Investing in Bitcoin and Ethereum: How to survive a Bear Market

Key Insights:

• Investing in a bear market can be tricky.
• However, assets like bitcoin and ether can still provide a much-needed cushion to investors in these challenging times.
• In the crypto market, volatility plays an essential role in triggering short-term investors’ sell-offs.

As the adoption of cryptocurrencies across the globe rises, trading in risky assets has become more mainstream. After the 2020 price rally, which pushed bitcoin’s price above the $25,000 mark, crypto trading became more popular with every changing day.

Approximately half a year back, bitcoin (BTC), ether (ETH), and most altcoins were at a record high. Amid high social anticipation, cryptocurrencies, and NFTs were getting endorsed by celebrities.

The larger narrative of quick gains was fueled by a social craze and phrases such as ‘to the moon’ and ‘wen Lambo.’ While many crypto investors are attracted to crypto trading and investing in a bull market, they are left clueless when a bear market sets in. In fact, many new investors turn to panic selling owing to the larger bearish market sentiment.

This article will look at some crucial mistakes traders and investors make during a bear market and how they can be avoided.

Don’t Forget the Volatility

At the time of writing, BTC sits at $30,303, down by over 55% from its all-time high made in November 2021. Likewise, ether, the top altcoin, was down 63% from its all-time high price of $4,847.

After significant adoption, highly bullish sentiment, and buying pressure BTC’s price set an all-time high at $68,000 last November. However, over the last few months, the ongoing price downturn has transformed even some of crypto’s most stalwart defenders into skeptics.

More often than not, traders overlook that crypto assets are highly volatile and end up losing money to poor trade setups. In a market as volatile as the crypto space, two words by the famous author Douglas Adams can make a lot of sense- ‘Don’t panic.’

Don’t Run After the Dip

While ‘buy the dip’ is one of the most well-known bear market phrases, plotting the right dip could be a tough job for most traders and investors. Tonnes of analysts claim they have found an accurate bottom; however, the truth remains that predicting an accurate bottom isn’t something one can usually do.

Even though technical and fundamental analyses can predict larger price action, it is mostly hit and trial and can’t be trusted 100%. Sometimes, to buy the dip, traders buy higher in a bear market.

Traders may buy at what appears to be the bottom to them at a given time; however, prices could further drop as selling pressure rises. More often than not, the dip-buying strategy only causes wallets to shrink.

As seen above, the following levels around the $58,000, $51,000, and $42,000 price zones were considered ‘buy the dip’ opportunities by many market participants and analysts. However, had traders bought at the said ‘buy the dip’ zones, they would’ve seen considerable losses since BTC’s price made lower lows on a larger time frame.

So, what is a decent strategy during a bear market?

Fight BTC and ETH Movements with Age-old Trade Tactics

It is often said that even fools can make money in a bull run; a trader’s true skills are tested during a bear market. While that isn’t a universal truth, the fact that making money during bear cycles could be slow, painful, and exhausting holds true.

First things first, assessing the larger trend in the market is crucial before entering a trade. Notably, as of June-2022, we are still in the middle of the current bearish trend; however, bitcoin’s price has found major support near the $30,000 mark.

At the $30,000 mark, psychological support could act as crucial long-term support for the top crypto asset. Looking at the several big institutional investors that bought BTC around the $30,000 price level price can be expected to hold the fort within this range.

On the other hand, the recent dip saw many new investors abandon the ship and sell in losses. Notably, the recent downtrend in bitcoin and ether prices was fueled by short-term investors liquidating their positions.

Market fear, panic, inexperience, and doubt (FUD) play a huge role in molding short-term holders’ sentiments that affect the market. A good understanding of the market and a general understanding of fundamental and technical price analysis can help traders position accordingly and act quickly to minimize losses.

Some Tested Strategies

While there isn’t a sure-shot way to make profits in the market, a general understanding of trends can better help traders navigate a bear market. Trade strategies like support to resistance trading have proven beneficial for many traders.

In a bear market, prices fluctuate in a tight range between a key support and resistance level. For instance, from May 10 to June 8, BTC prices have maintained in the $31,500 and $28,620 range.

Generally, a good strategy is to buy at support and sell at resistance and make small profits instead of bigger bucks.

Additionally, it is best to play safer bets in a bear market, like investing in coins that have a more substantial market presence. Especially after the recent LUNA debacle, it is crucial to play it safe and only invest what you can afford to lose.