What to Do During a Downturn in the Crypto Market?
As you know, nothing good lasts forever. In the cryptocurrency market, the bullish trend is replaced by a bearish one. But it doesn’t matter. The bear market is an ideal opportunity to learn something about the revolutionary technology underlying the cryptocurrency projects that so many people earn from. Moreover, expanding your knowledge about blockchain and Web3 may be the best way to pass the time during the crypto winter.
Let’s look at some of the common methods and strategies that allow you to navigate bear markets. We will look at how you can learn from your mistakes and position yourself to profit in the next bull market. In addition, we will discuss some ways in which you can improve your understanding of blockchain and Web3.
Bear Market vs Bull Market
Before we discuss how to survive a bear market, let’s first clarify some terms. A bull market is when asset prices rise and investors expect them to rise further. Thus, “bullish” or “bull” means that a person is confident in the positive dynamics of prices.
Conversely, a bear market is a long period of negative price movement and market sentiment. A bearish investor will be wary of current market conditions and will most likely look for a trend reversal before entering a significant position.
When the breathtaking bull market comes to an end, many crypto investors feel regret. Greed, naivety and lack of discipline can lead to annoying but avoidable losses. Accordingly, learning how to survive a bear market can prepare investors for the crypto winter and allow them to benefit from the volatility in the markets. Below we will look at some of the best ways to get the most out of the market downtrends, and tighten up your knowledge in the field of blockchain and Web3.
- Study
Research is the first step for many investors when learning how to survive a bear market. While you were watching your portfolios fall, a lot of interesting things were happening in the world of cryptocurrencies. When was the last time you checked those promising projects that brought you 10 times the income last year?
Trends and narratives are changing rapidly in the blockchain space. Accordingly, by taking the time to study the latest developments in the industry, you can gain an advantage in the future.
Conduct proper research. Blockchain technology is developing at a phenomenal rate, so theses and proposals can quickly become reality! Moreover, if you have suffered losses as a result of not doing your own research, a bear market is an ideal time to explore new projects in search of potential “real” projects.
- Education
During a long-term downtrend, speculating on price movements can be especially risky. However, this is the perfect time to focus on exploring the blockchain industry. At the peak of a bull market, it’s easy to get carried away with intraday price movements. Airdrops, token sales and the latest opportunities for growing crops are all that you can find in projects on Coinmarketrate.com. This is enough to occupy any investor. However, during the crypto winter, these opportunities often turn out to be less fruitful.
Invest in yourself to eventually survive the bear market. Learning about the latest technological advances in Web3 can give you an unfair advantage in the labor market. In addition, deepening your knowledge of blockchain can give you an advantage in future bull markets. Accordingly, ensuring the relevance of your understanding of Web3 is one of the best ways to learn how to survive in a bear market.
There has never been a better time to master new skills in an evolving technological field. In addition, blockchain developers are in great demand in the sector as a whole.
- Find a job in the field of blockchain
You don’t have to be a developer to make a career in Web3. From the HR department to the media and marketing – companies working in the field of blockchain are hiring employees! Accordingly, having spent time searching for reputable companies with vacant positions, you will be able to apply your knowledge and experience in this niche.
- Create something
A bearish market is the perfect time to build something. If you have learned how to write smart contracts or use open source Web3, why not try to create, for example, a DEX or NFT exchange? During the crypto winter, you have time to eliminate all the flaws in the code or rethink outdated ideas for creating a blockchain application.
Moreover, a bear market is an ideal time to collaborate with other developers to create something grand. If you have ideas for a Web3 project, doing the bulk of the work during a bear market can help you prepare for the next market!
- Improve your strategy
When it comes to how to survive a bear market, many investors take some time to think. Determining which strategies work and which don’t can help you cut unnecessary losses and double down on profitable scenarios. To help with this, it is very useful to have a good understanding of technical analysis (TA) and fundamental analysis (FA).
Technical analysis is the process of forecasting price movements based on historical data. This type of analysis uses graphical models and indicators to establish probabilistic results. This can help eliminate emotions from trades. Fundamental analysis, on the contrary, uses a broader approach to understanding market cycles. These include time-sensitive geopolitical considerations, the impact of volatility in other markets, as well as institutional adoption of blockchain and cryptocurrencies.
Moreover, using a combination of TA and FA will allow you to make the most informed decisions.
- Mining or staking cryptocurrencies
If you have access to inexpensive or renewable energy sources, mining cryptocurrencies can be a profitable way to generate passive income. Considering the initial equipment costs and current electricity costs, mining cryptocurrencies during a bear market can give you a better share of the mining reward if it becomes unprofitable in other regions. But if you can’t afford it, POS algorithm coin staking is the best solution.
- Stable Coins
Making a profit at the peak of the bull market, many investors cash out funds in the local fiat currency. However, one of the common tactics that allows you to navigate the bear market is cashing out funds in stable coins. When your profit ends up on the blockchain, you can put it into an income-generating account or provide liquidity to the lending protocol. Thus, you can use untapped assets during a bear market and receive passive income without being exposed to volatility.
- Short positions
Shorting (or short positions) is a trading strategy that involves betting on a decrease in the price of an asset. If you think that there is a high probability of a decline in the asset price, you can benefit by opening a short position.
When opening a short position, a trader can take crypto assets on the exchange and sell them at the current exchange rate. When the price drops, the trader can buy back the assets and repay the loan, making a profit. Shorting is inherently risky. However, it allows traders to make a profit when the asset price falls.
- Taxes on cryptocurrencies
If you have suffered any losses during the bear market, you can write them off as taxes. It depends on the country and local laws. However, in many countries you can write off some losses from cryptocurrencies to reduce your tax burden.
- Improve your skills
Regardless of how you decide to survive the bear market, expanding your knowledge and understanding of Web3 in one way or another will undoubtedly help you in the future. It can be anything: watching instructional videos, reading articles, learning a new programming language or practicing technical analysis.
During bear markets, there is always a temptation to speculate wildly or look at price charts, waiting for a correction. However, learning new skills or improving old ones may be a more efficient use of your time.
How to survive a bear market? Just to go on!
Like many crypto traders, if you were involved in the cryptocurrency turmoil during the bull market, some aspects of your life could suffer from this. By taking time to meet with friends, family and loved ones, you can distract yourself from the hysteria associated with the crypt and focus on what is really important!
Why not take a walk in the fresh air, take up a new hobby, or do the housework that you’ve been putting off all year? Or take some time for yourself! The cryptocurrency markets will most likely still be waiting for you when you get back!