Even people outside the world of crypto know - the cryptocurrency market is highly volatile. Prices fluctuate - they go up, then down, then up again - it’s a never-ending cycle. Recently, we have witnessed another bear market scenario for Bitcoin, and therefore for the entire market, too.
At end of March/beginning of April 2022, BTC price was around $47k, and right now, in September, it’s below $20k. That kind of loss, especially if you’ve invested a significant amount of money, can really be discouraging.
There is a common saying though, that people sort of tell as a joke - it’s not a loss unless you sell - and it’s a true one.
What is a bear market?
Economy-wise, a bear market represents a situation where asset price falls 20% or more from the recent high, usually followed by the ‘panic sell’. Knowing BTC was at its ATH in November 2021 (just shy below $70k), and that its price now is not even $19k - you can easily deduce it’s a far bigger price drop than 20%.
Now, crypto veterans know well that this is a (kind of) normal occurrence, and most of them don’t panic easily. However, a natural reaction to the bear market, in any market, is panic selling. You hurry to sell your asset while you can since the price is getting lower by the minute.
Yet, BTC has always managed to come back and strive for new all-time highs. Most Bitcoin enthusiasts will tell you to hodl and basically don’t do anything but wait for the market to correct itself.
While hodling is a better option than selling all your crypto assets, these two aren’t the only options. You can hedge and actually buy the dip, even if it continues dipping after your purchase. Let’s see how!
Hedging mechanisms to the rescue
Before stablecoins, the traders could choose between two mentioned options - to sell their assets or wait and pray for the price to go back up. Nowadays, the situation is a bit different.
And here’s the essence of this hedging strategy, for everyone to understand - just when the price starts dropping, you trade BTC for a stablecoin (let’s take USDC as an example). When it’s at its lowest, use your USDC to buy more BTC than you’ve previously had (since the price is now lower than what you paid for). Then when the price skyrockets again (and eventually, it always does), you will have more BTCs than before the bear market.
It’s not all doom and gloom when it’s ‘’a red day’’ and prices drop. This can be a great opportunity to enhance your assets. But bear in mind - for this move to work, you need to do your own research and be very careful.
If there ever was a perfect recipe for dodging losses, everyone would’ve been a crypto millionaire. So, mistakes are okay and can happen to everyone. Whoever tells you they’ve always traded flawlessly… well, you know, their pants just might be on fire.
There is no unique solution
Your actions depend on your experience, the assets you own, and of course, your local reality in terms of regulation and crypto policies. Therefore, you should probably not just copy-paste what someone said e.g. on Reddit. (We love Reddit, though.)
While there is no unique solution, there is a very typical error - selling all of your crypto assets and exiting to fiat. Stay within the world of crypto, look out for ‘’winners and losers’’ by market cap and volume, but don’t abandon ship for something so susceptible to inflation. With fiat money, you simply cannot dodge losses in the long run, no matter what you do.
The crypto market is so vivid and vast now, that you have a lot of investment opportunities you could explore. And no matter how hyped you are, know your limits. It’s perfectly okay to start with smaller amounts, test the waters, and see how it goes. Being successful in crypto trading requires beginner errors, patience, time, and dedication. It’s cool if you’re not richer than Elon Musk after your first trade.
To sum it all up
Lastly, here are some DOs and DON’Ts for the bear market situation.
DO
Research, research, research
Have a mapped-out hedging strategy in place
Follow the market situation thoroughly and continuously
Ask crypto veterans for help (someone with credibility)
Know all the bears eventually go to hibernation :)
DON’T
Panic; this has all been seen
Make rash decisions out of fear; make smart decisions after thinking it all through
Put all your eggs in one basket; diverse your portfolio
Exit into fiat and sell all of your crypto assets
Leave it all to the universe to sort it out; you’ve got this
Alternatively
When there’s a bear market, everyone speaks about BTC. And that’s fine, bitcoin has always strongly influenced the entire market. Just don’t forget there are so many altcoins in the sea, and if you invest wisely, you might be the first holder of the next MATIC.
We at Dexvers believe that trading crypto should be accessible to everyone, everywhere. We’re building an ecosystem that’s beneficial to all parties included - traders, liquidity providers, listed projects - all of our community members.
Feel free to join Dexvers communities on Telegram and Discord where we discuss what’s happening on the market and how to anticipate what’s coming up.
__
Disclaimer: The information provided in this post is not legal, accounting, or financial advice. The information should not be construed as investment or trading advice and is not meant to be a solicitation or recommendation to buy, sell, or hold any cryptocurrencies.