6 Tips to Ensure Your Success in the Bear Market
Disclaimer: Article is NOT financial advice.
My crypto journey began halfway during the bull run of 2017. As prices climbed and soared, I was left wide-eyed as my gains increased every time I refreshed my Blockfolio app. What ensued then was a drop of epic proportions, with a crypto winter lasting 3 long years from 2018 to 2020. $BTC then fell from a high of $19,500 to $3,000.
Fast forward to today, I’m still here, and I’ve made multiples of my initial investment. I would say that without my entries into assets such as $VET, $AVAX, $QNT, $BNB and so forth during the crypto winter, my portfolio would not be where it is today. The adage is indeed true that money is best made during bear markets.
I share some tips and experience I’ve gained below, in hopes that it could help you during this time as well.
Tip #1 — Managing Your Emotions & Discipline
Firstly, it is important to manage what’s going on in your head. In crypto, prices will always dip harder and soar higher than your expectations. Knowing that alone tells you that your risk tolerance needs to be increased. It is just how the crypto markets are. Once you’ve increased your risk tolerance, large dips won’t scare you into panic selling as much.
Next, it is to DYOR for the tokens you’re holding. If you’ve done the due diligence and are confident in your investment, then a dip is just time for you to buy more. You’ve already tipped the scales in your favor by researching as you understand the project is likely to succeed, and price appreciation of its coin is very likely in the long term. Once you’ve established that, it takes the emotion out of the equation when markets dip. An analogy is like buying a Rolex or Lambo on the cheap. Who wouldn’t want to own these at cheaper prices?
Tip #2 —Knowing When to Buy
It is understandable to follow the saying “Buy the Dip”. However, a problem investors regularly face is running out of capital, or stables, to enter buy positions. I present below 2 scenarios on when to buy:
- In a bull market, DCA frequently during daily dips and on red days. Prices recover very quickly with huge volume during bull markets. Do note to take profits.
- In a bear market, buying daily dips is NOT recommended. Prices tend to make lower lows during bear markets, and there’s always a better price to enter if you’re patient enough. A good tool to time your buys would be to use Fibonacci retracements in a weekly or monthly time frame.
In short, Fibonacci retracements draw a scale of 1 to 0 on a price chart from a low to a high. Key retracement levels are 0.382, 0.5, 0.618. Using the above chart as an example, assuming BTC’s long term price trajectory is to the upside, it is best to buy at the 0.5 or 0.618 mark, and not at prices near the highs. By doing so, your risk-to-reward is improved greatly. Of course, it is not guaranteed the price won’t fall further, such as to the 0.786 mark.
Tip #3 — Consolidating Your Positions
In a bearish market, it is unlikely for small or mid-cap cryptos to have significant price increases. It is then time to cut your degen losses and consolidate capital into cryptos which’re likely to last into the horizon.
Back in 2018 to 2019, I was dabbling heavily into small and mid-caps but once the market crashed during the March of 2020, I consolidated all my losing positions into $DOT, $AVAX, $QNT and some other positions, keeping my portfolio small.
Similarly for today, I’ve been divesting my small and mid-cap cryptos into $AVAX, $LUNA, $FTM, $ASTR and some others which I’ve done research on and am confident of their long term future.
Tip #4 — Selling Positions during Relief Rallies
So how do we know when to sell our riskier positions? In a bearish market, we have to look for relief rallies, or bull traps. In other words, once the market is green on the daily or lasting for a few days, typically without any significant volume, it is a good time to exit your riskier positions into stables. Then, wait for the downward price action to follow before stacking back into the solid cryptos which you’ve DYOR’ed on.
Tip #5 —How Money Flows in Crypto
Unless you’re stacking only $BTC and $ETH, you really should study the below chart. It is a pattern that has recurred across the many bull runs in crypto. It is also the reason for Tip #4, on why we should move capital from riskier assets to $BTC or strong, high cap altcoins. This is because when their prices rise during the next bull run, we can then take profits and allocate them into riskier small or mid-cap cryptos, for maximum gains.
Tip #6 — Be Aware of Macroeconomics
Unfortunately, crypto, just like all other major markets, are affected by macroeconomics and major events of the world. It helps for you to be on top of such news. Examples today include the Ukraine War, commodity prices, US stock indices such as the S&P 500 and NASDAQ, US Federal Reserve Interest rate decisions, Elon Musk’s tweets and much more.
All of these would have an impact on the crypto markets. For instance, the NASDAQ is highly co-related to the crypto markets. So anything that affects US stocks will likely affect your crypto portfolio as well. I recommend you to stay informed of markets and major world news, which can better prepare you for your investing decisions in crypto as well.
That summarizes my 6 tips for your success during this crypto bear market! Hope it is of some, if not much help and if you’d like to drop me a follow, you can follow my Twitter here.