Crypto investing can be a lucrative business. Particularly in a bull market where one All Time High (ATH) is followed by another. We can also see that these success stories are shared with friends and family, and many people with limited knowledge invest in their favorite projects.
However, what if the profitable market cycle is over and we end up in a bear market? On average, this bear market period lasts one to two years; however, how can you make money in a bear market? In this article, we’ll share several strategies and everything else you should know about making money in crypto bear market so that you can also take profits during this period!
Table of Contents
What is a bear market?
Bear markets are market cycles which are characterized by sharp price falls. In this case, we see that FUD can occur whereby there is more sell pressure than buy pressure. In concrete terms, many investors sell their positions, and fewer people are willing to buy at that price.
This financial action is usually the result of government decisions on a large scale which can cause investors to experience FUD. Overall, investigators are pessimistic about the future and thus “bearish.
The traditional stock market is also associated with market fluctuations, but they are much more extreme with crypto projects. It isn’t exceptional for a project to increase profit by a thousand percent. In the same way that we can rise exponentially, it’s possible that in a bear market, we just drop by 70 or 80%. But is it possible to make money even during a bear market?
Stay tuned as we will talk about some strategies to making money in crypto bear market.
Strategies to making money in a bear market
Let’s look at which strategies you can apply to still make profits during a bear market. The strategies are accompanied by a certain risk, so if you want to actively trade during a bear market, you should be aware of the risks.
Fundamentals
In a bull market, we are often blinded by unprecedented profits and the percentage increases, which makes us wonder more often if it’s worthwhile to take our chances. Finally, we are more likely to make profits during this market cycle.
We will see more projects appearing where there is no use case. For example, we will see a lot of meme-coins, often referred to as shit-coins. The gains to be made here are based purely on the hype regulating this currency’s price.
But when entering a bear market, it becomes increasingly difficult to remain positive about a project without a fundamental plan for the future.
‘Do your own research’ is an important statement that we see recurring more often. During a bear market, fundamental data is extremely important. After all, you only want to invest in projects you believe in that have a future and will also positively influence the further development of the crypto landscape.
Patience
Every one of us prefers instant gratification, meaning we want to earn profits immediately after investment. When you were just entering the market, were you also looking at your exchange several times an hour to see if you had already made a profit?
Or are you still doing it even now? Then you’re certainly not the only one! However, what should you do with this during a bear market when these are not profits but rather losses?
There is anything but instant gratification during a bear market. Linked to the fundamentals of a project, being patient is necessary. You won’t make money immediately in a bear market with this tip, but this investment will pay off over time. Determine for yourself if you want to invest, if so, on which levels and be patient until the market recovers.
Short positions
During bull markets, investors usually take a long position. In doing so, they are bullish and, therefore, positive about the future. Short positions are when you are not going to trade but consider it a long-term investment.
However, if there is a downward trend, like during a bear market, you could also take a short position or go short to take profits during a bear market. You start to predict the market, as it were, through technical analysis.
You will sell a share of a certain currency you do not yet own to buy back later at a lower price. This lending is done through an exchange whereby investors make their digital currency available so others can take short positions with their digital assets. So how exactly does this work? Let’s discuss it using an easy example.
Example
Let’s say you don’t have any Bitcoin in your portfolio. Still, based on your technical analyses, you predict that the price of Bitcoin will drop. This would allow you to take a short position and make money from the drop. We borrow one Bitcoin worth $40,000 from an exchange and sell it immediately. Your analysis was correct, and the price drops to $35,000, a difference of $5,000.
You must, of course, return the stock, one whole Bitcoin in this example, to the owner, with a present value of $35,000. That means that in this short position, you have a profit of $5,000. Please note that borrowing these assets comes with a minimal interest rate.
Pros
Flexibility
You have the flexibility and are not dependent on a rising market to make money. Due to technical analysis, you can decide to go short on any project. You can even decide at which price you want to buy back this currency. This flexibility, of course, also brings risks.
Responding to bubbles
Suppose you are familiar with technical analysis and can assess the market well. In that case, you can determine when a particular project is in a bubble.
It may be that the market is very bullish. Still, according to your predictions, this bubble will burst sooner or later, and the market will have a correction. These corrections can be quite large, but you can also anticipate the downward trend in this period by taking a short position.
Safeguard your capital
With a long position, you predict that the market will rise. In contrast, you anticipate a downward trend with a short position. However, if you hold both positions at the same size, theoretically, you can never make a profit or a loss.
In this way, you protect your position and also your capital. It is done when the market is uncertain, or you can’t or don’t want to just get out and convert your assets to stablecoin or fiat.
Cons
Pay interest
Loaning these coins through an exchange is not free. You will pay an interest rate to the owner of these assets. Theoretically, this interest rate is minimal, but it is not unimportant to take into account.
Risk of infinite loss
To go short is actually the opposite world. You are making money in a downward trend; basically, this limit is the absolute bottom price. Between the present price and the bottom at which a currency falls back to 0 dollars, which doesn’t happen in practice, this is the range in which you can make money with your short position.
