Bear markets hurt. It’s tough to enter the cryptocurrency market when things are going great and then watch all of your gains go south.
Too many people make the wrong moves when this happens. It’s something that even experienced investors are guilty of doing, but it always seems to hit the new people just a bit harder.
If this is your first bear market, then sit back and relax. Today, we will tell you a few ways that can help soften the blow and prepare you for the next bull run.
1. Take the Time to Reevaluate
There is no such thing as a perfect portfolio. But when every chain and project is pumping, it may not be clear which protocols are the best.
A bear market will sort out the best from the worst really fast. Devs will give up. Investors will bail. The FUD will be coming in from every angle.
By the time you see the writing on the wall, it could be too late. Take a hard look at your current holdings. Which ones have proven themselves to be blue-chip investments capable of surviving market downturns both now and in the future?
While you may take some short-term losses now, it’s better than watching the tokens of destructive projects sink to zero.
A bear market could also be an excellent opportunity to rebalance your portfolio. Maybe something that looked risky at first is holding strong and being resilient to the downturn.
Now could be the time to move some funds over and increase your position so you can be ready for the next pump and take some nice profits along the way.
2. Keep Stables Ready to Deploy
With new blockchains emerging every week and hundreds of defi projects, gamefi options, and NFTs popping up all over the place, it’s way too easy to ape into anything and everything.
Investing well requires you to be patient and disciplined. One of the best ways to do this is to keep stablecoins at the ready. This way, you can invest incrementally.
This process is called DCA’ing, or dollar-cost averaging. The first part of the process is to decide on a plan. You can add money at key support points or feel it out with your instincts. The second part of this strategy involves figuring out how much of your stablecoins you want to use for each deployment.
As an example, let’s say you have $1,000 in USDC. One strategy could be to invest $500 at one support line, $250 at the second, and the rest at the third. Then you just ride it out from there.
Or you could break it up into $100 or $200 increments. The choice is up to you.
What matters is having a plan and you should make an effort to devise a strategy for this situation before it happens.
Keep in mind that downturns don’t include a single dip. There could be multiple dips, rallies, and sideways trading along the way.
3. Buy the Dip
Now is the time to reinvest in your highest conviction plays. It doesn’t matter if the price is dropping to extreme lows. As crypto investors, it’s essential to understand that these markets are volatile on a level you do not see in traditional finance.
And that’s ok. It’s part of the game.
Just like any other game, the more you play, the better you’ll get.
There are multiple ways to buy the dip. You should do your own research to find out which one of these strategies will work best for you. But what really matters is what you’re buying, why you’re buying, and how you’re buying.
Don’t expect to make perfect plays, especially if this is your first bear market. Use this as a learning experience. Researching combined with experience in the market will only help make you a wiser investor in the future.
Periods of market turmoil have a lot of arbitrage bots going crazy. Expect to see some high gas fees and wait for opportune moments to unload your fiat for the lowest possible prices. You’ll save a ton of money in the long run.
4. Farm and Chill
Crypto offers something you don’t see at all in traditional finance. This is the ability to “farm” tokens.
The most popular way of accomplishing this is to go to your favorite DEX (decentralized exchange) and split your money between two tokens, create liquidity provider tokens with these funds, and add those tokens to the pool in exchange for a reward.
While this strategy does incur impermanent loss, it can also help you make extra money during a bear market. As the price goes up, you can continue farming or pull out the lp tokens and distribute the funds however you see fit.
5. Don’t Time the Market
“Time in the market beats timing the market.”
It’s impossible to perfectly time the bottoms and tops of the cryptocurrency markets. Most of us look at graphs and charts that show price movements in a line.
But it isn’t a line at all.
Financial markets are cyclical, and they’re also unpredictable. However, they usually aren’t random. Interest rate hikes, recessions, acts of war, and global economic shifts affect every market.
Rather than attempting to time the market, put your money in and deploy the funds in various forms depending on your strategy.
If you think a correction is coming, maybe you go heavy on stablecoins to avoid significant losses when the correction happens. Alternatively, you can also go heavy on stablecoins in a bear market using farms and wait for price action to move in either direction before you throw money at a volatile asset like Bitcoin or Ethereum.
Another part of your plan could be to slowly limp into projects while keeping a certain percentage of your portfolio in stablecoins so you can make moves as the markets shift without having to take heavy losses.
The possibilities are nearly endless. What matters most is getting money into the market and educating yourself on the fundamentals before tackling advanced strategies.
6. Beware of Influencers
Crypto influencers are all over platforms like YouTube and Twitter. One of the biggest issues I see with new and young investors in the crypto space is that they receive the bulk of their information from these influencers.
While there is nothing wrong with using these channels to learn about new projects, it’s crucial that you do your own research and understand that influencers are not educators. In fact, many of them use their viewers and followers as exit liquidity.
If you discover a new project or blockchain through an influencer, start doing your own research. Join the Discord and Telegram. Read the docs. Ask questions. Know what this project or chain is bringing to the table.
Think of it like you’re investing in any other business. What is the problem these developers are trying to solve, and how well can they do it? Aping into projects because they’re new and you want to catch the pump is a good way to lose money. The same can be said for chasing high APRs.
Conclusion
You should use these tips as a starting point for your journey through this bear market. Do not take them as gospel. Instead, use them to hone your strategy, find new projects worth your time and money, and explore the communities that come with them.
Crypto is a lot of fun, regardless of the sentiment we’re seeing on any given day. So sit back and relax because not even the worst bear market doesn’t last forever.
If you enjoyed my post today and want to read some more, check out this one I wrote on NFTs.
