A bear market is when asset prices dip below 20% from recent highs and continue trending downwards. Whether in the traditional stock market or cryptocurrency market, a bear market can send waves of panic and anxiety to investors and traders.
But rather than being afraid of suffering losses during a bear market, there are actually some ways you can benefit from it – or at least come out unscathed. As they say, a loss is not really a loss until you sell it! In fact, most bear markets recover and become bullish again with time.
Let’s look at some ways to invest wisely amidst a bear market and cut your losses.
Decide on your game plan
Stay well away from the fear of missing out (FOMO) crowd, and stick to your guns. The bear market is dominated by fear and panic – but you don’t need to be driven by your emotions and make impulse decisions.
Instead, you should plan ahead even before entering any trade. What is your threshold for risk, and how much are you willing to lose? When you set clear targets for yourself, you are less likely to react on impulse and make silly decisions.
This approach banks on the fact that most markets don’t stay bearish forever. Take a look at Bitcoin, for example. Although there are frequent price fluctuations and times when the market is bearish, Bitcoin has ultimately shown an upward trend over time. Of course, certain factors like scarcity and real-life value also affect whether a crypto project will grow in the long run.
So, if you are investing in a project you believe will continue to grow, it’s worth exploring a longer timeframe for your investments. A bear market is nothing to worry about if you are taking the ‘hold on for dear life (HODL)’ approach.
Dollar cost averaging
A sweet yet beginner-friendly crypto trading strategy, dollar cost averaging (DCA) spreads out your spending over time, letting you buy crypto at more affordable prices overall. It works by you investing a fixed amount at regular intervals, whether the prices are high or low.
By using DCA, you won’t need to fret during a bear market because you will actually be getting more bang for your buck! For assets that you believe will eventually grow in price, DCA is an effective way of investing efficiently and taking out the guesswork of when the best time is to buy.
Take advantage of opportunities
For the more experienced or adventurous traders, bear markets are opportunities in disguise. Two common methods to take advantage of the bear market are buying the dip and short-selling.
Those who are quite confident about the long-term growth of a project can make use of bearish markets to buy the dip. In other words, it is buying more assets at a ‘discounted’ price! This way, you can enjoy even more profits later on when the market becomes bullish again.
Short-selling is a more advanced technique that requires predicting that the prices will continue to drop. In which case, you sell off your assets at a low price but buy them again when the price has dropped even lower. This way, you get to earn a profit from the difference.
A bear market is not always the scary situation the media makes it out to be. A good investor or trader will know how to make the best use of the situation, acting with a rational mind and strategic thinking.
You can begin by trying out some of these strategies for the bear market on Coinut, a secure and trusted cryptocurrency exchange in Singapore and Canada. We support Bitcoin, Ethereum, and Litecoin exchanges, in addition to some stablecoins such as Tether and XSGD. With low commission fees and real-time updates, you can trade without worries anytime and anywhere. Join us today on Coinut!
RISK DISCLOSURE: ⚠️
Digital payment token investments, such as cryptocurrencies, are not guaranteed by service providers or cryptocurrency exchanges and the government. It is crucial to exercise caution in investing, including the awareness that a part or all of the capital may be lost and may not be recovered especially in cases of high price volatility or down market, bankruptcy, seizures and other factors. Hence, the user’s risk tolerance, investment appetite or capacity for loss should be set firstly and they should observe safe and knowledgeable investment practices accordingly. For more information, please visit MAS' website.
IMPORTANT NOTE: 📢
Coinut.com is a financial entity regulated as a Money Services Business in Canada and an exempt entity under the Payment Services Act in Singapore. Please be reminded that cryptocurrency trading is highly risky and is not suitable for the general public. For more information please refer to Risk Warnings and Risk Statements.