Bear Market Investment Guide (Part 2): How to Come Out the Other Side Stronger
It’s halfway through 2022 and the bear market continues. Is history repeating itself in the cryptocurrency market?
In November 2021, Bitcoin reached an all-time high of roughly $69,000 before pulling back a little. Since then, the price of BTC has been in decline. The same goes for Cardano, which hit an all-time high of $3.10 in late August 2021 and now has fallen all the way down to $0.45.
Nobody wants to be caught in a bear market, but we all must face reality. Those who prepare themselves and make the right moves now stand to gain over the long run. There are potential strategies to counter the effects of a bear market and even take advantage of this environment.
- Read part 1 of this guide series here
In this article, we’ll expand further on how to navigate a bear market and come out the other side stronger. Let’s get to it.
1. Keep Cash on Hand If Possible to Capitalize on Buying Opportunities
Cash is king, and it’s your cushion against a crypto storm. By keeping cash on hand, you can capitalize on buying opportunities.
For instance, the price of ADA could approach multi-year lows soon. If you’re confident in the long-term potential of Cardano, buying at that price may be a wise idea. You can only buy at that price if you have cash on hand.
Just remember to not let fear or greed get in the way of investing. In bear markets, you must let data, analysis and sober decision-making drive what you do. Here’s how:
- Separate your emotions from the investment decision-making process.
- Keep calm and monitor the movements of assets to capitalize when the odds to benefit are high.
- Maintain the right perspective. A bear market often seems like a massive global catastrophe for a while before it’s remembered as nothing more than a blip on the radar screen when the market enters a bull run.
2. Maintain Perspective and Stick to Your Plans
A bear market can be a period of doom for inexperienced investors. We’ve heard about some investors losing their life savings due to the Terra Luna collapse.
However, bear markets don’t necessarily mean you’re doomed to lose money and just have to wait out the cycle. You can maybe profit by swing trading or by shorting certain coins. You can also position yourself to benefit even more from the next bull run.
For instance, if you’re a supporter of Cardano, you could begin buying ADA at current prices in the hopes of selling it a few years later at a profit. This is positioning yourself to ‘buy low, sell high’, as they say.
Just remember: Stick to this plan. There’s a chance prices could drop even further, but don’t let fear get the better of you (as you’ll end up selling at a loss rather than awaiting a turnaround).
Take this time to evaluate your long-term investment goals. Ask yourself: What can I do now to help me achieve those long-term goals? Then take action. Don’t give in to fear. Stick to your plan.
3. DCA Into Assets You Believe Have Long-Term Potential
As an investor, it’s important to understand that markets often have negative years — it’s part of the regular cycle. It’s hard to time markets, especially bear market bottoms.
A worry-free strategy you can employ is dollar-cost averaging (DCA) into assets you believe to have long-term potential. Assets like Bitcoin and Ethereum certainly have long-term potential. Implementing a DCA strategy to buy any of these assets in regular intervals while the price is low can potentially benefit you over the long run.
For instance, assume you invested $10 daily in Bitcoin starting from the 7th of December, 2018 to the 7th of June, 2022, then you would have invested a total of $14,610. This strategy would mean you have 142,720,000 Satoshis in your portfolio today, which would be worth $59,466 as of now. That’s a total return of +307.03% (source: dcaBTC.)
The most important thing to keep in mind during an economic slowdown is to only use this strategy on assets with long-term potential. And fret not! Because with Adax as your trading platform, all intermediaries, complexity, and cumbersome procedures will be eliminated from the equation, allowing you to have freedom of control over your assets.
4. Stake Legit Stablecoins Such as USDC
Staking has always been a legit method to overcome the effects of a bear market. You can stake stablecoins to get rewarded for providing liquidity. This method ensures that you won’t lose money and can at least earn interest.
For example, on some centralized and decentralized exchanges and protocols, you can stake your USDC for rewards of 1% to 10% based on the current interest rate subjected to each tier APY.
However, you ought to understand that even though stablecoins value are often pegged to an outside asset, such as the U.S. dollar or gold, to stabilize the price, it’s not 100% shielded from risk. Terra Luna’s UST, an algorithmic stablecoin, collapsed, after all. USDC is considered more stable because it’s backed by reserve assets, but it’s still not immune from risk.
5. Rebalance & Diversify Your Portfolio
It’s important not to rely on a specific asset. Don’t put all your eggs in one basket!
Always try to diversify your portfolio among crypto, bonds, stocks, real estate, commodities, art and other assets. This way, you diversify your portfolio and keep yourself from substantial assets if one sector enters a period of crisis.
You can spread your investments around so that your exposure to only one type of asset is limited. With this approach, you potentially minimize risk while ensuring you capture opportunities, as some asset classes will perform better than others at times. Every investor’s situation is different when using this strategy, so be sure to use proper asset allocation.
Change Your Mindset & Take Advantage of the Bear Market!
At some point, a price decline will occur in almost any asset class. It’s left for you to make plans to turn the tides around.
At ADAX, we’re ready to serve as your go-to decentralized exchange. As an automated liquidity protocol that gives you full control of your assets, you’ll always be able to make the trades you want, when you want. Check out our exchange today: https://dex.adax.pro/
ADAX is an automated liquidity protocol that facilitates trades within the Cardano ecosystem in a completely decentralized and non-custodial way. ADAX has no order book — to eliminate all intermediaries, complexity, and cumbersome procedures from the equation, offering users untrammeled freedom to trade without censorship or loss of control over their assets.
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*Disclaimer: The material provided in this article should be used for informational and educational purposes only. It is NOT intended as financial advice. Do your own research and consult with a financial advisor before making any investment decisions.