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The Crypto Bear Market Is Here: How to Invest Now?

Alex Lielacher
Last updated: | 4 min read
Source: Adobe/byrdyak


Bitcoin (BTC) is down almost 40% year-to-date, while most leading altcoins have dropped 50% to 70% since the start of 2022. So it’s fair to say, we are in a bear market. However, that doesn’t mean you have to exit the crypto markets because we’re having a bad first half of the year. 

Read on to learn how you can weather the storm in the current crypto market climate. 

What’s been happening? 

The crypto markets have cooled off to start this year, following a record year in 2021. Last year, we saw record-high crypto prices, an exploding NFT market with JPEGs selling for millions, and a burgeoning DeFi market expanding beyond Ethereum (ETH) and becoming multi-chain. 

Today, the situation is different. We have dropped sharply off the all-time highs. While BTC and ETH managed to “only” lose around 60% of their value since their highs, numerous leading altcoins have lost more than 90%. 

The recent collapse of UST and LUNA has sent prices crashing, as investors received a stern reminder of how risky cryptoassets can be.   

Needless to say, crypto investors are feeling uneasy. According to the Crypto Fear & Greed Index, they are actually “extremely fearful.” 

But that doesn’t mean investors have to leave crypto and wait for the next bull market to jump back in. 

What can crypto investors do now?

It has been a difficult year for crypto investors (well, stock investors too), especially those who have only entered the market recently and are experiencing their first market downturn. 

Let’s take a look at what investors can do during this crypto bear market. 

Move into trusted stablecoins

If you are concerned that the bear market will continue and asset prices will move another leg lower, you could move a large portion of your assets into stablecoins. 

However, you will probably want to stick with trusted stablecoins and avoid anything that isn’t backed by anything. USDC and BUSD have seen capital inflows, suggesting investors trust these stablecoins more than others. Meanwhile, the most popular stablecoin, USDT just proved that it can manage huge redemptions. 

By moving into dollar stablecoins, you increase your chances to protect your portfolio from a steep drop in value in case the market collapses, but it also gives you the option to jump onto buying opportunities as soon as the market turns bullish again. 

Move into high-quality assets

If you aren’t that bearish and are worried you might miss out on a market turnaround, you could move your funds away from small and mid-capitalizations coins into higher-quality assets, such as BTC and ETH. 

While the upside during a bull market may not be as high as with the latest layer-1 (or base protocol) chain’s token, in the past, the BTC and ETH losses were lower in comparison to smaller altcoins. 

Alternatively, you could sell everything for bitcoin and start dollar-cost averaging the cryptocurrency to slowly rebuild your digital wealth in what is arguably the highest quality asset in the crypto markets. 

Buy put options to hedge against a further drop in prices

If you would like to hold onto the assets you have in your portfolio but are worried about the market moving lower, you could hedge your portfolio by purchasing put options on BTC and/or ETH.

Buying put options on bitcoin enables you to sell BTC at a predetermined price at a specific time in the future. 

If, for example, you purchase an option with a strike price of, let’s say, USD 20,000 and the price drops to USD 10,000, your options hedge will be “in the money” (as you will sell BTC for USD 20,000 while buying it for USD 10,000) to offset the losses in your crypto portfolio. 

However, you will need to ensure that your hedge ratio is correct, so you will need to buy enough put options contracts to offset your potential losses. Should the price of bitcoin not drop below USD 20,000, your options contracts will expire, and you will lose the premium (i.e. the price) you paid for them. In a sense, put options act as an insurance contract against losses in portfolio value. 

HODL, Diamond Hands

Finally, if you are convinced of the future success of the crypto networks’ assets you are holding, you could also just “HODL” your portfolio and wait out the bear market. 

In addition to HODLing, you could also buy dips in the assets you believe in the most. This will arguably be very difficult for newcomers as it’s hard to see the light at the end of the tunnel during the first crypto bear market. But if history repeats itself, many of the crypto assets that have dropped over 90% since their highs may reach new highs again. However, as always, there are no guarantees about the future, therefore, invest only what you can afford to lose.  
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