Bear Market: 5 Tips on How to Profit from It

Are we in a bear market? When will it end? Don't sell your cryptos too soon. The crypto market is an emotional roller coaster ride. For this reason, it is important to keep a cool head and not neglect the psychological aspect of trading and investing. AtoZ Markets tells you how to survive the bear market!

Almost all cryptocurrencies have plummeted in recent weeks and Bitcoin is no exception. On Wednesday, May 11, the price of the flagship cryptocurrency crashed below $30,000. At the time of writing, Bitcoin is trading at $27,368, down 11.72% in the last 24 hours.

Bear Market - Bitcoin Crash

Now, the question is, is this a bearish market or is it just a bad time in a bull market? According to Charles Hoskinson, Cardano's creator, there is no doubt that we are dealing with a bear market.

What is a bear market?

There is no official measure for what exactly a bull or bear market is. Rather, one should think that it is a description of a long, indefinite period and the feelings associated with it, and the length of that period may be freely interpreted.

The term bull market is used to describe a long period of growth. An increase in the value of the stock or, in our case, the cryptocurrency market. The bear market is quite the opposite. A bear market is a situation where the price or value of Bitcoin falls over an extended period of time.

These two terms are derived from the stock market. Wall Street has the image of a bull, and in the financial heart of Frankfurt, the bear looks the bull straight in the eye.

Don't Get Carried Away by the 'Bulls' in a 'Bear' Market

  • The bull market is characterized by optimism, which means that prices are rising.
  • The bear market is characterized by pessimism, and prices are falling in the course of it.

In the beginning, bitcoin was mostly of interest to tech-savvy people. However, after some time, more and more people began to see BTC as an investment. Since then, these two terms have also appeared in cryptocurrencies. A bull market or a bear market can arise in different ways. For example, by changing supply and demand, or changing macroeconomic factors.

However, the psychology of the market should not be forgotten. Is the price going down very fast and is it a bearish market? Then it can have a strengthening effect. Fewer and fewer investors believe in a good result and sell their coins, which in turn leads to a further drop in prices. As a result, even fewer people trust the market.

Don't sell your cryptos too soon

A bear market is painful, especially for newbies, but falling prices are quite normal and even positive for long-term price development.

Read also: Bear Market Guide for Beginner Traders

In the crypto world, the profits are immense, but it is all the more difficult to keep them. In the depths of a bear market, many developers abandon their projects. The news is filled with fear, uncertainty, and doubt and many large (and small) market participants are being liquidated.

But it's not all negative. The best buying opportunities occur during the bear market when the crowd has already left the crypto world and the market is in a depression phase. The most important thing is surviving the rough patches and knowing when to take your foot off the accelerator.

Because the market conditions cannot be influenced. What you can influence, however, is how you personally deal with it.

For this reason, we give you 5 tips on how to survive the bearish market and even emerge victoriously.

5 tips on how to survive the bear market

Tips to trade bear market

1# Dollar-cost averaging

With the Dollar Cost Average, or DCA for short, you split your investment into small chunks instead of entering the market with all your capital at once. This is a low-risk form of investment and prevents inexperienced investors from losing all their funds immediately.

For example, an investment of $10,000 could be broken down into 20 smaller investments and used at certain prices or over a certain period of time.

Example: Every other Sunday, or whenever the price has fallen by 10%, you invest $500.

2# Work in a DAO (Decentralized Autonomous Organization)

The crypto world is progressing rapidly and new market segments and technologies are constantly emerging. One of these advanced technologies are DAOs. DAO is short for Decentralized Autonomous Organization. This is a new form of organization that anyone can participate in relatively easily.

Many crypto projects these days start out as a DAO. They are not tied to any central government and decisions are made democratically, via code. Especially in the bear market, when prices are suppressed, it is great to work in the crypto world.

3# Learn theory

Likewise, the bear market is a great time to learn theory. These could be topics related to investing and market behavior, or technical theory such as on-chain analysis or the fundamentals of blockchain. The possibilities are endless. Another interesting point is the fundamental analysis of crypto projects and their tokenomics.

4# Train your mind

The crypto market is an emotional roller coaster ride. For this reason, it is important to keep a cool head and not neglect the psychological aspect of trading and investing. There are a lot of exercises that provide inner balance. These include visualization, breathing exercises, meditation, fitness, and healthy routines.

5# Patience (Zoom Out, the bear market is passing)

Market cycles are quite normal and occur to an extreme extent, especially in crypto. Take a step back and realize that cryptocurrencies will still exist several years from now and have already gone through at least 3 bear markets. To illustrate, a tweet from 2011:

When will the bear market end?

When will the bear market end?

Cryptocurrency enthusiast, billionaire, and CEO of Galaxy Digital believes that the bearish market will continue, and the environment will be “volatile and complex.”

In a conference call with investors regarding the financial results of Galaxy Digital, Mike Novogratz noted the high correlation between the cryptocurrency and stock markets.

In his opinion, this may lead to a continued decline in the prices of digital assets:

Cryptocurrencies will likely continue to trade in line with Nasdaq movements until we reach a new equilibrium point. I feel that the cryptocurrency market will suffer even more damage. The market will become very choppy, volatile, and complex for at least the next few quarters until traders realize that an equilibrium point has been reached.”

Read also: How to Trade Bullish and Bearish Stock Market

Earlier, Novogratz said that the bitcoin rate would stay above $30,000 if the Nasdaq Composite index kept the level of 11,000. At the same time, in an interview with CNBC, the businessman said that “the market is waiting for even more pain.”

In the first quarter of 2022, Galaxy Digital reported a net cumulative loss of $111.7 million, compared with a profit of $860 million in the same period a year ago.

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