When you invest in cryptocurrency, expect that bear markets are unavoidable. Moreover, it can be difficult to predict them. There’s no certainty about how much it will affect stock values and how long this state will continue.
This article prepared a list of useful tips which can help you minimize your crypto investment losses or perhaps profit from the bear market. In a market cycle, bear markets are a normal part. So, you may not only survive them but also set yourself to gain from them. Read on to find out how.
What Is A Bear Market?
A bear market occurs when the stock prices drop easily, and an overall unfavorable outlook leads the mood to deepen. Negativity develops as investors expect losses in a bear market.
When prices start to drop, it’s difficult to predict when they’ll hit bottom. If you wait too long, stocks will rise again, and you will have lost a chance to buy on a fall and will not benefit from the subsequent comeback.
However, if you act too quickly, the value of your new stock investments may continue to drop. In such situations, determining the ideal time and managing active trading at the beginning of a bear market can be challenging.
6 Helpful Tips To Survive In A Bear Market
1. Search for strategic opportunities.
Find defensive stocks, such as utilities, consumer goods, and healthcare, because they can offer opportunities during a market slump. Of course, you can try high-quality businesses, too.
Besides, you can discover chances in higher-quality dividend-paying stocks, particularly those that have regularly increased their dividends in the past. These may assist in raising your overall return when stock prices are declining.
2. Look at the positive side.
Markets have rebounded back in the past, no matter how severe or extended the slump was. Bear markets have been observed previously. The past price charts in those markets have rebounded to climb higher than before.
3. Buy short- and long-term puts.
A put is a type of option that represents 100 shares of stock. It has a specified time limit until it expires worthless. Plus, it has a fixed selling price.
Buying affordable short and long-term puts on the key indexes is another beneficial method. Only if you believe a bear market is developing and you have significant long market positions.
Options fluctuate by a considerably greater percentage than stocks. Thus, even a few contracts can help you balance your long stock position losses.
You have the choice of selling your puts on the open market. Or, you can opt to exercise and give up the shares when expiration approaches. This is a high-risk method that should only be attempted after you have gained some expertise.
Remember that trading derivatives sometimes requires margin. It means that they may necessitate specific access privileges with your trading account.
4. Refrain from making rash decisions.
When the market falls, selling and waiting for asset prices to rise again can be tempting. However, don’t do it. This can lead to expensive mistakes. In addition, you run the risk of investing in a permanent capital loss if you jump out when the market has declined sharply.
5. Continue consistent investments.
You can acquire stocks at more inexpensive rates if you regularly invest a certain amount of money, regardless of market trends. The shares may also increase in value once the market recovers.
Dollar-cost averaging means you are contributing weekly or monthly to your portfolio in a regular period. It is a type of systematic investing that might give efficiency when the market falls.
6. Assess your goals and risk tolerance.
When the financial market is rising or expected to increase, it is called a bull market. However, during this condition, people tend to overlook how unsettling it can be when the assets lose value, particularly those dependent on meeting a short-term goal.
The higher the number of stocks in your portfolio, the riskier it is since you’re less diversified with other assets that may have less volatile price movements.
It’s a good idea to consider reducing risk if you’re planning on retiring soon, even if it feels like you’re doing it after that fact.
Bear markets are undoubtedly worrisome for crypto investors. No one likes seeing the value of their portfolios fall. However, while stocks are selling at a discount, they might be chances to put money to work for the long term.
You don’t have to be afraid of a bear market. Instead, by utilizing different tactics, you may perform fairly well when many others are experiencing significant losses in their financial portfolios.
With that in mind, follow the tips presented in this article while investing any cryptocurrency in a bear market. For any questions or clarification, leave a comment below.