Bear the Crypto Bear - What to Do During Bear Markets
So you’ve invested in cryptocurrency. That’s cool. You assumed your investment would grow the moment you put your money in it, but that was not the case. You invested during a bear time in the market, meaning prices are usually expected to continue decreasing. What now?
Volatility is a word that cannot be dissociated from cryptocurrency yet. As the blockchain technology-based currency aims to become more stable in the future, traders must understand that prices will not always look pretty. In fact, it can be quite discouraging. So when prices are consistently going down, how should a trader act? Here’s a list of things you can do:
1. Keep a clear mind and do not panic
Seeing the market prices go down daily can trigger various (negative) emotions in a person. The easy way out of this would be to immediately sell the investments to cut further losses. Such snap decisions usually end up in bigger losses. Rather than letting your emotions control your decisions, try to step back and rationalize the situation.
Ask yourself:
Why is the market going down?
What are the experts saying about this?
Why did I start trading in the first place?
What action steps should I take?
Being objective about the whats, whys, and hows of the bear market is crucial in restrategizing.
2. Research, research, research
You might have a trusted expert who you listen to when it comes to trading decisions, but nothing will give you more confidence than your own judgment. Investing your time in learning how the market works during bear markets would be beneficial in the long run as the crypto scene is quite unpredictable. Proactivity is rewarded in a market that always changes. Take this challenging situation as an opportunity to become a better trader.
3. Try to diversify your portfolio
“Do not put all your eggs in one basket” is how the saying goes. To explain this professionally, it means that investing in only one crypto coin is riskier than investing in a variety of coins. Not all cryptocurrencies go through the same level of dips. With over 17,000 cryptocurrencies on the market, you have a lot of options to choose from. Since you’ve already done your research, choosing would be easier now than before.
4. Make the right purchase decisions
You are often told to “buy the dip” whenever there are bear markets. This strategy has benefited a lot of traders in the past, so it is a good strategy. But it is not a fool-proof strategy. Prices might fall even further, leading to greater losses. If you’re in it for the long run, you can try the “dollar-cost averaging” (DCA) strategy. This basically means that you divide your allotted investment money into tranches, buying investments in small portions at a time. Since it is difficult to predict when a coin will reach its lowest before reversing, the best option is to buy a small amount and see how it will go.
Investing in cryptocurrencies is a double-edged sword. You win some, you lose some. This is the reason why you would need to resist the hype and do your own research first. By doing this, you can prepare to bear the crypto bear.
Sign up now for your BloomX.app account! Go to https://bloomx.app/r/EARLYACCESS and start your trading journey today.
