Surviving a Bear Market: 6 Practical Steps.
Cryptocurrency trading isn’t a science, but it does follow Newton’s third law of motion and the law of gravity. What goes up must come down. As good as bull markets can be, you will one day wake up to discover that the financial world has taken a turn you didn’t expect, and it may be too late to avoid losses. Welcome to the bear market, then.
Here are some tips for surviving the cryptocurrency winter or bear market:
See also: Why Is The Crypto Market So Wild? Factors That Move The Crypto Market.
- Fight the urge to pack up shop and run.
You might be tempted to sell all your cryptos at the first sign of a bear market to limit your losses. That strategy, as it turns out, runs antithetical to the wealthy mindset.
“During an economic downturn or bear market, investors must be able to hold on to their investments; unfortunately, most investors might sell off their crypto instead of delving into their long-term investments.
One of the keys to avoiding this situation is having liquid cash on hand when the economy is shaky. This will enable you to take your eyes off your investments in the meantime.
2. Instead of converting to cash, convert to a stable coin.
Stable coins are cryptocurrencies backed by a reserve asset and aim to provide price stability. Traders utilize these to maintain stability and to enter and exit positions. Another advantage of holding stable coins is the abundance of staking payouts, which can often be as high as 6%.
When you convert assets to stable coins, you maintain the dollar value and expand it at a constant rate, regardless of the market situation.
3.Try staking
Staking appears to be a fantastic strategy to create a passive income from your crypto stack when the going gets rough in a crypto bear market and your portfolio starts losing value left and right. Staking is the process of storing your funds on a proof-of-stake (PoS) blockchain for a set amount of time in exchange for a reward.
See also: Surprising Uses Of Blockchain Outside Cryptocurrencies.
4. Avoid shorting in a bear market
Shorting is a trading strategy that allows traders to profit from dropping cryptocurrency values. That should make it a great fit in a bear market, where price decreases are prevalent. Most experts, however, advise against shorting bitcoin and other cryptocurrencies because it might result in permanent losses or the liquidation of your position. This is a basic issue with shorting, and no amount of practice can prepare you for the unpleasant surprises that await you when things go wrong.
5. Don’t store your cryptocurrency on exchanges.
“Nor your keys, not your coins,” as they say. This holds true in almost any scenario involving a centralized, custodial cryptocurrency exchange. However, during a severe bear market, the dangers of losing your cash deposited in these exchanges become significantly greater.
Consider what would happen if the stock market crashed suddenly. Hundreds of billions of dollars would be wiped from the market, leaving several exchanges bankrupt.
To completely control your crypto assets, always use a non-custodial wallet program or, better yet, a tried-and-true hardware wallet.
6. Incorporate Stop-Loss Orders into your trading strategy
It’s not a terrible idea to utilize stop-loss orders to assist limit greater losses. In fact, in a crypto bear market, they should form the foundation of most of your trade. A buyer can use these orders to limit losses when the price falls by establishing a lower limit and then selling the coin. This lower restriction is set to a percentage below the amount an asset is purchased at, with the assumption that once the price reaches this lower limit, it will most likely fall even further.
Finally, understand that, this is only a phase of the entire market cycle. In no time, the bull will reclaim the market and you will be in massive profits again.
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