However, if your prediction is wrong and the price still rises, then what happens? It is important to realize that there is no absolute ‘upper limit’. Taking the example above and looking at the Stock-To-Flow model, the price of Bitcoin could go to $500,000 or even $1,000,000. If so, then your potential loss is infinite.
Stay tuned as we will talk about swing trading and how it can help you to making money in crypto bear market.
Swing trading
Another way to take short-term profits in a bull and bear market is swing trading. With a swing trade, you’re going to look at the micro-economic situation in the very short term. It’s essential to know the market and to use extensive technical analysis.
A swings trader makes use of support and resistance levels. During market fluctuations, the swing trader buys a certain asset at the lower limit and sells it again when the price reaches the resistance line. Here risk management is important, and the use of stop loss is essential to minimize your loss.
Margin trading
A supplement to other strategies is the use of margin trading. As a result, you make a trade in which you borrow money and/or digital assets to execute a trade. This causes a leverage effect, also better known as leverage.
It is a risky activity in which an investor has to be aware of the potential consequences. In one successful story, you are increasing your profits, as it were. However, this may also result in a larger loss. In this case, you are always using your current portfolio as collateral.
Example
You currently have a portfolio of 10,000 euros but wish to place a margin trade worth 15,000 euros. In this case, you borrow 5,000 euros. This is, therefore, a ‘margin’ on top of your own assets. The leverage you choose depends on your risk management and the desired result.
Advantages
Suppose you have an accurate estimation of the market trend. In that case, you can increase your position in the market considerably in a short period. Using even small market shifts, if you are a good trader, you can capitalize on them and take profits.
Disadvantages
The biggest advantage is also the most significant disadvantage. Blindly focusing on the potential profits without risk analysis is a dangerous thing to do. As a result, using leverage is often a way for investors to lose money. As a result, it is only recommended for very experienced traders with years of experience with the market. Stay tuned as we will talk about pasive income and how it can help you to making money in crypto bear market.
Passive income
During a bear market, there are several ways to take minimal profits. One of them is the generation of passive income. There are several ways to generate passive income, but we focus on staking in this case.
If you add your assets to a striking pool, you will get an annual return; depending on which digital assets and staking pool, those returns are attractive and add value. Indeed, if you are taking long positions and do not plan to trade your currency, it is definitely worth it.
Naturally, these currencies are also subject to market fluctuations, and their value will decrease during a bear market. Still, you will get a nice return on your currency during this downward market.
Of course, these profits will not be comparable with a growing market, but both in the short term and in the long term will give you extra returns. If you receive more assets, in the long run, it will also be beneficial when the price of this currency increases.
Crypto Pearls
During bear markets, it is often said that it is a big sell-off, and of course, it is the best time to invest because the price is so low. Therefore, you want to invest in coins with great potential to maximize your profits, especially when you return to the bull market.
These crypto pearls can be found by researching and determining which project is worth investing in for you. Stay tuned as we will talk about seven tips to making money in crypto bear market.
7 tips to successfully pass the bear market!
It is very easy to focus on something else during a bear market. Many activities are adventurous, inspiring or exciting during this period. It is the crypto market, where the stock prices drop, and the mood of many investors drops just as much, where most people like to spend their time.
To ensure that you can hold your own during this period, we’ve got 7 tips to help you maintain focus. You can find out which strategy is right for you and how to apply it through different investment strategies!
1. Staking your coins
You may have missed the boat during a previous bull run and could not sell your coins in time for a profit. If the price makes a big drop after that, then your investment is under water. In the short term, the chance is small that you will profit from these coins, but you could use them to expand your portfolio.
You ensure you receive more crypto as a reward by staking your coins. Certainly, this may be a relatively safe way to expand your portfolio for the less risky crypto assets, like Bitcoin and most stablecoins.
Yet another situation in which crypto staking is useful is if you decide to invest for the long term. When you have bought your coins and decided to hold them for a longer period, staking them is an interesting option.
With this, you can increase your portfolio by saving in a savings account. You secure your investment and receive a fee for it. However, the rates with crypto are a lot higher! Whereas the bank only gives just 0.1% savings interest, crypto allows you to stake fairly easily with 10% as a reward.
2. Watch the BTC-USD closely
When bitcoin starts a new bull run, it’s important to get in position well with the right altcoins. Besides doing a lot of research and having a good spread between risky and less risky coins, you should also keep an eye on the BTC pairing of an altcoin.
If all the altcoins have fallen rock-hard in dollar value, but some coins have fallen a lot less hard in BTC value, this can create opportunities. If Bitcoin rises, those coins may also rise very hard. In these cases, the dollar value gives a distorted picture. However, by far, most investors only look at the dollar value, but not at the BTC pairing.
However, just what is the BTC pairing? You have probably looked up the Bitcoin chart, in which Bitcoin is pitted against the U.S. dollar or the euro. We’re talking about BTCUSD or BTCEUR as a pair in this instance. Suppose you are looking for altcoins in better shape than the dollar value suggests. In that case, you search for DOTBTC instead of DOTUSD in the case of Polkadot, for example.
Stay tuned as we will talk about making money with NFTs and how it can help you to making money in crypto bear market.
