Every market goes through a bull and bear market. As shiny and amazing the bull run seems, it comes to an end one day.
Right now, we are in a bear market that doesn’t seem to end. The price of bitcoin fall tremendously in the past year, and now it is hovering around $4,500. That’s a substantial drop from an all-time high of $20K in December 2017.
Bear markets can be tough, and that’s why as an investor, you should learn how to survive a crypto bear market. If you are a type of person who invests only for profit, then you need to start learning about the market works.
Before we decide and list the tips on how to survive a crypto bear market, let’s try to understand a few basic things about the bear market.
Why bear markets exist?
The first question that we want to discuss is the existence of the bear market. Why do they exist? First, we need to understand that the bear market is part of the market cycle. In no perfect world, no market can grow in one direction. The downward movement is part of the whole deal, and you should acknowledge it rather than fear from it.
To get a better understanding, let’s check the bitcoin price graph below:
As you can see the price of bitcoin fall sharply after January 2018. If you zoom in to the graph, you will see that the price has gone through a complete cycle of bull and bear market. It is has grown tremendously, only to be corrected in the upcoming months.
The price of cryptocurrencies is highly speculative as the market is new and unregulated compared to other markets. This leads to unprecedented growth. Also, the fact that institutional money comes in when there is a bull market(in the case of cryptocurrency at least). With the crypto hype settled, the interest in cryptocurrency and bitcoin has decreased over time. We can verify the info by checking the interest over time for the “bitcoin” keyword. We used bitcoin keyword because it was the catalyst in making the crypto market reach new heights.
Source: Interest over time for bitcoin keyword using Google trends tool.
The cycle of Market Emotions
Emotions drive market more than you think. In retrospect, a successful trader is the one that can identify the market emotion and act accordingly. Returns are guaranteed only for those who make a rational decision. To get a better understanding, we need to take a look at the cycle of market emotions. Every market, irrespective of its nature, goes through the cycle of market emotions.
Image Source: Forbes
Forbes in their article, understanding the cycle of market emotions, explains how important it is to understand it and enable you to make smart investment decisions. We do recommend giving that article a read.
How to Survive a Crypto Bear Market
With the basic knowledge of how the bear market works, we are now ready to list the tips on surviving a crypto bear market. Let’s get started.
Cost Average: Should you buy more?
The bear market might be an emotional rollercoaster, but it does give you the ability to cost average. This means that you can buy more units of the crypto and bring down the average cost of your holding. But, beware not to spend more than you are ready to lose.
The idea here is to lower the average such that when the market rise, you can break-even earlier than those who didn’t do cost average. The key to do a proper cost average is to buy in small chunks when you think that the prices are the lowest or near the lowest point. It is not easy to predict the market, and you also have to take an educated guess or use technical analysis to help you make the decision. This leads us to our 2nd point which is about learning technical analysis.
Learn technical analysis
Technical analysis is one of the important skills that a trader should have. If you invested without any technical analysis, the chances are that you don’t know how important it can be. In the bear market, you should invest time in improving your understanding by learning technical analysis. Start with basics and slowly move towards complex topics. Technical analysis can also help you to do cost average.
Set long-term goals: Patience is the key
Many investors invest in crypto with a long-term goal. But, during the bear market, emotions can dictate, and they might forget their long-term goal. Even if you didn’t have a long-term goal in mind, selling in the bear market is not a good idea. That’s why you should rethink your strategy and wait for the market to grow. Patience is the key here as it gives you the ability to make rational decisions and not act because of fear.
Use your knowledge and get a Crypto Job
One more tip that you can use is to do a crypto job. There are many crypto related jobs out there including writing, promotion, marketing, and so on. If you are into cryptocurrency, you may also want to start learning how to develop and manage apps for blockchain. This will give you enough time to breathe and look into things in proper perspective.
Becoming a crypto winner is no simple task. You need to be patient and have proper knowledge on how to stay strong during the hard times. A bear market can be very hard, considering that many investors lose hope. Also, the positive news hardly makes any impact on the market which makes the market stagnant for an extended period. We hope that you understood the cycle of market emotion and will make informed decisions.
So, which tips are you going to use to survive this crypto bear market? Join the discussion on our Discord and Telegram channels.