Batting The Crypto Bears: How To Make The Most Of A Crypto Market Downturn
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It is best to keep an eye on the long-term trend in a bear market. If too focused on the short-term, you may miss some opportunities that emerge from a broader perspective.
As with every bear market, cryptocurrency prices are currently in a downward spiral. However, it is crucial to remember that markets move in cycles, and prices will fluctuate over time, not just to the downside.
Some traders give in to FUD (fear, uncertainty, and doubt) and start panic-selling assets at a loss, further impacting the prices. Yet, this isn’t the best move to make in a bearish market.
Instead, one of the best ways to benefit from a bear market is by taking the time to grow your portfolio. It is a clever idea to diversify your investments, especially focusing on allocating funds to projects that display robust growth prospects over the long term.
But before you go about diversifying your portfolio, it is vital to consider the following:
Avoid FUD & Panic Selling
Bear markets create the right environment for people to spread rumors. You’ll find a ton of speculation, opinions, and theories circling the web, especially during extended bearish phases. It is common for humans to fall prey to these statements and opinions, which in turn may influence your decisions.
If you come across any news or statement that concerns one or more assets in your wallet, take the time to review the authenticity of the source (and the claim). Although it sounds like a no-brainer, taking control of your emotions during bear markets isn’t as simple as people claim it to be.
Remember that fear and greed are two of the most influential motivators, often forcing people to make snap decisions. And these decisions don’t generally end up well. Accordingly, be aware of market movements, plan your strategy, consider every aspect, and only then execute.
Focus On Staying Solvent
Fundamentally, you always want to be able to come back to trade another day. During bear markets, some investors start taking enormous risks to recover losses. It is quite common to fall into the mentality of “investing to recoup all losses in one trade.” However, strategies can also backfire, and this is a time when disciplined risk management is most important for success.
If possible, stay away from leveraged (margin) trades. Resorting to leveraged trading during falling markets usually carries a much higher risk of losing your entire investment. Most importantly, don’t bet big on multiple long positions because a prolonged drop in prices can lead to their liquidation if you have no spare funds to collateralize any resulting margin calls.
Use DCA To Buy More Coins
One of the best ways to make the most of bear markets is opting for the dollar-cost averaging (DCA) strategy to withstand the downward spiral. Although simple, this strategy can help you build a long-term portfolio of assets that were previously beyond affordability.
With DCA, you can keep buying smaller amounts of assets over a period regardless of price changes. For instance, instead of buying USD 200 worth of BTC in the first dip of the bear market, you can spread out your purchases into USD 50 weekly. You can even set limit orders to benefit from falling prices. Timing the market is incredibly difficult, so this approach can help balance the total cost of a position, improving your chances of getting involved at a good entry price for the long term.
Not only will this help you accumulate more tokens when everyone is busy selling, but it will also increase your chances of generating more revenue than investing all your money in a single trade.
Diversify Your Portfolio
Finally, a bear market presents the right opportunity to expand your portfolio. On the one hand, the prices of established cryptocurrencies continue to fall. And on the other hand, dozens of new projects prepare themselves for the next bull run.
Although there is no guarantee that the assets you choose will reach all-time highs in the next bull run, you can DYOR (do your own research) to find projects and tokens that have higher chances of performing well in the long run. You can use a mix of fundamental and technical analysis to better understand the project, its sustainability, roadmap, short- and long-term goals, and past deliverables.
Most investors often consider the price changes of assets before investing in them. However, to increase your odds of generating positive returns during a bear market, it is valuable to evaluate other indicators (such as the project’s growth rate, network activity, total value locked, etc.). For instance, experts claim that several mid to low-cap tokens like Cardano (ADA) are witnessing an influx of user and development activity, suggesting that the native token is primed for an upside reversal in the future.
Likewise, it is also important to look at new and upcoming projects, especially those that address the existing shortcomings of the blockchain ecosystem. Take $KLV token of KleverChain - a layer-1 blockchain designed to boost multichain DeFi as the market prepares for its transition to DeFi 2.0.
KleverChain just rolled out its mainnet, featuring pre-built and ready-to-use smart contracts, which allow developers to build and deploy Dapps and protocols quickly and cost-effectively. As the future of blockchain is multichain and DeFi 2.0 marks a new era for the evolving technology, KleverChain and its $KLV token are well-positioned to grow as the market gets back on its feet.
Ultimately, bull and bear, boom and bust cycles play a role in nearly every market, whether financial, housing, or commodities, and the crypto market is no exception. Be patient, take the time to research, make well-informed decisions, and focus on expanding your portfolio with disciplined risk management to capture opportunities during bearish and bullish markets alike.