Whether you're looking into cryptocurrency, stocks, real estate, or any other asset, markets are frequently described as either a bull market or a bear market. Simply put, a bull market is one that is rising, whereas a bear market is one that is declining. Because markets frequently experience day-to-day or even minute-to-minute volatility, both terms are commonly used to refer to longer periods of mostly upward or downward movement, or significant swings in either direction.
A downward trend in pricing can usually signal the start of a bear market. As prices continue to fall, investors lose faith in their ability to recover, resulting in further downtrends.
In general, wars, political crises, pandemics, and slowing economies can all precipitate the start of a bear market. A bear market may also be triggered by government intervention. However, in crypto, it is much more difficult to predict when a bear market will begin based on previous trends. Whereas the stock market has decades of data to which investors and analysts can refer, the crypto market is still in its infancy.
The bear market may be the ideal time to make some good cryptocurrency purchases that will benefit you in the long run. The problem with a bear market is that you never know how long it will last or how far prices will fall. As a result, you run the risk of making a hasty purchase or missing out on a good investment entirely.
You will need to be patient because this is a speculative investment.
However, there are certain ways to avoid this problem, some of them are -
1. Dollar-Cost Averaging : To follow a plan in which you invest a fixed amount at regular intervals during this phase, regardless of how the cryptocurrency market is performing. This strategy is known as DCA (Dollar-Cost Averaging)
Simply choose a set amount of money to invest in your preferred cryptocurrency over a set period of time to use the dollar-cost averaging method. Then, regardless of where the market is at the time, you continue to invest your money until you reach your target. It might also be a good idea to make a spreadsheet to keep track of your investments. The most important thing to remember once you start investing is to stick to your plan. This can be the most difficult part of the dollar-cost averaging process, but it will be well worth it in the end.
The temptation to withdraw money from your investments once you start making money can be difficult to resist, but sticking to your plan is critical if you want to earn the most and minimize your risk.
How to use DCA to improve your portfolio? Read here.
2. Diversification : If you've been using only one type of cryptocurrency, now might be a good time to branch out. Not all cryptocurrencies experience drops at the same time. So, during a downturn, controlled and well-researched investments can help you build a versatile portfolio.
3. Long-Term Investments : Making fussy reactions to market movements is one of the worst things you can do in a bear market. Over time, the average investor significantly underperforms the overall stock market, and the primary reason is that they move in and out of stock positions too quickly. When stocks fall and appear to continue falling indefinitely, our instinct is to sell "before things get any worse." Then, when bull markets occur and coins continue to reach new highs, we invest for fear of missing out on gains. The main goal of investing is to buy low and sell high, but by reacting emotionally to market swings, you're actually doing the opposite.
Should you invest for long or short term? Read here.
4. Focus on Quality : Trying to time the market is usually a losing proposition. One thing to remember during bear markets is that you will not invest at the bottom. Buy coins because you back the tech and want to hold it for the long term, even if the share price drops slightly after you buy.
While predicting what drives price movements is difficult, it is clear that crypto is heavily influenced by specific events and narratives, both positive and negative, as well as news outlets and social media channels. This is to understand that the current bear market is not Bitcoin's first, and it is unlikely to be its last.
If you are into crypto and looking to hold up discussions, join communities and network better with traders and crypto enthusiasts from all over the globe, you should definitely check out Our Crypto Talk.