How To Survive a Crypto Bear Market

Bitcoin’s fall from $64,000 to $21,000 in 14 months with the probability of dumping further is enough to freak you out.

A crypto bear market is a period of steady decline in price characterized by intense fear, investors dumping their assets, and cryptocurrencies losing more than 20% of their value. A bear market can elongate into crypto winter, lasting up to 2 years.

In this article, we outline ways to stay sane in a bear market.

3 Ways To Stay Sane in a Bear Market

1.  Don’t freak out:

Cryptocurrencies are high-risk investments, riskier than stocks and bonds. Their volatility causes price fluctuation in large amounts within a short period. If you are an investor, the best way to handle the crypto bearish market is to buy more and hodl as short-term price fluctuation is insignificant in the long run. 

To understand this, let’s go back in time:

1). The $29 to $2.10 dip:

From its all-time high of $29 in June 2011, Bitcoin dumped 93% to $2.91 in November 2011. It didn’t bounce back in 2012, finishing the year between $13 and $14. Bitcoin rose to the $30 range in the first quarter of 2013, $100 by April, and $1,000 by November 2013.

2). $1,135 to $175 dip:

From $1,135 in December 2013, Bitcoin dipped 85% to $175 in January 2015. It didn’t recover its $1,000 range until 2017 when it kicked off a bull run doubling to $2,000 in mid-May and over $19,000 by December 2017.

3). $19,640 to $3,185 dip:

From $19,640 in December 2017, Bitcoin dipped 84% to around $3,185 in December 2018. At the end of 2019, its price was about $7,200. By December 2020, Bitcoin increased over 300% to $29,374 doubling this price in the first quarter of 2021. Bitcoin sat at $64,000 before falling below $30,000 birthing the fourth bear market.

The similar trait in all Bitcoin’s bear markets is:

1). The dip can last for a long time but that does not mean the crypto is going to crash. This is why doing your research, investing in sound projects, and following the fundamental principle of investing — investing only what you can afford to lose is very crucial.

2). While the recovery period can take a while, the coin ends up doubling (sometimes quadrupling) its previous high. If you freak out and sell during a bear market, you would miss out on the coming bull run.

 At the time of writing, Bitcoin is bearish, worth less than half of its previous high in 2021. A drop from $64,000 to almost $21,000 is enough to freak out. But Bitcoin went from $19,640 to $3,185 in 2017/2018 and bounced back.

To stay sane in a bear market as an investor, make sure the project you are investing in is solid. Do your own research.

As a crypto trader, don’t time the bottom, no one is certain of how far the dip will go. Take the bear season to check out less volatile assets like stable coins, diversify your portfolio, consider play-to-earn features, and test your trading strategies. 

2). Consider staking:

Staking is like putting your money in a savings or fixed deposit account, you make money as the value of the currency increases in the international market and earn an extra percentage for keeping your money in the account. With crypto staking, the extra percent you earn is because your staked coin is helping improve the security of the blockchain.

Not all coins can be staked. Bitcoin for instance secures its network by solving complex mathematical puzzles in a Proof-of-Work (PoW) structure, it does not require staking.  Blockchains using Proof-of-Stake (PoS) structures like Cardano secure their network with validators. These validators are chosen by their amount of staked coins.

The profit you earn from staking depends on the type of crypto you stake, the staking platform, and the market condition. Some exchanges offer lesser staking rewards than others. 

Understand the terms before staking. Some coins have a minimum lockup period. This means that you cannot withdraw or transfer your staked coins.

For conservative investors, staking stable coins like USDC (with an annual percentage yield of 4-5%) is the way to go.

Other staking coins include:

Solana (SOL) yielding 7-10% APY depending on the exchange, Cardano (ADA) with 4.6% APY, Algorand (ALGO) with 3-10%APY, Polkadot (DOT) with 13.5% APY, Tezos (XTZ) with 8% APY, and Polygon with 10% APY.

Metaverse cryptocurrencies like Axie Infinity (AXS) pays 20% APY on Binance exchange with Sandbox (SAND) yielding 3% APR + compounding interest on YouHolder exchange.

Market conditions affect your staking reward. In cases where the value of your staked asset dumps while locked up, the value of your APY reduces but If you are determined to go through the bear market, staking helps you make more than you originally had.

If you stake 1,000 SOL, for example, you get rewarded 10 SOL. It will always remain 10 SOLs. Even if the price of SOL changes, you’ll still be in profit.

3). Buy the dip using dollar-cost averaging (DCA):

Dollar-cost averaging is a long-term strategy where you buy a small number of assets over a period regardless of the price. This means instead of buying $500 worth of Ethereum at once, you spread the payment in the form of an installment ($100 every two weeks for example). 

With dollar-cost averaging, you take advantage of the price difference to accumulate more assets. Using the example, if $100 is worth 0.032 ETH at your first DCA installment and the ETH price dips 2.88% in two weeks, your next payment of $100 will get you 0.32 ETH.

Some exchanges like Binance and Pionex have buy features that help automate DCA.

Conclusion

The crypto bear market is the time to trust your research, stay off the chart, improve your trading strategy, diversify your portfolio, consider play-to-earn options, and keep hodling. 

If you are new to the crypto space, check out our beginners’ guide to cryptocurrency or our 5-day starter pack.

This is not financial advice. All information on this website is for educational and entertainment purposes only.