What is a bear market?
A prolonged drop in investment prices is known as a bear market. A bear market is declared when the price of an investment falls by 20% from its high.
Investors usually deposit their money with riskless entities or hold money in a traditional bear market. Generally, there is a downtrend in all major economic indices during this time. A bear market can only be declared when the fall in the indices is more than 20% for at least 60 days or more.
The crypto bear market
Cryptos have lost more than $2 trillion in value this year since their massive high in 2021. Bitcoin’s value has fallen 70% from an all-time high in November last year. Some experts warn of a prolonged bear market. The last crypto bear market occurred between 2017 and 2018. Bitcoin and other crypto values fell sharply after a steep climb in 2018. It is known as the burst of a hype bubble.
The current crash is different and a result of macroeconomic factors such as high inflation and high-interest rates. These were not a factor in the last bear cycle. The current crypto market has been trading in a closely correlated way to stocks. The Nasdaq fell more than 22% this year. At the same time, Bitcoin posted its worst quarter in over a decade.
However, earning through cryptos in the bear market is not impossible. There are many opportunities to make money in the crypto bear market. In this article, we will learn about the different ways to trade and earn in this market.
How to trade in a bearish market?
1. Margin trading or shorting
Crypto exchanges offer an incredible way to earn in a bear market. For example, you can get anywhere between 10 and 50% profit on a 10% dip, depending on leverage. It may sound improbable, but margin trading can bring massive profit if done correctly.
You do not need to be an expert. By mastering the basics of charting, you will be able to produce consistent profits. Real-world experience and studying chart patterns will enable you to grasp the basics of technical analysis. You can pick your entry and exit points once you accomplish this.
The earnings from mastering margin trading can be great, but only for those who have a deep understanding of the fundamentals of technical analysis.
2. Scalping
Scalping will allow you to make profits regardless of which way the market is moving. You will need to use frequent bid and sell opportunities during an increase in volatility in the market. This will require a few hours of research in front of your computer. You can also use trade bots to automate this process.
Scalping is not without risks, like other trading strategies. All your hard work can be erased by just one major dip. Keep a tight stop loss and walk away with a 1-5% profit. Remember to not get too greedy, as it could be a slippery slope.
3. Lookout for low-volume coins
Low-volume coins are typically not affected when the price of Bitcoin. is plummeting. Standard alternative coins tend to follow the trend of Bitcoin, but low-volume coins have their agenda. Anything with a daily volume below 50 BTC is a low-volume coin.
You can swing or scalp many low-volume coins to make decent profits. You need a basic understanding of technical analysis and always set a stop loss.
Other methods of earning in a bearish market
In a bearish market, there are many other ways to earn money through crypto. Some of the methods are listed below.
1. Staking
Staking is an easy way to grow your assets if you already own certain crypto assets and have no intention of selling them. The process of locking your crypto tokens on a platform to receive interest is described as staking.
Platforms usually offer two types of staking: fixed staking (locking assets for a certain time) and flexible staking (you can withdraw at any time). Binance, By bit, and Crypto.com are some of the platforms through which you can stake your tokens.
Staking is not limited to bear markets; you can grow assets easily via staking and selling them when the prices rise again.
2. Lending
Crypto lending, as the name suggests, is a process of lending your crypto assets to someone for a set period. You receive a specified rate of interest from the time you lend your crypto asset.
Lending is available on many decentralized platforms as well as CEX platforms. However, compared to staking, the return is lower. Nevertheless, you can expect to achieve good returns as the market is volatile and demand is increasing.
3. DeFi Projects
The ecosystem of decentralized finance is growing at the moment. There are new projects launched every day that offer terrific investment opportunities.
Extensive research is needed when investing in DeFi projects. It is a time-consuming process, especially if you want to perform an in-depth risk assessment and spot good projects. It can be a valuable investment of your time as it offers great returns.
This investment strategy is for advanced crypto investors as it requires a deep understanding of technology and the crypto market.
Conclusion
Despite the many reasons for fear and doubt, investors are far more optimistic than they were during the last bear market in 2018. The fear of the 2018 bear market evaporated when Bitcoin touched $20,000 in December 2020.
Experts say that the industry is in a stronger place as there are more crypto users and use cases. Examples like NFTs and DeFi apps have attracted millions to buy and earn interest on their crypto deposits. We should not fear the bear market if we are cautious about how to invest and trade our crypto assets. There are plenty of reasons to be optimistic about the crypto market bouncing back.
