Investing in cryptocurrencies can be intimidating and difficult, especially when the market is in a bearish season.
To deal with it, consider four tactics that enable investors to survive even during bear markets: shorting, HODLing, continuing investments, and diversification.
Investors have learnt how unpredictable the cryptocurrency industry can be when Bitcoin first appeared 10 years ago. Bull and bear tendencies have repeatedly replaced one other over the years, with no way of anticipating or stopping them. Even the smallest detail has been enough to dramatically alter the scenario, and this has happened countless times.
The greatest boom in cryptocurrency history occurred approximately a year ago, when the Bull Run propelled coins to whole new heights.
Those who bought before the Bull Run made a fortune. Those who invested while prices were rising lost money. This was owing to a big market meltdown that occurred in early 2018, and the tendency has continued to this day.
Experts believe that a new bull run is on the way, as cryptos follow a well-established market cycle. However, this has not occurred thus far. Given the circumstances, investors needed to devise a variety of tactics that would allow them to survive the bear market while making a profit or at the very least not losing money.
4 Crucial Tips For Investing During Crypto Bear Markets
There are four possible strategies in such a situation, which are as follows:
1. Shorting
Short selling, sometimes known as “shorting,” occurs when traders forecast that a market will fall. They will benefit if their prediction is true. This is an approach that works in a variety of marketplaces and is not restricted to cryptocurrency markets. The most well-known example of this occurred in 1992, when an investor named George Soros profited roughly $1 billion by correctly forecasting the fall of the British pound.
Shorting can be a very profitable strategy, and it is feasible to do so via CFDs (Contracts For Difference), or derivatives, as well as crypto margin exchanges. Using them, traders can sell assets that they do not actually possess. Borrowed assets are instead sold at current market prices, which is the true meaning of a “short trade”.
If the market changes and the asset price falls, their position rises, allowing traders to acquire the asset (which is now much cheaper) and profit.
Hedging can also be accomplished through shorting. If you own a substantial amount of a volatile asset, such as Bitcoin, you can open a short position to reduce its volatility. For example, traders who had an open short position for 25% of their Bitcoin holdings would only lose 50% of their investment.
2. HODLing
The second method is HODLing, which is sometimes a perplexing term for many beginners because everyone assumes it is a mistake. While this was true when the term was coined, it is now a widely used term in the realm of cryptocurrency investments. Interestingly, “HODL” has also become an acronym for “Hold On for Dear Life,” which means that investors will not sell their coins even if the market falls precipitously.
HODL
Simply put, the word refers to a trading method employed by individuals ready to wait. It is not only a long-term strategy, but also the mentality of many investors. Because the crypto market is still considered young and fresh, present volatility, low pricing, and market crashes are thought to be attempts at stabilization and maturity. The key, according to HODLers, is to hold on to their coins and weather the pressure. When the market stabilizes and cryptos become more popular, it is envisaged that they will be rewarded for believing in their coins.
HODLing has become an important element of the crypto culture, and the strategy has earned widespread support from investors all around the world. Given that most people believe that cryptocurrencies will not go away, HODLing has a lot of potential. In fact, this is a method that may be applied to different markets.
The best example of failing to HODL and realizing it was a mistake occurred in 1970, when Ronald Wayne, Apple’s third co-founder, chose to sell his shares of the firm. That decision earned him $800 at the time. That $800 would have grown to $100 billion if he had waited a few decades.
Predicting the future is, of course, impossible. Popular investors, however, like as Jay Smith, feel that HODLing is always the best approach. He even commented on this notion, claiming that cryptocurrency will replace old stock markets and reshape the world. They will power machines, the internet of things, governance and voting systems, and possibly the internet itself.
While he acknowledges that it will be years, if not decades, before this occurs, he is persuaded that cryptos are the future.
3. Buy Low And Sell High
Naturally, all investors want to make a profit. As a result, when the value of cryptocurrencies falls, many of them decide to withdraw. Only a select handful are willing to take a chance and continue buying, even if the prices are low. The majority of folks buy towards the top and sell near the bottom. This is not unique to cryptocurrency, but stems from a human tendency to be averse to risk.
As many investors aim to sell their coins in a panic, others seek to average down the price and have purchased during the brutal markets of 2018. Before purchasing any coin, any investor should conduct thorough study.
4. Don’t Pin Your Hopes On A Single Coin
Finally, ambitious investors should keep in mind that diversification is always the best option. It is hard to predict the future of cryptocurrency, and any investment involves risk. Investing in a variety of projects, on the other hand, enhances the likelihood of choosing the appropriate decision.
And there you have it: the 4 crucial tips you should keep at the front of your mind during a bear market. Found them helpful? Think we missed some? Let us know in the comments section below. Thanks for your time!
