The crypto market has been a grueling battle between the bull and the bear since 2022, with several projects collapsing, exchanges declaring bankruptcy, and many more market downtrends. Thus, navigating the crypto bear market has been difficult for crypto investors, particularly keeping a profitable portfolio while adjusting to continuously shifting trends that gradually erode their investment.
While the crypto bear market is considered a perfect time to buy crypto assets at lower prices, avoiding loss can be challenging if the market continues to crash to new low price points, causing your portfolio to plummet 30-50% more. In this case, crypto bear markets are the perfect opportunity to put your crypto knowledge, discipline, and experience to the test. So, what are the ways to avoid loss in a bear market's downward trend?
A bear market, characterized as a 20% or more decrease from recent highs, necessitates strategic approaches to mitigate potential losses and even leverage the downturn to one's advantage.
From prudent risk management to seeking alternative investing options, the following insights delve into five smart approaches to protect your crypto portfolio while avoiding the sharp claws of a crypto bear market.
5 Ways to Avoid Loss in a Crypto Bear Market
Only Invest What You Can Afford to Lose
The most obvious and important advice for anyone venturing into the realm of investing is only to invest money you are willing to lose. Consider this: your life should not be substantially altered if you lose that money tomorrow. You should be able to pay your bills, eat, and live comfortably. Adhering to this rule ensures you do not find yourself financially in a tight spot.
Also, knowing you've only invested money you can afford to lose makes you less inclined to make reckless decisions out of anxiety. Let's assume the market falls unexpectedly; if you've over-invested, you may experience a rush of worry and sell your investments quickly, maybe at a loss. However, if you only play with money you're willing to lose, you can stay calm, think things through, and make sound decisions even when the market isn't on favorable terms.
Diversify Your Portfolio
All crypto assets tend to fall in a bear market, though not by the same percentage. That is why having a well-diversified portfolio is essential. Don't put all your eggs in one basket by investing just in one asset class because it's difficult to forecast which asset will continue to fall. As a result, balancing your portfolio among various similar assets helps decrease your total losses.
Instead, diversify your investments. Purchase several cryptocurrencies and consider investing in other sectors, such as equities or bonds. In this manner, if one element of your investment performs poorly, the other sections may perform excellently. It balances things out, and you're not unduly reliant on one thing succeeding. By diversifying, you spread your risk and reduce the likelihood of a large loss.
Ignore FOMO and FUD
Here are two terms you may hear frequently: FOMO and FUD. FOMO is an abbreviation for "Fear of Missing Out," and FUD is for "Fear, Uncertainty, and Doubt." These emotions might screw with your head and lead to poor financial decisions. Here's the thing: there will always be ups and downs in the investment sector. Some days, you'll see others making a lot of money and feel like you're missing out. On other days, you'll hear bad news or rumors and feel terrified, unsure, and skeptical.
It is critical to recognize these emotions for what they are and not allow them to influence your judgments. Instead of reacting to every up and down, keep your cool, do research, and make informed decisions. You're more likely to stay on a steady investment path if you avoid the traps presented by FOMO and FUD.
Staking is unique in cryptocurrency investing, providing a path to possible asset appreciation and a steady stream of passive income. Staking is based on assigning or "locking up" a fixed amount of your crypto assets in a blockchain network to help validate the process on a proof-of-stake (PoS) blockchain.
Participants often gain more tokens as prizes for staking their assets, increasing their asset base over time. It is critical to remember that during a bad market, while the value of a cryptocurrency may fall, staking acts as a cushion, supplying more tokens and minimizing the valuation loss. However, staking needs a thorough understanding of the process and associated risks and a careful network selection to ensure that the rewards offset any depreciation during downturns.
Use Dollar-Cost Averaging (DCA)
Dollar-cost averaging (DCA) is a strategy for mitigating the impact of volatility in investment, notably in the famously volatile area of cryptocurrencies. The technique is simple: at regular intervals, a preset dollar amount is invested in a specific asset, independent of its current price. DCA enables investors to buy more of the asset when prices are low and less when prices are high, allegedly lowering the average cost per unit over time.
DCA is a smart strategy, especially during a bear market, because it reduces the need to time the market precisely. It ensures continuous investment, profiting on lower prices and setting the investor advantageously for potential market recoveries.
It's worth noting that while DCA can provide a systematic investment path, a thorough understanding and belief in the long-term viability of the chosen asset remain critical, ensuring that consistent investments are based on solid financial reasoning rather than a reaction to market fluctuations.
How the Right Crypto Wallet Helps You Avoid Loss in a Bear Market
Diversification is one of the most significant ways to avoid loss when investing in cryptocurrencies, regardless of the market's movement. It ensures the investment risk is evenly shared among several assets, and you don't lose so much when the value of one asset drastically falls.
However, while spreading your investment across different assets may help you reduce the rate of your portfolio's free fall, keeping your crypto assets in a trustworthy crypto wallet that supports a wide range of cryptocurrencies to build a balanced and well-diversified portfolio is vital. As a result, having the right cryptocurrency wallet is critical. A cryptocurrency wallet that allows you to easily shift your assets while avoiding major loss through swift diversification.
Among the cryptocurrency wallets available today, one that stands out with this benefit is Cwallet. As an investor, you need more than just a safe place to keep your digital assets; you also need a wallet that connects you to the greater cryptocurrency market, making trading, buying, and selling simple. Cwallet edges others in this area. Cwallet is a one-of-a-kind versatile cryptocurrency wallet that combines custodial and non-custodial capabilities. It bridges the gap between Web 2.0 and Web 3.0 by combining on-chain and off-chain wallets, allowing you to manage and trade 800+ crypto assets in one location with security, simplicity, and flexibility.
Understanding that the market results from human behavior intimately tied to emotions is vital. How markets fluctuate is astounding and profitable if you know what to do. As a result, each market will require a distinct strategy. The sooner you learn about the market, the better you'll be able to trade in it.
On the other hand, using a reputable wallet, such as Cwallet, and following the best practices stated in this article on strategies to avoid loss in a crypto bear market will go a long way toward decreasing the risk of having your portfolio dip and losing money in a bear market.
Why wait any longer? Download the Cwallet App today to gain access to over 800 cryptocurrencies over 50 networks, allowing you to diversify your portfolio and reduce the impact of the bear market.