During the 2018/19 crypto winter cryptocurrencies lost over 80% of their value with Bitcoin falling below $4,000 from a near $20,000 high. Despite the price decline crypto reached a new all-time high (ATH) a few years later. Here are a few lessons traders can take from the prior bear market.
How to Survive the Bear Market
1. Managing Risk is Crucial
Managing risk involves taking measures to minimize potential losses and optimize profits in any market. To get through a risky market, here are three risk management strategies to use:
- Diversification: Invest in diverse crypto asset classes like base currencies, stablecoins, and interest-bearing coins, which have varying risk levels to mitigate losses in a market downturn. Hold a portion of your cryptocurrency portfolio in cash as a buffer if you need to liquidate the assets for daily expenses or to re-enter the market when the prices are favorable.
- Actualize profits: Don’t be afraid to take profits when you feel the price is right. You can re-enter the market as the price falls or during a resurgence.
- Use Stop-loss: The stop-loss mechanism automatically sells an asset once it hits a specified price, limiting losses during a bear market.
2. The Market is Unpredictable
Cryptocurrencies operate free from most rules controlling stocks; therefore, crypto becomes unpredictable with no guiding or limiting parameters. Avoid any news predicting an end to the crypto winter or a price resurgence; stick to your crypto plan adjusted for the bear market to survive the downturn.
3. Not All Projects Will Survive
DeFi lending platforms, decentralized exchanges, and NFT projects are experiencing their first bear market. Unfortunately, not every project will survive the current downturn. Like the 2018 price fall, many projects may succumb to the financial strains of the bear market.
The market hype will die, leaving only problem-solving platforms with solid blockchain foundations. Users can protect their portfolios by identifying and investing in projects that solve real-world difficulties, as they will probably emerge from the crypto winter with a higher valuation.
4. A Learning Opportunity
Bear markets provide a learning opportunity for new crypto traders. As prices fall, platforms try to explain the cause behind the downturn. Traders can learn technical analysis basics, bear market survival strategies, portfolio diversification methods, and more. The newly found knowledge equips traders with vital skills in any market situation.
Ooki’s blog provides extensive knowledge on crypto trading, including more tips concerning survival in a bear market.
5. Nothing Lasts Forever
Market cycles confirm that no downturn or bull run lasts as long as traders desire. The current bear market, though daunting, will have an end. After going through the accumulation, mark-up, and distribution phases, crypto is now on the downtrend—the last market cycle phase.
The market will bounce back during the accumulation phase.
Survive and Learn!
Managing risks, having an open mind, and constantly increasing crypto market knowledge will help new cryptocurrency traders survive the current and future crypto winter.