In 2022, the crypto market has taken a downturn, and we are facing the blues of the crypto winter. Even the largest players are facing the adverse effects of this market. Not intending to generalize the lines, we can’t deny that making money in the bull market is not that big of a deal. But earning benefits during a bear market is not everybody’s cup of tea. How efficiently you navigate the bear market of this intensely volatile crypto world proves how good a trader you are. With another crypto winter in for a while now, we can see how every small and big player in the market is optimizing their investment and trading strategies to survive this bear run.
A strong market sell-off that features a large-scale decline in price for a considerable period is referred to as the bear market. In this situation, the supply is more than the demand, and as a result, prices decline. Such a situation lowers the confidence of the investors.
Investors who hold a pessimistic approach and believe that the prices will continue to fall are called bears. Bear market trading can be tricky, specifically for traders who don’t have much prior expertise. While the bear market also occurs in traditional markets like real estate, forex, stocks, etc., the ones in the crypto realm are much more volatile.
This might be because, as an assets class, the crypto market is just around a decade old, making it relatively new to investors. In addition, within just a short period, it has witnessed a series of ups and downs. Thus the certainty of this market is often questioned.
Bull v/s. Bear market
Take the circumstance just the dire opposite of the bear market, and you get a bull market. It occurs when the asset class price is on the rise for an extended duration, due to which the value of your portfolio surges.
When the investors are confident that the price of an asset or an asset class will rise and will continue to do so for a prolonged period, we can witness the bull market. Due to this belief of the hike in the price of the assets, the investors start purchasing and holding them, thinking they would benefit the most from the bull market. With such an increase in demand, the prices start increasing, turning the bullish market into a self-fulfilling prophecy.
While some investors might be bearish in any market, most have a bullish approach. As compared to the bull market, the bear markets are short-lived. They are a more challenging period to make investments and maneuver.
One of the major factors in deciding the bullish or bearish trend of the market is the investor’s psychology. Apart from this, several other factors include supply and demand, socioeconomic stability, activities in the broader financial market, etc.
Generally, the bear market is associated with a short duration during which the price of the assets takes a dip of around 30 percent compared to their all-time highs. When it comes to the concept of crypto winter, it is more disastrous as compared to a regular bear market. Crypto winter is the most shuddersome period in the short history of the crypto realm. It refers to a prolonged bearish market condition, continuously extending up to several months.
Under such circumstances, the price of most of the assets in the crypto world continues to fall. This fall in price during the crypto winter tends to be quite steep. For instance, the last crypto winter, which occurred in early 2018, and continued till mid-2020, witnessed the Bitcoin shedding almost 88% of its value compared to its then all-time high (ATH) price. Apart from this, several other popular coins witnessed a 90 to 95% drop in price compared to their then ATHs.
Best strategies to overcome a bitcoin bear market
Bitcoin is the oldest and the most popular coin in the crypto universe. It’s a trendsetter for the market. The first signs of the effects of the market’s ups and downs are most often visible in the price movement of Bitcoin. By far, the other cryptocurrencies follow Bitcoin and take the turn that Bitcoin takes. This holds even when the market recovers and preps for the eventual fresh bull run.
Bitcoin has been at its lows for several weeks in the present crypto winter run. Almost all significant coins, including Ethereum, Tether, Cardano, etc., have been facing similar blues with the alpha crypto shedding its value. However, if we look at previous data on Bitcoin, it has a history of always bouncing back.
Due to this previous trend, a major share of crypto experts and industry insiders are of the notion the best way to survive a Bitcoin bear is to Hodl and wait for the storm to pass. They suggest that at such a moment, we should avoid giving in to the urge of panic selling and have a futuristic long-term-based outlook. Apart from this, most of the points we would discuss would also apply to the Bitcoin bear market.
Top 7 ways to survive a crypto bear market
- Stay calm and assess your options
The first thing that you have to pay attention to is to keep your calm. Whether you are someone who thinks that the bear market would serve as an opportunity to purchase the dip, or the one who gets stressed when the crypto prices start falling, you must ensure that you don’t get too worked up with the situation. You must calmly and objectively assess the situation. Emotional and rushed decisions that are not backed by solid logic and strategy would most likely subject you to regrets in the run.
- Don’t try to time the bottom
Do NOT be of the view that you can accurately time the bottom. Nobody can make accurate predictions regarding the bottoms irrespective of how learned they are in the crypto universe. You can listen to as many experts or go through several technical and fundamental analyses, but ultimately, you must rely on your gut feeling when trying to time the bottom.
The worst part is, in the crypto bear, you may purchase some asset at a price that appears to be the bottom at the time. However, the price might drop further; if this happens, you will ultimately have to sell it again to have another shot at timing the elusive bottom. Generally, this strategy just shrinks your wallet. The situation is even worse during the crypto winter.
- Dollar-cost averaging (DCA)
DCA, or Dollar-cost averaging, is probably the most effective strategy, even in the most bearish market trends. It is a simple strategy but focuses on long-term benefits. Under this strategy, you must keep purchasing small assets over a specific period irrespective of the price.
For example, per the DCA schedule, you will have to invest $50 in Bitcoin weekly. Now, supposing that you started purchasing Bitcoin for $50 every week and continued this act for three years, your total investment would be $7,850 in Bitcoin.
Now, when you’d calculate the total value of your investment, it would stand at $21,777. This significant gain of 177.42% of the percentage chain over these three years.
