Bearish Crypto Market vs. Bearish Stocks Market
Before we get into details let’s see how the cryptocurrency market is different from the stocks market. The answer is quite simple; there are almost none. The same rules and “laws” of the stocks market apply to the crypto market as well. The only differences are that the cryptocurrency is younger, and the returns can be incredibly higher than those in the stocks market.
What are the smart strategies for dealing with a bearish crypto market?
A bear market refers to a general decline in asset prices of at least 20% from recent highs. Clearly, these times are nothing to look forward to, but reacting impulsively can be dangerous. Here we will go through several important investment and mindset strategies to help you stay calm and play dead when the stock market slides your returns.
WHAT TO KNOW YOU MUST KNOW ABOUT THE BEAR MARKET
- Nobody wants to be surprised by a bear market, but if you find yourself among falling stock prices, there are a few strategies you can put in place.
- You can take a practical and defensive stance, accumulating more shares in a regimented fashion as prices fall to collect shares for sale.
- You can also go on the offensive and take a short position in the market, taking advantage of falling prices.
Keep your fears in check
There is an old saying on Wall Street: “The Dow climbs a wall of worry.”
In other words, the Dow has continued to grow over time despite economic problems, terrorism, and countless other calamities. Investors should always try to separate their emotions from the investment decision-making process. What one day looks like a massive global catastrophe may be remembered as nothing more than a blip on the radar screen a few years down the road. Remember that fear is an emotion that can cloud the rational judgment of a situation.
The exact same goes for the cryptocurrency market. Because of a series of external factors in recent months, culminating with the Russia-Ukraine crisis, the price of Bitcoin, and consequently, the whole market has suffered.
And, although everything pointed towards a bearish crypto market at certain points, now it seems clear it was still an extended bullish cycle. Had investors made sudden, decisions driven by fear, they would have lost money (Just a week ago Bitcoin was $35K, and today it has run up to $41K.
The moral of the story is clear: Keep Calm and carry on!
A bearish crypto market is natural
The most important thing to keep in mind during an economic slowdown is that it is normal for every market to have bad years, it is part of the business cycle. If you are a long-term investor (i.e. a time horizon of over 10 years), one option is to take advantage of the average dollar cost (DCA). By buying assets (coins, stocks, etc.) regardless of the price, you end up buying them at a low price when the market is down. In the long run, the cost will be always rising to leave you with a better overall ROI.
During a bear market, the bears dominate and the bulls have no chance. There’s an old saying that the best thing to do at a bear market is to play dead – the same protocol as to when you meet a real grizzly in the woods. Fighting would be very dangerous. By staying calm and not making sudden moves, you will save yourself from becoming a bear lunch. Playing ” dead ” in financial terms means staying liquid and putting more of your portfolio into money market securities.
Diversify your investments
Having a percentage of the portfolio split between different coins is the core of diversification. The breakdown of the securities portfolio depends on risk tolerance, time horizon, objectives, etc. Every investor’s situation is different. A correct resource allocation strategy will allow you to avoid the potentially negative effects of putting all your eggs in one basket.
Invest only what you can afford to lose
Investing is important, but so is eating and keeping a roof over your head. It is not wise to take short-term funds (i.e. mortgage money or loans) and invest them in crypto. As a general rule, investors should not be involved in cryptocurrency unless they have an investment horizon of at least three years, preferably longer, and should never invest money they cannot afford to lose. Remember, putting up with the market and even minor corrections can be extremely destructive.
Look for good values in a bearish crypto market
Bearish markets can offer investors great opportunities. The trick is to know what you are looking for. Undervalued, undervalued, undervalued – these are the 3 golden rules when choosing good coins to invest in.
That’s the tricky side of investing in crypto – how to be able to point out the good undervalued coins with growth potential?
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Bearish Crypto Market – Conclusion
Usually, a bear market means losses for investors, but only if you “put all your apples in one bucket”, or if you’re focused on short-term profiting. Even if a bearish market surprises you, keep in mind that every market moves in cycles, and each new cycle is stronger than the previous one.
For example, if you invested in Ethereum when it was around $3000, during the next bear cycle the price could drop down to $500. But, Ethereum is a $5000 – $10000 coin, and you could even invest more at a lower price because, rest assured, the prices will reach new all-time highs during the next bull cycle.
“Buy low, sell high”. We have all heard this expression, and it truly is the law of any market, including cryptocurrencies.
When the bears kick in, Bitcoin, as the original cryptocurrency will drop, maybe even dramatically. And since Bitcoin is the strongest regulating element of the crypto market, the altcoins will suffer too.
The top cap coins will be affected, but the lower ones will be hit the hardest. Especially the ones that had the best and biggest runs in this bull cycle.
Make sure to chose wisely which ones to invest in. During the next bearish crypto market, you will have the chance to buy coins that have the potential to go 10, 100, or 1000x for pennies.
So, educate yourself, don’t make rash decisions based on emotions, diversify, and arm yourself with patience. The crypto market is the best opportunity to change your life forever,
To your success!