It's no longer news that the cryptocurrency market is volatile, with price movements changing by the second due to supply and demand. The constant rise and fall of cryptocurrency values are why investors time the market to know when to buy a certain asset to maximize profit.
Like other financial markets, the cryptocurrency market goes through phases and seasons, displaying predictable fluctuations or patterns that recur over time. These cyclical patterns influence how investors approach investing in some particular cryptocurrencies and affect the profitability of their portfolios.
The crypto year has numerous seasons, including altcoin season, crypto winter, DeFi summer, and Bitcoin season, whereas the crypto market has only two phases: bull and bear market. Unlike the crypto seasons, where profitability is determined by the investor's perspective and personality, the bull or bear phase occurs when the market is either up or declining.
While practically everyone wins from a bull market, with or without a framework plan, the opposite is true in a bear market, as the value of most cryptocurrencies falls dramatically from their all-time high (ATH) to a low price point. As a result, the bear market is the period most investors lose money to the market.
Although the bear market is unpleasant and difficult because it affects the value of your crypto holdings, it can be viewed as an excellent opportunity to acquire an asset at a low cost and profit handsomely. Bear markets are where you can put your crypto knowledge, discipline, and experience to the test. So, how can you profit despite a downward trend during a bear market?
Don't worry; this post will provide various techniques to ensure you make the most of and profit from a bear market season. Let's get started!
What is a Crypto Bear Market?
The bear market, often called the "Fear Market," is when an asset trades 20% or more below its recent high, generally accompanied by negative investor sentiment and a lack of confidence in market prices' overall performance. As a result, a bear market is a significant downturn defined by significantly decreasing prices over a comparable period.
Bear markets are typically the product of pessimism, with investors anticipating a market drop after a sustained upward trajectory that results in more supply than demand. These investor sentiments of the market often result in negative publicity for the market, driving people to withdraw their cash and resulting in a major decrease in trading volume, leading to the market's downward trend.
Aside from investor sentiment and lack of confidence in the market's performance, policies and regulations, fear, uncertainty, and doubt (FUD), negative news, new investors dumping projects, and so on all contribute to the market's bearish movement. However, regardless of the downward movement of assets in a bear market, it still provides a few advantages and allows investors to profit.
How to Make a Profit in a Bear Market
One of the clear benefits of a bear market is that it gives investors a chance to purchase most cryptocurrencies at their all-time lows (ATL) and get ready to profit when the market turns around, and the bull takes over.
While knowing when a bear run will end is unpredictable, it is vital to have an optimistic mindset and be ready to take advantage of the possible ways to make a profit in the market. Let's look at some ways to profit in a bear market.
Dollar Cost Averaging (DCA)
Dollar-cost averaging (DCA) is a strategy for limiting the impact of volatility on your overall portfolio by breaking your investments into buying in small quantities over a given period. This is the practice of purchasing assets in tranches over time to average the prices paid and adjust for price changes due to volatility.
DCA is effective in a bear market as it allows you to buy any of your favorite cryptocurrencies at a reduced rate and profit from it when the market hits green. DCA is a profitable strategy that allows you to buy the dip with some allocated funds throughout the bear market. For example, if you have $1,500 in stablecoin to invest in a bear market, a decent DCA strategy would be to divide the money into twelve $125 tranches and utilize those smaller quantities to purchase the asset whenever it dips more until the entire capital is expended.
Day Trading and Scalping
Day trading and scalping are other profitable ways to make money in a bear market. It entails timing the market and taking advantage of the instant change in the price of cryptocurrencies. The downside of this method is that it necessitates a significant amount of free time because you will effectively be making your calls regularly due to the rapid price fluctuation. When scalping, you will be looking for any price activity allowing you to exit the position profitably. Also, you must be quick and agile to use this strategy effectively.
Crypto Saving and Lending
Crypto saving and lending is a DeFi investing protocol enabling you to earn passive income by saving or lending cryptocurrency tokens. While the market is down, you can receive passive income by investing your tokens in a DeFi protocol, which offers you a percentage of your investment and some additional tokens that could offset any losses caused by the downturn. This means that you can gradually begin to make up for the bear market losses as these tokens amass.
Staking is frequently used to refer to DeFi activities that require a short-term or long-term commitment to crypto assets. It is safeguarding tokens in a smart contract while earning more tokens of the same crypto asset. Staking your cryptocurrency is a way of adding to your portfolio and surviving the bear market by locking your assets in a protocol for a limited time. There are two types of staking to make money in a bear market: fixed and flexible staking. With flexible staking, you can withdraw your funds anytime you believe the benefits are sufficient. On the other hand, Fixed staking locks your money in for a certain amount of time.
Providing Liquidity and Yield Farming
Another way to profit in a crypto bear market is to become a liquidity provider. You can earn rewards in a bear market by providing liquidity to facilitate trades of decentralized exchanges. Typically, liquidity providers will earn a percentage of the fees based on the volume of assets delivered. So, if a liquidity pool has $100,000 and your stake is only $5,000, you will receive 10% of the pool's total fee revenue.
On the other hand, Yield farming is the process of lending or staking your cryptocurrency coins or tokens to maximize your return on transaction fees or interest while avoiding risk. Yield farming is similar to crypto staking but different because, with yield farming, you can transfer your assets from one pool to another, unlike with crypto staking. As a result, yield farming is a more flexible way of earning profits through passive income during a crypto bear market.
Diversify Across Different Crypto Assets
All crypto assets tend to fall in a bear market, though not by the same percentage. That is why a well-diversified portfolio is critical. Don't put all your eggs in one basket by investing only in a particular asset type because it is hard to predict which asset will continue to dip. Therefore, balancing your portfolio among many related assets helps to limit your portfolio's total losses.
While spreading your investment across different assets might help you limit the rate of your portfolio's free fall, keeping your crypto assets in a reputable crypto wallet that supports a wide range of cryptocurrencies to create a balanced and well-diversified portfolio is critical. This is where Cwallet comes in; it is a one-of-a-kind multifunctional cryptocurrency wallet that combines custodial and non-custodial functionality. It bridges the gap between Web 2.0 and Web 3.0 by merging on-chain and off-chain wallets that allow you to manage and trade 800+ crypto assets with security, simplicity, and flexibility in one spot.
Cwallet gives you the best of both worlds in a single app, regardless of whether you choose a custodial or non-custodial wallet. As a result, you can easily switch between custodial and non-custodial wallet options within the app with a single tap. Furthermore, you can transfer your crypto assets from Cwallet's custodial wallet to the non-custodial wallet anytime without paying any gas fees.
Cwallet is unique because there are no transaction fees, allowing you to maximize your profits in a bear market.
- No Deposit Fees
- No Internal swap fees
- No Internal/ External withdrawal fees
- The lowest network and gas limit allow you to pay the lowest network fees.
Each crypto phase, whether bull or bear market, requires unique investment strategies. However, Understanding that the market results from human behavior heavily influenced by emotions is crucial. If you know what to do, whether uptrend or downtrend, you can maximize the period with an adequate strategy and make profits.
On the other hand, using a reputable wallet, such as Cwallet, and adhering to the best practices outlined in this article on how to profit in a 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.