Here’s Some Strategy for a Crypto Bear Market

Paigambar Mohan Raj
Source: Seeking Alpha

The week is off to a no-good start. Crypto markets have plummeted to a new low this year, with massive liquidations hitting everyone’s pockets. 2021 saw the intake of many new investors into the world of crypto. 2021 was also the year of the incredible bull run. Hence there are many investors in the world of cryptocurrencies, for whom this is the very first bear market.

Given the recent circumstances, let’s take a look at some strategies that can help you navigate your way through a bear market.

Diversify your crypto portfolio

Diversification is an easy way to limit losses. This means that you should have other investments to hedge the losses on another. However, in the current situation, the entire crypto market seems to be in a downturn. In these events, it is safe to have your investments spread out in a variety of asset classes, such as stocks, bonds, gold, real estate, etc.

Your risk tolerance, time horizon, goals, and other factors all influence how you split up your portfolio. Every investor is in a unique scenario. You may avoid the negative consequences of putting all your eggs in one basket if you use the right asset allocation strategy.

Invest what you can lose

This is an extremely important lesson. Many people have made the mistake of putting their life savings into certain crypto, or stock. And many times they have regretted doing so. It is of the utmost importance to not risk one’s future. Investing is an important practice, but only as far as not risking your well-being. One should only invest as much as one can afford to lose.

As a general rule, investors should not invest in equities unless they have a five-year or longer investment horizon, and they should never invest money that they cannot afford to lose. Bear markets, as well as modest declines, can be exceedingly damaging.

Go Short

Well, there’s always money to be made whether the markets go up or down, albeit with risks. Shorting is a good way to stay in the game even when the tide is against you.

Short selling necessitates the use of margin accounts, and it can result in significant losses if markets rise and short positions are called in, causing prices to climb even more. Another alternative is put options, which increase in value when prices fall and guarantee a minimum price at which to sell an asset, thereby setting a floor for your losses if used to hedge.

It is no easy task to remain calm in times like this. Bitcoin, the original and largest crypto is down by 27.4% in the last seven days. However, we must take care of ourselves and remain as composed as we can be. And such be capable of making the most rational decisions that we can. The market is down for the moment, but like always, it can climb its way out of it.