The crypto market has been in turmoil for over six months, with prices dropping steadily. It’s not looking good at the moment, but things could get better in time—and there are some simple ways you can prepare yourself now. Here is how you should survive this bearish period of crypto trading…
If you have any plans to invest or trade cryptocurrencies like Bitcoin (BTC), Ethereum (ETH) or other major coins such as Litecoin (LTC), then it would be best if you check out our complete guide on cryptocurrency investing before proceeding further. This article will provide you with five key tips that may help you stay afloat during the current crypto slump.
Top Five Ways to Survive the Crypto Bear Market in 2022
- Do Not Try to Short the Crypto Market
Shorting is when an investor sells their own shares/equity in exchange for borrowed ones from another party. In most cases, short sellers borrow stocks from brokers/brokerages firms and sell them back to investors once they think its price has fallen too low. Theoretically speaking, shorting makes sense. However, only those who understand technicalities of stock markets can actually make money by doing so. Moreover, short selling carries many risks associated with counterparty risk, credit default, margin calls, etc.
- Have a Clear and Long-Term Vision
While the crypto market might seem volatile right now due to certain factors, the future outlook is bright. As per recent reports, Bitcoin’s value is expected to increase in the future. According to CoinMarketCap data, BTC was worth $14,933 at present which means it lost around 15% of its total valuation since last year. So far, 2020 hasn’t seen any significant growth figures either. But experts predict that the situation will change soon after the release of Bakkt futures contracts in December 2019.
However, while Bitcoin is predicted to gain value next year, do keep your long term vision clear. You need to know why you want to buy Bitcoins in order to avoid making rash decisions. If you don’t have any specific reason behind buying Bitcoins, then you shouldn’t even bother about owning them. After all, what use does a coin serve if you’re just going to hold onto it?
- Use Dollar-Cost Averaging to Your Advantage
Buying something expensive without knowing exactly how much it costs is always risky. We often end up spending more than we intended because we tend to forget inflation. For example, let’s say you bought one pound of gold 10 years ago for $10,000. Now, the same 1lb weight of gold will cost you roughly $16,500 today. Hence, dollar-cost averaging works well here. By buying small amounts regularly, you’ll be able to save big through compounding interest.
- Conduct Research
It goes without saying that whenever people start investing in anything new, they usually look for advice online. Before putting your hard earned cash into the hands of someone else, you must first research everything thoroughly. There are several websites available where you can find reliable information regarding different aspects of cryptocurrency investment. Such platforms include Cointelegraph, Reddit, Twitter, Facebook, YouTube, LinkedIn, and others.
- Stay Positive
As tempting as it might sound, try avoiding negative news channels like CNBC, Bloomberg TV, Sky News, BBC, Reuters, Yahoo Finance, CNN Money, etc., on social media. Most of these sites contain articles and videos related to cryptocurrencies and blockchain technology. While you should definitely read and watch informative content, do refrain from getting emotionally attached to any particular outcome. Remember, everyone knows that Bitcoin is volatile, and nobody can guarantee positive returns.
In fact, keeping emotions aside altogether is probably the best way to remain calm amidst volatility. Many traders lose money when they chase high hopes or fall prey to FOMO. On the contrary, sticking to a plan and being rational helps you stick to your strategy despite upsets occurring every day.
Withdrawal strategies also matter. You must choose a suitable method depending upon your goals. Some users claim that cashing out frequently leads to loss of capital, whereas holding larger quantities of tokens offers higher profits. Decide accordingly based on your preferences.
Lastly, remember that you aren’t alone. Even though Bitcoin seems down now, it isn’t uncommon for it to double or triple within days. Similarly, Ethereum went from $200 to nearly $400 in mid-2019. That said, don’t panic and follow your instincts. If you feel strongly about a project, go ahead and add funds to your wallet.
Crypto Bear Market Is Overwhelmingly Transient
At times, the market behaves unpredictably. Therefore, it becomes important to adapt to changes rather than trying to control them. Cryptocurrency bears are inevitable, especially when the industry matures. Eventually, you will see the true potential of digital assets. Nevertheless, patience is required to reap maximum benefits from the nascent asset class. Keeping these top five ways to survive the crypto bear market in 2022 will help you weather the turbulence.