervals regardless of price. Many trading experts believe it’s one of the most effective and safest ways to gather Bitcoin. The advantage of DCA is that it mitigates Bitcoin’s volatility, and gives investors peace of mind in their saving strategy.
For instance, if you invested $10 daily in Bitcoin starting from 7 Dec 2018 to the writing of this article (7 Dec 2021), then you would have invested a total of $10,960. This strategy would mean you have 108,962,000 Satoshis in your portfolio today, which would be worth $64,095 as of now (calculations based on Bitcoin price history). That’s a total return of 484.81% (source: Dollar Cost Averaging Bitcoin).
- Here’s an interesting side fact: The same amount invested in gold for the same duration would have yielded you a return of less than 20%.
You can use dollar-cost average strategy to buy altcoins or Bitcoin daily, weekly, or monthly investments. It depends on your cash flow and investing preferences.
HODL vs Trading During a Bear Market
So, you bought crypto during the bearish season. However, there’s no certain way to find when bulls will take over the bears. As you see in Bitcoin’s price charts, all of 2018 was pretty much bearish after Bitcoin touched an all-time-high on 19th Dec 2017.
Generally speaking, day trading or short-term trading works best for retail traders during the bull market — when it’s easier to buy the dip, follow popular trading indicators, and employ other strategies for gains.
Day trading is a bit trickier during a bear market, and you may need to think more long-term and employ strategies like shorting particular coins. Staying on the sidelines by holding stablecoins is considered by many to be a safe play too.
Therefore, the HODL strategy is arguably the best solution in a bear market. As practice shows, you will not lose your deposit by adhering to a HOLD strategy, unlike traders whose positions can be liquidated. The main downside of the HODL strategy is it takes time and you need patience. It could take a year or more to get back your original gains.
Also, note the biggest investors love to accumulate during the bear market. Whales treat the bearish market as a discount period (i.e. the season of buy). But for that, you need to have cash, as “cash is king when the market goes bearish.”
If you analyze that the market is turning bearish, then consider getting to the sidelines or getting fiat and stablecoins ready. This way, you can buy when coin prices drop in price.
Mining and Staking
You can also earn crypto by mining during a bear market. However, mining Bitcoin or top altcoins like Ethereum require expensive hardware, such as ASIC miners and GPUs, that eat too much electricity. If you have a limited budget, then opt to mine coins that do not require a huge investment.
For instance, you can mine Monero without the need for specialized hardware. Mining XMR only requires consumer-grade hardware.
Alternatively, you can stake your coins to get rewarded for providing liquidity. For example, PancakeSwap, a decentralized exchange built on the Binance Smart Chain, offers APRs of over 50% through their syrup pools. All you have to do is stake CAKE tokens.
You can also stake coins for participation in transaction validation on a proof-of-stake (PoS) blockchain. ETH 2.0 uses the PoS consensus algorithm and you can stake your coins to earn rewards. Ethereum 2.0 staking can offer you over 5% APR on any ETH that you stake as a reward for helping secure the network.
Take a Break from Crypto
If you have made gains during the bull market, you could also consider taking a break from the market for a while and enjoying our profit. If you are not an experienced trader, then it’s also a good option to take a break from crypto during the bearish season and focus on other activities like earning from your job or equity trading.
While you are taking a break from crypto, spend time analyzing the market and expanding your knowledge and expertise for future investment. Update yourself with fundamental and technical analysis, follow reputable crypto experts, and research projects thoroughly.
Going Forward with Confidence & the Right Plan
We can never predict the future with 100% accuracy, but we can prepare for it. Employing these strategies mentioned here can get you in a good position to navigate the next bear market successfully.
As you prepare for the bear market, equip yourself with the best trading tools. This way, you have access to the best data, information, and trading capabilities. At Zenfuse, we built an API that’s designed to help you excel in any market, including bear markets. From news feeds and panic sell buttons to technical analysis and exchange integrations, Zenfuse has it all.
Try our trading platform — and we’ll get through the next bear market together.
About Zenfuse
Zenfuse is a powerful all-in-one platform for cryptocurrency traders and investors.
It aggregates multiple cryptocurrency exchanges, allowing control of funds via API, and powers up the trading process, making trading more profitable, simple, and stress-free.
Our cross-platform app provides rich analytics of both your portfolio and order history, giving you the ability to control your funds on a mobile device.
