What Should You Do in a Strong Crypto Bear Market

It is never easy for many people to hold their nerves as the crypto assets plummet with double digit-losses. However, it is time to gather some strength and make the most from the bear market.

The crypto market has experienced a huge loss, with Bitcoin (BTC) falling below USD 30,000. TerraUSD (UST) and LUNA also shed off a huge value, but that does not indicate that you should give up and exit the markets. Here is what you should do.  

Purchase the Crypto Dip with Dollar-Cost Averaging 

When the market comes down tumbling, it is pretty easy to get yourself on the wrong side of the trade, but this does not imply you should sit back and watch everything sink into an abyss. 

Investors with a reserve of stablecoins or fiat money have the opportunity to purchase the dip. This means buying cryptos when there is a notable downtrend correction in the market. The idea is that when the prices move up to the previous highs, dip buyers will rake in some good profits.

Use Indicators to Note the Best Trading Entry Points

If you are an investor with a good understanding of technical analysis, it is possible to predict the price movements of an asset and determine when it is approaching or has hit the bottom (level of support). Although there is no indicator that it’s 100% foolproof, it will provide a strong signal of the best moment to buy a dip. 

One of the best technical indicators is the relative strength index (RSI), a momentum oscillator that can help you to identify when an asset is overbought or oversold. Overbought or oversold points indicate that a reversal is likely, and this is the perfect opportunity to look for crypto trading opportunities. 

Diversify Your Crypto Portfolio 

It is never easy to predict how low a bear market will go. It is also pretty hard to pinpoint the cryptos that will recover faster than others and by what margin. 

One method of hedging your bets is using dollar-cost averaging (DCA) over a number of crypto coins and assets. This might include cutting down the trade sizes into smaller units to keep the risk low. Note that this does not mean randomly picking the cryptos to invest in. You should do comprehensive due diligence on every crypto that you target to purchase or trade. Make sure to check for things such as: 

  • Past performance of the crypto asset. 
  • Upcoming announcements. 
  • Previous all-time highs. 
  • The development team of the asset. 
  • Market sentiment.

Do Not Panic

This might look obvious, but managing emotions in a bear market is very difficult for many people. According to Benjamin Graham, a renowned American economist, people who cannot master their emotions are ill-equipped to profit from investment processes. 

You need to appreciate that fear and greed can be powerful motivators in crypto and stock trading, but they often result in snap judgments and losses. Therefore, you need to craft a good plan and stick to it. This can be something such as “when I notice a bullish RSI divergence, I will allocate Y amount to the trade and take profit at X.

Note that the crypto market is very volatile, and although you might be disappointed after missing to optimize profits from the dip, you have to remain focused because another opportunity will show up. So, be ready for it, and ensure to have some capital reserve.

Comments are closed.