Cryptocurrency, Investing Essentials

Smart Strategies to Survive a Crypto Bear Market

Crypto Bear Market

It’s quite natural to feel low and anxious when things don’t work the way you wish them to. Especially when those things involve your hard-earned money. Investors, especially the ones who have just gotten into an investment tool are prone to this feeling of anxiety. Investment tools such as crypto where the market is extremely volatile make investors old or new all the more anxious and stressed. The decline in the price of an asset class by at least 20% from the recent all-time highs is what is generally called a bear market. It is no surprise to investors who are in this game for a long time that bear markets are a fact. Every asset class that goes up will recline and decline to its support zones every once in a while. However, rather than panicking and anticipating such market cycles one should strategise and make the most out of such opportunities because these are also the times when you get a piece of the pie at the cost of bread. We mean, assets are undervalued, and it is a great time to add some strong crypto assets to your portfolio at a small amount. 

In this article, we shall discuss a few methods that shall help you just not survive the bear market but also benefit from the same. 

5 ways to survive Crypto Bear Market 

1. Accumulate with Dollar Cost Averaging 

One of the most crucial things to remember during crypto downtrends is that it is normal for the crypto market to have a negative year, it’s all a part of the business cycle. If you are a long-term investor, as in you are investing for a time frame of more than ten years, you should try to take advantage of dollar-cost averaging (DCA). 

Dollar-cost averaging refers to the investment strategy wherein an investor divides the total invested amount across periodic purchases of the asset with an effort to reduce the impact of volatility on the overall purchase. The purchases can take place regardless of the price of the asset and at regular intervals. By purchasing crypto assets regardless of price, investors often end up buying shares at a very low price when the market is moving down. Ultimately, this helps the investors to average down their cost leaving them with better overall price entry for the crypto assets. 

Rupee cost averaging also works similar to dollar-cost averaging.  However, there are times when investors due to other priorities miss out on their regular investment to average down the overall cost. So why not automate the entire process? Investors can now perform Rupee cost averaging (RCA) with the Crypto Investment Plan or CIP feature introduced by CoinDCX. 

2. Diversify 

Diversification is the key factor to fight volatility. A wise investor must spread his or her portfolio among various crypto assets. The process of diversifying the portfolio among various crypto assets depends solely on the risk appetite of the investor. The goals and conditions of every investor are different, with a proper asset allocation strategy investors can easily avoid potential negative impacts on their assets. All you have to do is not to put all your eggs in one basket. 

Additional Read: How to diversify your crypto investment portfolio

3. Invest only what you can afford to lose 

Having a proper idea about your risk appetite is important before you start investing in any asset class. This becomes all the more important with volatile asset classes like crypto. Investing is good to create long-term wealth, however, it is important to invest wisely. No one wants to become the biggest crypto investor while sleeping on the streets. Invest only that much which you can afford to lose. One should always remember that bear markets and minor corrections can be destructive. 

Additional Read: Which is the best crypto to invest in?

4. Rebalance Crypto portfolio

Over time, your crypto assets can appreciate and depreciate and it can happen more quickly than your cash or bond holdings. This might push your portfolio out of alignment. However, this should not be seen as adversity. Investors must consider it as an opportunity to re-address the imbalances that have occurred. If certain crypto assets take up a large portion of your investments, you might consider selling a part of it and moving the money to cash equivalents or might invest the same into other more promising assets after doing the due diligence over that asset. 

Bear markets often provide good investment opportunities to investors. Some of the common terms you would often come across with respect to your crypto assets during bear market are battered, underpriced or beaten up.  Value investors often consider the bear market as a buying opportunity because valuations of good cryptos get hammered downing along with poor cryptos. Value investors often build up their position in their favourite crypto asset during the hard times in the market and wait for the good old times to return. 

Read: Crypto Technical Analysis: How to do technical analysis

5. Do not freak out 

The dow climbs a wall of worry is a very old saying in wall street. According to this proverb, all investment assets continue to climb up or rise in value despite economic issues, natural calamities, or other factors. Investors must always keep their emotions separate from their investment decisions. One should always take their investment decisions wisely and rationally. Never become fearful or anxious about a certain situation and let it cloud your rational judgment. 

During bear markets, the bulls stand no chance against the bears. Don’t make any sudden moves and stay calm, this will only save you from becoming a bear lunch. This is when HODLing comes into play. If you have done your research and believe in the long-term prospects of the asset, HODLing can also get you through the phase. It’s just that before you take any decision just have your fundamentals clear about the certain crypto asset and take a decision accordingly. 

Summing it Up!

No investor wishes to see his or her investments in red. However, the moment you choose any asset class the idea of a bear market or price decline must be clear in your mind. Investors must remember that what goes up will come down. Therefore, invest only as much money as you can afford to lose. Do not panic during such situations and use the above methods to mitigate the situation. That being said, always do your own research before investing in any crypto asset because strong assets have greater strength to bear the downtrends. 

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Disclaimer: The above views, information represent the independent views of Primestack Pte. Ltd, Neblio Technologies Pvt. Ltd, and/or their affiliate entities and are for informational/ educational purposes only. The content, information or data provided above is not an offer, or solicitation of an offer, to invest in, or to buy or sell any interest or shares, digital assets/ cryptocurrencies or securities, or to participate in any investment or trading strategy. Any statement or communication made above shall not be treated as legal, financial, investment or tax advice by the reader. The calculations, data, risk-return formulations, performance or market capitalization indicators captured above are based on the independent data sourcing including collation of public information and/or analysis performed by analysts, advisors or employees of Primestack Pte. Ltd/ Neblio Technologies Pvt. Ltd and/or their affiliate companies and/or any third party. Past performance is not indicative of any future results. The reader(s) are hereby advised to consult their financial/ legal/ tax advisor(s) before making any investment.


 

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