We’re fully aware that crypto bear markets come and go. However, knowing doesn’t make them any easier to approach, considering the dwindling crypto prices and the sense of fear, uncertainty, and doubt (FUD) among users.
Unfortunately, due to various factors, we’ve been in a bear market since 2022. The value of Bitcoin (BTC) alone has plummeted from its all-time high price of $69,044.77 in November 2021 to below $30,000 in August 2023. Many cryptocurrencies have also tumbled down to their all-time lows, prompting contemplation about how to endure further losses if the bear market persists in the next few months.
If you’re an active crypto trader or are planning to get started but are worried about market pullbacks, this article provides tips on how to survive a bear market. Hopefully, this can also help you bounce back as soon as possible if you’ve suffered from losses.
7 Tips for Surviving a Bear Market
These strategies can equip you with valuable insights about working around bear markets with (even just a little bit of) confidence.
Note: Not financial advice
1. Hedge with stablecoins.
Stablecoins are usually pegged to a traditional currency like the euro or U.S. dollar. By converting a portion of your crypto holdings into stablecoins, you can preserve the value of your tokens and reduce exposure to potential losses.
Holding stablecoins may also allow you to effectively "park" your funds in a secure and stable asset while they weather the storm of market turbulence. This can help safeguard your funds, while also providing them with a liquid and easily accessible alternative that can be swiftly reinvested in case market conditions become more favorable.
In addition, stablecoins allow you to seize opportunities that arise during a bear market. When crypto prices are down, certain assets or trading opportunities may become particularly attractive. By having stablecoins on hand, you can swiftly capitalise on these opportunities without the need to convert back and forth between cryptocurrencies and fiat currencies, which could save time and potentially avoid transaction fees.
2. Read the news.
Reading the news can empower you to gain insights, manage risks, and identify opportunities during a crypto bear market. Timely news coverage can reveal trends, patterns, and potential catalysts, which may enable you to anticipate market shifts and position yourself strategically.
At the same time, news outlets cover legislative changes and governmental actions that may affect crypto use and trading. Staying updated on regulations can help you comply with legal requirements and navigate any shifts in the market resulting from regulatory decisions.
3. Explore new projects and technologies.
Exploring new projects and technologies during a bear market is not just a proactive approach; it's a strategic necessity for users who want to not only survive but also thrive amid challenging market conditions.
This may inspire you to diversify your portfolio and reduce dependency on a single asset. By investing in a variety of projects with promising potential, you can spread risk and mitigate losses if one project faces difficulties during the bear market.
Correspondingly, looking at new projects can provide you the chance to discover hidden gems that may be under the radar during bull markets but have the potential to gain traction and value over time.
Engaging with other crypto enthusiasts, traders, and experts can help you gain diverse perspectives, strategies, and information that may be helpful in protecting your portfolio during a bear market. Some crypto users even attend events, conferences, and webinars to discuss market conditions, share experiences, and learn from others' successes and failures.
Moreover, connecting with individuals who share similar interests and goals can open doors to potential partnerships, collaborations, funding, and even job opportunities in the blockchain and crypto sectors.
5. Use analytical tools for market analysis.
Emotional impulses often run high during bear markets due to FUD. On the other hand, analytical tools rely on factual data—historical trends, resistance levels, trading volumes, market sentiment, etc.—which can help you make decisions and strategies that are not influenced by your emotions.
Additionally, market analysis tools may enable you to backtest certain moves and strategies. This involves simulating trading scenarios based on historical data to determine how a particular strategy would have performed in the past. By doing so, you can assess the viability of your strategies and make adjustments if necessary.
6. Stay active on community channels.
The bear market can be emotionally taxing for users, as the value of holdings declines. Sharing experiences, discussing coping strategies, and even commiserating over losses can help you maintain a positive outlook, bolster your mental well-being, and remain steadfast in your journey through the bear market and beyond.
Furthermore, community channels provide real-time updates and news that can impact the crypto landscape, whether they’re regulatory developments, technological advancements, or market-moving events. This can be beneficial to your future decisions and strategies, considering that staying ahead of the curve is vital in the crypto space.
7. Keep an emergency fund.
Keeping an emergency fund is a must for active crypto users. This financial cushion can serve as a safety net and provide peace of mind during challenging market conditions. Plus, it can help you avoid making impulsive decisions driven by fear or panic. For instance, instead of rushing to sell assets at a loss to cover urgent needs, having a financial buffer allows you to make more rational and informed choices about your holdings.
Also, an emergency fund can give you the flexibility to navigate the bear market with a strategic mindset. It can encourage you to seize opportunities that may arise during the downturn, such as buying undervalued assets or participating in new investment avenues.
Without the pressure of needing immediate cash, you can be more selective and patient in your investment decisions, and potentially position yourself for gains when the market eventually recovers.
Both positive and negative predictions about the crypto market’s direction are all over the news. However, the truth is, it’s hard to know for sure as the market could go different ways depending on various factors. These may include regulatory developments, economic conditions, market supply and demand, market corrections, user psychology, crypto payment adoption, and so much more.
But hopefully, these tips on how to survive a bear market have given you constructive viewpoints for devising strategies and making prudent selections concerning your crypto portfolio. You may also find it beneficial to read our article about how to make money in a crypto bear market.
What is a crypto bear market?
A crypto bear market refers to a period of sustained decline in the value of crypto assets. This stands in contrast to a bull market, where prices are on the rise.
Factors such as regulatory changes, macroeconomic events, technological concerns, or a lack of positive news can contribute to the onset of a bear market. During this period, investors may experience losses on their holdings and might exercise caution before making further investment decisions.
How long should a bear market last?
The duration of bear markets can vary based on multiple factors, but they usually press on for several months to even a couple of years. Throughout history, certain crypto bear markets have persisted for approximately 6 to 18 months, while others have extended beyond the span of 2 years. To give you an overview, the bear market between 2018 and 2019 lasted for approximately a year, whereas the bear market in 2013 lasted for roughly 14 months.
Can you recover from a bear market?
The simple answer is yes, it’s completely possible to recover from a bear market. Sure, bear markets can be challenging, but they’re a natural part of the market cycle. Many cryptocurrencies have experienced bear markets in the past, only to eventually rebound and enter new periods of growth years later.
It's also good to note though that recovery may not happen immediately after the bear market ends. Markets often go through consolidation phases before resuming a sustained upward trend. Additionally, the timing of recovery can vary between different cryptocurrencies. While some may recover more quickly, others might take more time.
All in all, recovering from a bear market requires a combination of strategic planning, patience, and a long-term perspective.