- Consider staking
Amongst several effects of the crypto bear, one is that the value of your portfolio starts taking dumps. At this time, staking could be an efficient way of earning a passive income through your crypto stash. It is the process in which you lock away your coins on a PoS (proof-of-stake) blockchain for a certain period and gain rewards.
Under this system, the size of your wallet will increase even during the blues. Plus, when the market revives and goes to the bullish trend, you can start with more than what you previously had. Moreover, since your assets are locked on a blockchain, this would lower the possibility of panic-selling assets.
- Avoid shorting in a crypto bear market
Traders use the shorting technique to profit from the falling prices of cryptocurrencies. Ideally, this technique should serve as the perfect fit for the bear market where the drop in prices is a common occurrence. However, most experts and advisers are not in favor of the shorting technique. This is because this process also holds the potential of severing unlimited loss or liquidation of your position. If things go sour with shorting, no matter how experienced you are, you will not be able to handle it easily.
When you purchase a crypto asset (go long), you will never lose more than the amount you have invested. Plus, the gains have the potential to be limitless. However, in the case of shorting, the maximum you will earn from the trade is the amount by which you short a coin. But if the price of the crypto starts increasing and continues to do so, the losses can pile up indefinitely. Furthermore, if you decide to short using margin, apart from the original loss, you will have to keep paying the interest charges for as long as you keep the position open.
- Carefully assess the current state of the market
With numerous activities taking place globally in the crypto universe, you must be updated with the latest events and have situational awareness regarding the current state of the market. For instance, in mid-2022, amidst the current bearish trend, several major institutional investors purchased Bitcoin for $30,000. Thus, BTC seems to have found essential support near this range and is expected to hold the position for a while. Simultaneously, several indicators indicate that a large group of new investors who probably purchased near the top has sold most of their assets amid FUD. This might further stabilize the prices of crypto assets.
- Avoid leaving your crypto on exchanges
While you must avoid leaving your crypto on the centralized, custodial crypto exchange in any situation, you must be even more careful during bearish trends. In the turbulent bear state, the risk of losing your funds stored in the exchanges increases. A sudden market crash can result in billions of dollars being wiped out from the market. Several exchanges will become insolvent. Opting for a non-custodial wallet app or a tried-and-tested hardware wallet will give you complete control over your crypto stash.
Crypto winters are not the end
We cannot deny that bear markets bring several huge risk potentials. But then again, the fact that they make a good basis for your chances of success in the succeeding bull market is also undisputed. This is if you can handle these bear markets well with proper strategic planning and patience.
The crypto investors and experts suggest that you can take certain steps to efficiently manage your portfolio instead of making wrong decisions and suffering from loss in the bear market.
Since they are new assets introduced just around a decade back, the crypto market is surely volatile. However, the increasingly widespread adoption of crypto assets globally in all sectors indicates that these are here to stay. The experts anticipate that the number of jobs offered by the cryptocurrency industry will only increase in the coming days.
Of course, no matter how skilled or seasoned you are in this game of the crypto market, you can’t have a 100% strike rate. As a trader or investor, you are bound to lose money occasionally. However, if you follow the steps mentioned above and strategies, you will have the potential to significantly reduce your chances of bearing losses in a bear market.
There is no specified time for the bear market to last. Generally, it is said that the crypto bear lasts for a lesser time as compared to the bull market. However, it’s not always the case. It might extend anywhere from a period of a few weeks to even more than a year. The times when the crypto bear extends to several months is known as a crypto winter.
Yes, the blues of crypto winter is just as real as the warm bullish trend. The crypto winter is a situation when the bear market extends for several months and the prices of the crypto assets continue to fall. It is a very fearsome aspect of the market where the dip in prices is quite steep.
By now, it is said that the crypto world has witnessed 8 winters, all of which were unique in their way, with certain similarities. However, there is no specified time frame for which a crypto winter exists. The most recent crypto winter before the 2022 winter was the one that we witnessed in 2018, and it lasted for around 250 days.
A bear market refers to the market condition where the supply surpasses the demand, and as a result, the market witnesses a prolonged drop in asset prices. During this situation, your portfolio is likely to shed value. The bearish blue might extend from a few weeks to several months. The bullish trend of the market is just the opposite phenomenon. Here the prices for the crypto assets increase and remain on the rise for an extended period. As a result of this, ultimately, there is a surge in your portfolio valuation.
If we take a look at the market trends from the advent of the year 2022 to now, we will notice that Bitcoin, along with several other major cryptocurrencies has fallen in its value as compared to its value in November 2021. To add to it, even after several weeks, the prices continue to fall, and several organizations, big and small, are taking several steps to deal with the bear market conditions. These trends and activities indicate that the crypto market has entered the bearish market trend, or we can even safely say the crypto winter.
Those investors of the market who hold a pessimistic view of the prospects of the crypto market are referred to as the bears of the crypto market. They expect the prices of the crypto assets to fall in the near to medium term.
Those investors of the market who hold a pessimistic view of the prospects of the crypto market are referred to as the bears of the crypt
The insiders or the traders, the experienced players of the crypto world, and expert analysts generally suggest holding cryptocurrencies or crypto assets as the safest bet during the bearish market trend. According to them, holding these assets patiently and without losing calm, is the safest way to navigate through the risks and uncertainties of the bearish blues.
o market. They expect the prices of the crypto assets to fall in the near to medium term.