What is a Bear Market and How It Might Influence Your Investment Strategy
Unfortunately, the time has come, and the two dreaded words are all over the web: crypto winter. Such a market recession is not new for the community, but many traders were still shocked when the Bitcoin price dropped below $20K for a day or two.
Just think about it. When the value of your favorite coin goes down for a day, it’s disturbing. But when the whole market stays red for a few months, it might get incredibly stressful for any investor, let alone newcomers.
Being confused or scared in such a situation is a very logical reaction. But let us reassure you — this bear market will be over soon, and the industry will recover. Wanna know more? Read on to find out how to invest in cryptocurrency during a market recession and how to build the most effective strategy right now.
What is a bear market in crypto?
A “bear market” is a term borrowed from traditional finance. It defines a period when the market experiences a long price decline, usually of 20% or more. In the blockchain industry, this is also called a crypto winter.
At the moment, we are experiencing a crypto bear market, with the Bitcoin falling by over 70% compared to its November record high of $68K. The last time such a dramatic decline was in late 2017 and lasted for about 18 months, leading to a 65% Bitcoin decline and a huge capital loss by retail investors.
The good news is that bear markets don’t last forever but are followed by upward-trending bull markets, which are usually much longer.
How long does a crypto bear market last?
Traditional bear markets last an average of 289 days, while bull markets can run upwards of 991 days. That’s very promising, right?
However, when it comes to cryptocurrency, it gets really hard to predict the longevity of a bear market and the consequent losses. The main reason for that is the infancy of the industry. Since crypto is a comparatively young sphere, it is impossible to predict the price due to the lack of valuation models and specific analysis strategies.
How to invest in cryptocurrencies in 2022?
Market changes are inevitable, so, unfortunately, we will get bear and bull markets changing one another in a vicious circle. But even though you can’t prevent a market decline, you can learn to adapt, save your investments, and even take advantage of the situation.
The first thing that crosses your mind when you start noticing a downward trend in the market might be to withdraw all your investments and/or wait until the situation is stable and the value of crypto starts growing again. Of course, such a strategy might sound very reasonable, but what if we say that there are ways to benefit during a bear market, too?
Let us show you a few worthy investment strategies, and you may decide for yourself whether you’d like to try them or not.
Diversify your portfolio
The first thing you should do when building your portfolio is think of the ways to diversify it. Invest in different assets, work out a strategy that would allow you to find new promising coins, and you’ll never have to worry about a bear market.
The thing is that even though bear markets signify an overall downward trend, some assets drop in price much more than the others. This way, by diversifying your portfolio, you will minimize potential losses in advance.
Invest in a crypto index
If building a diversified portfolio seems like too much work, consider investing in a crypto index. This way, you will get a bucket of various assets chosen by professional traders in the best proportion.
At DeHive, we offer well-balanced crypto indexes that allow you to get the maximum possible annual yield on cryptocurrencies even if you have zero experience in trading. Currently, we have indexes in the Ethereum, Binance Smart Chain, Polygon, and xDai networks, but we are about to release the first-ever crypto index in the NEAR & Aurora ecosystem as well.
Take advantage of stablecoins
Although many traders use stablecoins for storing their assets, very few benefit from them. Perhaps, the reason is that there are not that many tools that allow staking stablecoins, or maybe investors don’t view it as a sufficient income stream. Either way, you might be missing out if you don’t use stablecoin instruments during a bear market.
Staking stablecoins provides traders with many benefits, including low volatility, high security, and stable passive income even during high market fluctuations.
One of the stablecoin tools is DeHive Stables that enable stablecoin farming, help you optimize returns and get maximum profit with minimum effort. Stables allow earning yield on stablecoins and, thus, staying afloat even during a bear market.
Focus on the long-term investments
It’s been proven that prices generally pick up the pace over time, and eventually, we all notice an upward trend regardless of the current market state. This means that long-term investments are still on, and you may get a great deal during a bear market that will eventually grow tenfold. Because if you are not looking for fast investment returns, bear markets are the best times to buy crypto assets at the lowest prices.
The final word
Bear markets are, indeed, the most dreaded periods in the crypto industry. However, they never last for decades and bring plenty of opportunities for thoughtful investors.
If you are trying to build or review your investment strategy during a bear market, consider diversifying your portfolio, investing long term, and getting crypto indexes and stablecoin tools. These instruments will allow you to make a profit even at times of market decline.