What is a bear market?
For those out of the loop, a bear market can be best defined as a prolonged drop in asset prices, which then causes your portfolio to shed value. In a bear market, the supply of an asset is typically higher than the demand because a large chunk of investors (known as ‘bears’) starts offloading loss-making assets from their portfolio fearing further price drops.
Bull vs. bear market
A bull market is diametrically opposite to a bear market. A bull market is when the price of an asset or asset class is on the rise over a prolonged period, which then results in a spike in your portfolio valuation.
Bull markets start when investors feel confident that prices will increase and the uptrend will continue over a prolonged period. In anticipation, they start buying and holding the assets that they believe will benefit the most from the bull market.
In other words, a lot of investors are willing to buy during a bull market while few are willing to sell. Thus, the demand becomes higher than the supply and the price starts increasing. This way, investors’ predictions about bullish market conditions turn into a self-fulfilling prophecy. In contrast, bear markets begin when investors are low on confidence and start believing that prices will continue falling.
With the kind of volatility crypto usually undergoes, the risks and difficulties brought along by a crypto bear market tend to be on a much higher scale. And as we witness the possible onset of another crypto winter with most of the popular coins knee-deep in the red, it’s time we optimize our trading/investment strategies with the following tried-and-tested ways to survive crypto bear markets.
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Welcome to “Bixin Q&A”, a talk show launched by Bixin Wallet, mainly focused on the cryptocurrency market. Bixin will invite friends in the industry to express their opinions together. Some of them are senior practitioners, some are technical developers, and some are market traders. They are all active in the market and can provide the latest valuable information in the market.
In each issue, Bixin Talk will select a hot issue to discuss, analyze it from multiple dimensions, and help you filter the value points.
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In this issue, Bixin Talk interviewed two Web3ers from the top 100 universities in the world. The first is Louis, a UCSD Alumni who is a founder of Web3 project. And the second is Joshua, a UCSB Alumni who is a crypto researcher. They are both active members of the Bixin community.
Louis shares 5 Ways to Survive in a Bear Market
If a bear market catches you unprepared, your chances of survival are slim. To ensure survival, your preparation should be both mental and physical.
Mentally prepare yourself during good markets by acknowledging that bear markets, while completely unpredictable, do happen (and quite frequently at that.) Remind yourself often that bear markets happen, and never be surprised when the next attack comes along.
It’s also imperative to recognize that your emotional state will impact your rational decision-making, and can wreak havoc if not kept in check. It’s something else entirely to actually stay calm and do that when faced with an angry bear market
In addition to mental conditioning, physically prepare by diversifying investments. While diversification won’t protect investors from a general market downturn, it will help to lessen the blow and avoid any isolated downturns that impact just one coin, sector, or region. Bonds can also add a stabilizing factor that investors can use to rebalance from or, if investors are currently withdrawing assets, to liquidate instead of the equity assets.
While the classic bear survival advice about “playing dead” may not seem applicable here, it’s actually a much better response than most investors manage during a bear market attack. Pretending you’re dead means you aren’t out there frantically selling all of your investments in a panic at the worst possible time.
Take a deep breath and remember one phrase: “This too shall pass.”
Please be prepared by diversifying investments and investors are managing not to panic even when everyone around that is frantically selling their investments. Investors survival is practically ensured! However, that can quickly change if investors lose confidence as the bear market wears on. Stay The Course. Now is the time to be confident in that plan and continue to implement it. If you’re saving money, don’t stop saving. If investors have a target allocation, rebalance back to that allocation (which will most likely mean selling the investments that are doing well and buying more of the investments that are doing poorly).
5.Don’t Give In!
Internally and externally, investors will be assaulted by emotions, family, friends, co-workers, “advisors,” and media screaming one message; “the market is doomed, this could be the end!” Always remember that no one can predict the future, and the most important thing investors can do is have a process and plan that will give investors the best chance of success.
Joshua shares 5 Ways to Survive and Prosper in a Bear Market
1.Don’t try to time the bottom
Nobody — absolutely nobody — can accurately predict the bottom. You could study technical and fundamental analyses all you want or listen to experts, but at the end of the day, you may still have to rely on your gut feeling while trying to time the bottom. And as you will probably agree, gut feelings are not much of an option if you’re looking for strategies to navigate a crypto bear market, or worse even, a crypto winter.
People may buy at what appears to be the bottom at a given time. However, the price could further drop. And if it does drop, investors will have to sell it again to have their next shot at timing the elusive bottom. More often than not, this strategy will only cause investors’ wallets to shrink.
When the going gets tough in a crypto bear market and investors’ portfolio starts shedding value left and right, staking comes off as a good way to earn a passive income from investors’ crypto stash. Staking basically refers to the practice of locking away your coins on a proof-of-stake (PoS) blockchain for a period of time and being rewarded for it. The best part about staking is that it increases the size of investors’ wallets even in a bear market.
3.Improve Investing Formula
Whether realizing it or not, everyone has an investing algorithm in their head. Sit down and reflect. Write down rules and principles.Just be real and don’t make the same mistakes in the next cycle.
4.Invest in Health and Friendships
The investor probably sacrificed a lot during the bull cycle. Some things are more important than money such as relationships and health. Use this period as a chance to strengthen those areas.
5.Beat ETH / BTC
The goal should be to outperform ETH and BTC as an investor.So measure the portfolio in those rather than USD. If investors can’t do it, then it’s easier just to buy ETH / BTC.
The above is all the answers of the two interviewed guests in this issue.
Have no doubt in mind that as an investor or a trader, peple bound to lose money occasionally. A 100% strike rate is practically impossible, no matter how seasoned who in the game. However, by following the strategies discussed above, people will significantly reduce chances of falling prey to crypto bears. Alongside, make sure to stick to the other basics such as always using stop-losses in case you are trading. If anyone has a personal opinion to share on cryptocurrency, feel free to contact Twitter: @Bixinwallet.