3. Making money with NFTs in various ways!
With NFTs, you can also start making money in different ways. This can be done by buying and then owning NFTs, which earn you coins when you own them. One example is the CyberKongz collection, in which NFT holders receive 10 BANANA daily. This allows you to build a passive income through NFTs. Additionally, NFT cessation is an option to earn money online with non-fungible tokens.
Striking your NFTs is a relatively new way to put your unique token to work NFT staking means linking your non-fungible tokens to a platform or protocol. In return for this action, your stake receives rewards. This way, you can earn extra while remaining the owner of the NFT.
You can liken this staking method to yield farming, which involves lending or deploying cryptocurrencies to liquidity providers to earn rewards via interest or transaction fees. This method of earning interest is similar to that of a bank, except that, in this case, there is no intermediary involved. NFT stake belongs to the decentralized financial world, whereas a bank is centralized.
4. Make a plan for it
The next tips contain specific activities you can use to your maximum advantage during a bear market. But most important is this tip: always make sure you work with a plan. By doing so, you’ll make your activities measurable, and you’ll be able to see how the progress is, as well as where you might be going wrong. It also prevents FOMO, as your plan serves as a guide.
It is essential in your plan to explain in detail how you will invest and what you will do with the returns. Here it is also important that you think about the time frame. A plan is useful for the short and long term, but a goal is also important. In the end, each investor has a motive which makes that person start investing. Stay tuned as we will talk about investigating other crypto projects and how it can help you to making money in crypto bear market.
5. Investigate different crypto projects
Often a bull market is relatively short in comparison to a bear market. Since bear markets tend to be long, you can use the time to properly research different crypto projects during a bear market. You could use this time to research which Crypto Pearls will make it all the way during the next bull run!
Researching projects is so important, especially during this time, because it is precisely during this time that you can invest cheaply. For instance, investors who researched the different forms of crypto adoption in 2018 through 2020 would have been able to link this information to different niches.
From CryptoPunks, Play-to-earn gaming and crypto projects competing with Ethereum, Investors who used the previous bear market well were able to reap the benefits in the years that followed.
In this regard, not only are existing projects interesting, but new crypto projects can also be very interesting. Though the plans often consist of a nice website and a white paper, Crypto start-ups are often a very risky investment. Still, the high risk can also mean a high reward.
6. Investing in Play-to-Earn gaming
Here’s a tip that might be the most fun way to prepare for better crypto times! Through Play-to-Earn (P2E) gaming, you can take care of some relaxation while earning crypto and NFTs in the meantime.
This way, you instantly ensure that a bear market doesn’t have to be boring! Interest in cryptocurrencies decreases during a bear market, which also applies to these games. Therefore, it is useful to build up a gaming portfolio during this period.
Investing in the right game, which after proper research, you expect to flourish during a bull market, will allow you to start playing P2E games. When doing your research, including how the team communicates, whether deadlines are met, what options the game has to offer and what blockchain the game is built on.
Blockchain may be important concerning adoption. However, some well-known games are not built on Ethereum, for instance. DeFi Kingdoms is an example of this, built on the Harmony blockchain but still incredibly popular with many gamers!
P2E games can often be played for free, but the most lucrative way is to buy NFTs and deploy them. Some games require this, which is referred to as NFT-to-earn. No matter your crypto game strategy, you can find interesting games on any blockchain. Ranging from Crabada on Avalanche to Aavegotchi on Polygon! Stay tuned as we will talk about dollar cost average and how it can help you to making money in crypto bear market.
7. Dollar Cost Average (DCA)
A widely used way to invest in blockchain technology is the Dollar Cost Average method (DCA method). Dollar Cost Averaging is seen as a useful strategy by many investors, many of whom are crypto investors. Besides crypto, this investing method is useful for other markets, such as stock, bonds and commodities.
The hallmark of DCA is that an investor will invest for a certain amount at a fixed time. Also, in what investment or even what coin you do, you have determined in advance. Creating a plan before investing ensures your emotions do not influence the investing.
This could be very difficult in the volatile crypto market, so you can avoid unnecessary mistakes via the DCA method.
This way of investing is also very useful during a bear market. Suppose your interest in investing in crypto is waning. In that case, you can switch on automatic investing and thus continue to invest silently and get pleasantly surprised when your interest also rises again during a bull run.
The below example is a great example of this. Would you like to learn more about the DCA method? Our colleague Matt wrote a blog about this earlier!
Conclusion
During bear markets, there is generally a lot of fear because the market is more volatile than ever. We have seen in the past that assets lose their value by up to 70 or 80%. Despite this, making money in crypto bear market is still possible. These opportunities are always short-term.
Note that some of the above options come with a certain risk. You have a great responsibility in this matter, which will also entail great consequences if you don’t sufficiently familiarize yourself with the possibilities and/or risks. Therefore it’s especially the experienced traders with enough knowledge and expertise who use these possibilities.
Have you been using one of the strategies mentioned above to gain profits during a bear market or periods when the market was relatively weak? Or have you got any additional strategies of your own? Please let us know in the comments section below, and let’s ensure we all keep our positions strong!
