If you are a regular trader, you must know that bear markets are just part of the cycle. However, knowing that bear market will come doesn’t grant you the knowledge to manage your cryptocurrency portfolio.
When the bear market hits, you may or may not be ready. It is hard to predict the market cycle, and you are not alone. Last year, we saw an unprecedented growth on the cryptocurrency market. However, this year (2018) became the complete opposite, and we are now in the year-long bear market. The rise and fall can be too hard for many investors out there, and that’s why we will be covering tips on how to manage your cryptocurrency portfolio during a bear market. Let’s get started.
Note: The tips that we are going to share do not represent financial advice. Hence, If you are not sure about a suggestion or do not entirely understand its underlying risk or the concept, we recommend you not to follow it.
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Tips to Help you Manage your Cryptocurrency Portfolio during this Bear Market
1. Short Bitcoin
If you are a trader and know what you are doing, you can short Bitcoin in the hope of making more money when the market is going down. Crypto assets are very volatile, and this adds a new dimension to trading. Shorting works if you can predict the value of the Bitcoin when it drops in value. If it does, you make a profit. This strategy is best effective in bear markets as you have higher chances of success.
Let’s take an example to get a better grasp.
For example, you bought 1 BTC at $5,000. Now, you want to short it. For it, you need to find a CFD broker with the support of BTC/USD pair. Now, set a hedge ratio to any percentage. Let’s pick 80%. So, if BTC falls to 80% of the value, your portfolio will be safe against the profit that you gain from shortening Bitcoin. We’ll further explore this topic in our next article.
2. Convert to USDT or BTC
Tethering your investment during the bear market can save a lot of your initial investment. USDT or Tether is pegged against US dollar and hence is a good way of holding your investment during a free fall or bear market. Many crypto exchanges don’t support USD and hence it can be a good alternative to convert your crypto asset to USDT or TrueUSD, for example.
You can also choose to convert your crypto asset to BTC. BTC is the leading cryptocurrency that reached new heights in 2017 by reaching $19,500. It is also seen as a storage value, and many investors always keep some of their investment in Bitcoin. It is also the most tradable crypto in the market which also makes it a good storage value asset.
In our opinion, keeping a percentage of your investment in both Bitcoin and USDT is a good choice. Also, make sure that you re-enter the market and buy back the coins that you have invested earlier. Want to learn more about it? Check out our article on stablecoins.
3. Don’t Panic
One of the common tips that are applicable to everyone who is going through the bear market is not to panic. Panic can hamper your decision-making capacity which in turn will you sell everything or make rash decisions to get into some coins. Of course, many will agree that this is easier said than done. However, being conscious of your own emotional state is the first step to control it.
4. Hold your investment
Another tip that can be used by anyone in the market is the simply do nothing. Markets have dropped in the past as well and have always recovered and gone past all-time-high. If you don’t need to take out your investment in the near future, we recommend you to hold your investment simply. This strategy might not be for everyone though. You may also think of holding a certain part of your investment and play with the rest.
In long-term, if you believe on the true vision proposed by bitcoin, you can assume that the chances of you making a profit are higher compared to if you sell your crypto assets now.
5. Swing Trading
Swing trading is another method that traders utilize to make the most out of a bear market. Traders, who can invest time into trading, can do swing trading and do portfolio management the right way.
So, what exactly is swing trading?
Swing trading is a method through which traders actively search for entering and exit positions. It is generally done for a short period, either for few hours to few days. This is done to utilize the short-term market trends. However, to make it work and predict correctly, you need some trading experience behind your belt. That’s why we recommend this strategy only for experienced traders who know what they are doing.
Also, you need to keep yourself up-to-date with every news out there. The news plays a great role in affecting the price movement. We recommend following top news sites such as CoinDesk, CoinTelegraph, and others. You may also want to keep your eye out on active forums including the popular Bitcointalk forum.
6. Take part in ICOs: Diversifying your portfolio
The bear market also opens up a new opportunity when it comes to diversifying your portfolio. An excellent diversified portfolio will always have less impact compared to a less or no diversified one. You can take part in ICOs to diversify. However, be wary that ICOs are potentially the riskiest option right now. But, if you do your homework (due diligence) and know your thing, you are bound to be successful and turn on a profit.
If ICOs is not your cup of tea, we recommend investing in other coins that you are interested in. You can also check out tokenized assets which offer an excellent potential to grow.
As is general knowledge, diversification is essential, but always ensure to set limits to what you are doing. Never over-diversify as it will have an adverse effect on your portfolio rather than helping it stay afloat.
Bear markets can be tough. But, if you know how to monitor and take proper actions, you can easily manage your cryptocurrency portfolio. So, what do you think about the tips shared here? Are you going to follow them? If yes, then comment below and let us know.