Crypto bear markets have a bad rap due to significant price declines, the pressure to sell, and overall fear, uncertainty, and doubt (FUD) among users. It’s understandably so, considering you may lose hard-earned money, especially if you don’t have risk management strategies or are fairly new to trading.
Yet, against the grain of common thought, it’s completely possible to grow your portfolio and make money in a crypto bear market. Let’s dive more into that in this article.
What Is a Crypto Bear Market?
A crypto bear market is a prolonged period of falling cryptocurrency prices. During this period, trading activity is lower than usual; the supply of crypto is greater than the demand; and market sentiment is negative.
The time span of bear markets may vary, and they’re caused by several contributing factors, so it’s hard to predict their timing and length. While they could range from several months to a few years, the average duration is around 289 days or about 9.5 months.
6 Ways to Make Money in a Crypto Bear Market
Many crypto users may be inactive during bear markets, but you can still take advantage of earning opportunities this season. In fact, if you play your cards right, you can turn the bear market in your favor, especially in the long haul. Here are some ways you can make money in a crypto bear market.
Disclaimer: Not financial advice
Crypto staking is one of the best ways to earn yields, even during a bear market. It allows you to participate in verifying transactions on a blockchain network, but you won’t personally do the validations yourself. The computer in the network will. What’s usually required is you holding onto (or locking up) a certain number of tokens in a wallet for a certain period. You’ll receive rewards by doing so, usually in the form of additional coins or tokens. The amount could be subject to market volatility.
In Ka.app, one of the apps like Cash App that allow you to send crypto & Bitcoin payments, you can earn up to 15% annual percentage yield (APY) on your KASTA tokens by locking them up in the app for six months. Locking up your tokens will also activate discounted convert crypto fees as low as 0.376% of the converted amount.
2. Buying the Dip
Everything is on sale during a bear market. For instance, a coin could be worth 20% to 150% less (or way cheaper) than it was a few months ago. If you have the capital, this could make a good opportunity to accumulate digital assets at a lower cost, or support the crypto project you believe in, for potential long-term gain.
Besides, the market has bull runs, too. And if you’re patient to wait for that to come, buying the dip could be a great option. The tricky part though is on choosing which cryptocurrencies to buy, so we’re cueing the classic to do your own research (DYOR) and only invest what you can afford to lose reminders.
3. Short Selling
The best thing about short selling, also known as shorting, is that you can sell crypto without actually owning them. It works with you borrowing crypto from an exchange or platform through a margin account. Then you will sell the crypto you borrowed when the price is high and then hope the price falls.
If it drops as you predicted, you will buy it back at a lower price and return what you borrowed to the platform. The difference between the high price you sold at and the low price you bought at is your profit.
Some exchanges you can go to for shorting include Binance, KuCoin, and Kraken.
4. Crypto Lending
As the term suggests, crypto lending is allowing someone to borrow your coins or tokens to earn interest from your holdings. This usually works through a crypto lending platform like Nexo, Aqru, CoinRabbit, and Crypto.com.
It’s good to note that while crypto lending can be profitable, it's not risk-free. Platforms can have risks like defaults or security issues, and thus it’s wise to be cautious. DYOR and choose a reputable lending platform to get your interest payouts accurately, securely, and on time. Also, don’t forget to read their terms and interest rates.
5. Yield Farming and Liquidity Mining
Yield farming refers to the process of providing or locking up your cryptocurrencies to a decentralised finance (DeFi) platform, and in return, you earn rewards such as yields or new tokens. Meanwhile, liquidity mining is providing liquidity to a decentralised exchange (DEX), and in return, you get rewarded with more tokens.
However, just like staking, the rewards you can get may be subject to market volatility. Yield farming and liquidity mining are exciting passive income opportunities during a bear market, but again, they have their own risks. Some of these include smart contract risks, impermanent loss of funds, and liquidity risks. Be sure to choose the right platform or exchange to avoid project-related risks and rug pulls as well.
6. Grid Trading
Grid trading is a strategy that involves setting up a series of buy and sell orders at different price levels. You place buy orders at lower prices and sell orders at higher prices, creating a "grid" of potential trades.
Grid trading can be a way to catch price fluctuations and make profits during a bear market. Let's say the price of a token is ranging between $55 and $65. You can set up buy orders at, say, $50, $45, and $40, and sell orders at $60, $55, and $50. If the price drops to $40, you buy. If it climbs to $50, you sell. You could keep making these small gains while the market moves.
A tip to keep in mind is to pay attention to market trends and choose your price levels wisely. Make sure your grid isn't too wide or too narrow, although finding that sweet spot can take some practice. Also, be aware of potential transaction fees, as grid trading involves multiple trades.
And as always, remember that grid trading comes with risks, too. Sometimes prices might not move the way you expect, and you could end up stuck in a cycle. Therefore, it’s ideal to start small, test your strategy, and only invest what you can afford to play around with.
The bear market may sound intimidating, but you can still take advantage of it with enough research and strategy. New and seasoned users alike can make money during these downturns using the opportunities mentioned above.
However, before doing anything, be sure to research, stay updated on what’s happening in the market, diversify your strategies, and know the risks associated with each earning opportunity to achieve your goals.
Can you make money in a crypto bear market?
Yes. As mentioned, there are various ways to make money in a crypto bear market. These include staking, buying the dip, short selling, crypto lending, yield farming and liquidity mining, and grid trading.
Should you sell crypto in a bear market?
There’s no one-size-fits-all answer to this because it depends on your circumstances and goals. While some opt to sell their assets to minimise potential losses or lock in earnings, others might choose to hold or even accumulate more crypto at lower prices for potential long-term gains.
How long do bear markets usually last in crypto?
The duration of bear markets may vary due to several factors, but they typically last for several months to even a couple of years. Historically, some crypto bear markets have lasted around 6 to 18 months, while others have extended beyond 2 years. The 2018-2019 bear market, for example, lasted for about a year, while the 2013 bear market lasted for approximately 14 months.