It has been a decade since Bitcoin was initially introduced, and investors have learned that the crypto market can be incredibly volatile. Bull and bear markets have alternated over the years, and none could be predicted or avoided. Even the most superficial detail has been enough to turn a situation altogether.
The Bull Run, which occurred around a year ago, was the most momentous event in the history of cryptos driving Bitcoin and numerous other altcoins to new highs. Those who bought into the bull run before it began made a killing. Those who invested while the price was high — lost it.
Before we start, let’s recap what a Bear market is if you do not already know.
How does a bear market work?
The term “bear market” refers to a period of falling prices. When prices begin to decline, traders panic and respond by selling their positions, shorting the market, or seeking other market exits, resulting in a domino effect. Many traders are “bearish” now, which means they expect prices to fall more before things begin to improve again.
The recent Bitcoin collapse is not the first time cryptocurrency has seen a bear market. For example, the industry had already been subjected to harsher winters, such as the ones listed below:
Bitcoin dropped from $1,200 to $200 in 2014, losing 86 percent of its value.
In 2018, the price of Bitcoin fell from $20,000 to $3,000.
During the global pandemic-fueled market crash in March 2020, Bitcoin fell from $9,000 to $4,500 in a matter of days.
Given this history, cryptocurrency traders may be able to ride out the bear market trends and position themselves in anticipation of a recovery. It is also possible for market makers to profit from a bear market, even if the market falls. But how exactly? Continue reading.
Combating bears the right way
These are some strategies that investors can use to protect themselves from the impending bear market and keep more value in their portfolios.
- Don’t accept ‘shitcoins.’
When the market has been continuously dropping for an extended period, it will help to reassess your positions and products. Altcoins with a high level of volatility should be kept out of the main spotlight.
Many initiatives, such as meme coins and rebase projects, float through the crypto market as a new offering with no make-hold requirement. The majority of token holders here are new to the market and lack a thorough understanding of it.
Investors should cut ties if things appear gimmicky with flashy marketing strategies and grandiose promises. Open your GitHub account to see whether there is any activity and how many developers are working on the projects.
Another option is to use the withdrawn monies to purchase stable coins. Future dips can be purchased with stable coins.
- An alternative to Dollar-Cost Averaging
There’s a reason bitcoins are always mentioning dollar-cost averaging. They have a unique understanding of work and scarcity.
Dollar-Cost Averaging (DCA) investors divide their overall investment into smaller, more regular purchases to obtain their chosen item. It minimizes the total volatility impact of the purchase. With this method, you can avoid making a single lump-sum investment that does not make sense in asset pricing.
The DCA technique is a terrific way to expose sound projects in the crypto market over time. If you plan to use dollar-cost averaging, ensure your project has a clear way ahead, a supportive community, and an active development cycle. It is difficult to anticipate the bottom of a bear market, and it is also impossible to predict which of the 17000+ cryptocurrencies will return first.
DCA can be used to invest in a wide range of crypto assets. This will lower the magnitude of your trades while protecting you from the overall risk of losing money. Of course, exploring potential crypto assets is a time-consuming and in-depth procedure that necessitates substantial research. It does, however, merely serve to diversify your cryptocurrency assets.