Common Bear Market Mistakes to Avoid

Bear markets in cryptocurrency can be harsh for inexperienced investors. The swings are generally much more violent than in traditional stock markets, with some coins dropping 90 percent (or more) of their all-time high values.

Investors can make costly mistakes if they lack sufficient knowledge or are experiencing a cryptocurrency bear market for the first time. With this in mind, learning from people who have been through prior periods, as well as anticipating these errors, could save both money and emotional stress. The following are some of the most common mistakes traders and investors make during a cryptocurrency bear market, as well as tips on how to avoid them.

Panic Selling

Panic is always a bad thing. This is because when we panic, we feel high levels of anxiety, and it usually occurs in response to an existing danger. Whenever this happens, we are more prone to losing control and making rash decisions that lack common sense and logic.

In the trading and investing world, panic selling refers to a widespread selloff of a cryptocurrency due to fear, rumor, or — in general — an overreaction rather than a reasoned and carefully planned analysis.

Investing in cryptocurrencies should be done on the basis of sound, objective merits rather than emotions. For example, Bitcoin is widely regarded as digital gold — a store of value that has historically appreciated over time. Many people invest in it to preserve the purchasing power of their funds, especially during times of high inflation when fiat currencies devalue at a faster rate. If this is the primer — the primary reason for the investment — one is likely to prefer a long-time frame, with the only reason to sell being if something fundamentally shifts in the narrative and Bitcoin ceases to fulfill its role.

However, in practice, many people begin market selling their BTC when the price begins to fall. They forget (or fail to recognize) that BTC is primarily regarded as a risk-on asset by many, and this is the general consensus, at least at the time of writing. As a result, during times of economic turmoil, it is entirely possible for investors to liquidate BTC before liquidating other assets deemed safer. This causes the price to fall, sometimes dramatically.

Many investors panic during these aggressive selloffs. This is completely normal, but it is also the most common error.

Holding too tight to your bags

While you should avoid panic selling, this does not preclude you from ever selling. Recognizing that you made a poor investment and putting your ego aside are equally important. Many people become “married to their bags,” which means they develop an emotional attachment to the investment and abandon reason and logic when the narrative behind it fails.

This happened to a lot of people in 2017 and 2018 when the ICO boom was at its peak. Many investors got in early, and made significant returns, but failed to take profit in pursuit of even greater returns.

Many altcoins that have lost more than 90% of their value since the ATH are unlikely to return to these levels. Don’t be afraid to cut your losses and take profit.

Overtrading

This also has a lot to do with mismanaging emotions. Overtrading is frequently the result of a number of factors, including regret for misreading an investment thesis, missing out on an opportunity, a strong desire to recoup previous losses, and so on.

All of the above have one thing in common: they all cause emotional decision-making. Remember, the market doesn’t care about your emotions; the charts are simply a visual representation of information, and it’s up to you to interpret it. In all cases, however, this is a process based solely on objectivity — one in which emotions have no place.

Attempting to Time the Bottom

Another common mistake that newcomers make is attempting to time the bottom. It’s an old story: “BTC still has room to fall; I’ll buy then.” Then one of two things occurs:

1. Bitcoin does fall, but they never buy because they believe (once again) that it has more room to fall.

Bitcoin never falls, and they don’t buy with the expectation of “one last leg down.”

Consider this, however. Assume Bitcoin is trading at $10,000 and you believe it will fall to $8,000 in another 20% drop. You do not buy, and Bitcoin then goes on a parabolic bull run, reaching $100,000. Now consider whether that 20% was worthwhile.

Failure to Pay Attention to Mental Health

One thing should be obvious from all of this: your mental health is critical. There is no amount of money that is worth sacrificing your health. It’s important to bring this up now that cryptocurrencies have somewhat entered the mainstream channels of investment. More and more people get into trading and investing in crypto.

Take care of your mental health; don’t ignore it. If you believe that cryptocurrency is here to stay, investing for the long term is one of the less stressful things you can do. If you believe Bitcoin is digital gold and will eventually replace traditional gold, why worry about a 10% increase or decrease in its price now?

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