The crypto universe is huge and evolving as it hosts highly volatile digital assets with great investment opportunities. The leading cryptocurrency – Bitcoin – is now testing $4,000 per unit, but it was almost $20,000 at the end of 2017. However, 2018 was catastrophic for bulls (market players, who push prices up to get benefits from positive trading) as almost all cryptocurrencies faced severe downtrends.
The time, when crypto or other assets go down on exchanges, is wonderful for bears (traders who bet on the fall in prices). During these periods, it’s difficult to remain optimistic and keep a strong belief in upcoming growth. Still, any experienced trader can get profit from falling markets – at least, when they don’t sell out in panic. You might wonder – why should anyone invest when the charts are red? Read on!
Understanding Bears
Before proceeding to the examples of making money in bear markets, let’s figure out what causes the downfall and why it is natural. Basically, all assets go through cyclic development stages, facing both high peaks and dramatic crashes in price. This was the case with Bitcoin that reached the insane highs in 2017, and plummeted throughout 2018. Thus, bear trends are part of the trading ecosystem and there are no reasons for panic.
But why these trends persist? Do bulls fail to overcome the resistance? Basically, there are two key factors:
- Market conditions. Financial markets regularly go through both bullish and bearish stages, which follow one another. Users can hardly do anything to solve this issue. Thus, we suggest studying technical analysis, at the least.
- Traders’ mindset. Beginner investors tend to spread FUD (fear, uncertainty, and doubt), sell their entire portfolios after price falls, and yell that crypto is a bubble. That’s natural for human beings, but it’s unacceptable for seasoned traders who learn to control emotion oks and keep a cool head.
As a result, whales (traders with large investments) make the most of the crashing market – they push the prices further down, buy cryptocurrencies at a discount, and then allow bulls to move rates up again. The most crucial thing to remember here relates to your own actions. Never panic and always study markets to reveal how you can react to current changes with the highest possible profit for yourself.
Ways to Benefit from Falling Markets
Most newbie investors think that downtrends are fatal for their money as the falling prices lower their portfolio value and inflict huge losses. By doing so, they think short-term. Theoretically, there will be another bull run even after the longest bear market. When it comes to crypto though, we can’t be 100% sure, but historical data proves this fact.
With this in mind, let’s unveil how you can invest during falling markets:
- Buy more crypto. Yes, don’t sell, but buy coins! Price decrease is a great moment to get more assets for a lower cost. Considering the upcoming corrections and new highs, you will be able to earn more after purchasing near lows.
- Understand tiers. It’s not the best idea to buy up everything because some currencies can disappear within the given bear period. Instead, you want to focus on famous coins which have good support: Bitcoin, Ethereum, XRP, and others from the top 20 at Coinmarketcap.
- Catch the moment. We suggest learning about market indicators to spot the best time for investment. Too early or too late purchases are inefficient because you will get minor profits or even face losses. The best moment to buy is near the bottom; and the best place is the exchange with active markets as the prices there are usually more profitable. For this, you can check the list of the largest markets at Theproblem.wtf.
- HODL! This motto is vital for long-term investors. Originating from the mistyped ‘HOLD’, it stands for keeping the money even during the most painful bear trends. Remember that good times are right around the corner.
- Open short positions. We recommend this action for experienced traders only. By short positions, we understand selling coins and repurchasing them later at a lower cost. Simply put, you bet on further price falling and try to get profit from this.
Three Valuable Hints
As a bonus, we’ve prepared three tips for those who want to trade successfully during the bearish periods. Although crypto geeks are optimistic about new uptrends now, it’s better to be wary of bears who are ready to seize the initiative and push prices down again. Thus, read, remember, and bookmark these insights:
- Research trends and indicators. Instead of emotionally selling every coin in your portfolio, do your homework and study technical analysis. It will help make decisions keeping a cool head. Remember that markets are unpredictable, but understandable.
- Diversify your portfolio and set timeframes. Try to fill your portfolio with different tokens and assets. Get some BTC for a long term, purchase a specific amount of XRP for a few weeks in a row, and perform scalping with EOS. All examples are hypothetical; they shouldn’t be taken as an investment advice!
- Be ready for changes. Even the most elaborate portfolios handled by the most experienced investors fail. Make sure that you know how to act in the times of high fluctuations. For this, try to avoid any form of arbitrage trading or trading on margin. Also, it’s often better to do nothing than to make unprofitable deals.
The Importance of Bear Movements
While the majority of active traders and investors consider bear markets the worst nightmare, some players admit that this market state is favorable in general. Sounds strange but let’s figure it out.
When prices go down, the entire crypto ecosystem faces lower risks of a bubble burst. It’s unnatural for investment assets to always increase in value, so we, as crypto enthusiasts, should accept temporary downtrends, which will empower the global idea of decentralized money. Bear markets help to get rid of speculators, as well. Finally, they are wonderful if you want to buy more coins ‘on sale’ and increase the overall portfolio value in the future.