The Trezor guide for surviving a Bitcoin bear market

Bear markets can be brutal. Don’t try to predict the next one, rather be prepared for it!

Bitcoin is down as much as 40% from recent highs, so it is understandable that many fear the onset of a prolonged bear market. It is not yet clear whether Bitcoin will recover soon or whether the current situation will turn into a long-term decline. In any case, it is better to be prepared for a bear market than to try to predict one. With the right strategy, you can actually benefit from a bear market!

What it’s like to live through a bear market… or three

We at Trezor know a thing or two about the hardships of a bear market. Just consider our history, retold with bear markets in mind:

We introduced the world’s first hardware wallet prototype in the depths of the first major Bitcoin bear market, in 2012. Bitcoin back then was still little more than a far-shot experiment, with price making a 93% correction after hitting an all time high of $30:

Chart data source: Coinmetrics.io.

The official release of Trezor Model One came in the summer of 2014, just as the market was crashing and Bitcoin was entering its second major bear market, at the bottom of which it would lost 85% of its value:

Chart data source: Coinmetrics.io.

And the release of our flagship Trezor Model T in the fall of 2018 was, again, marked with price crashing all around us. Bitcoin lost 84% of its value at the bottom of its third bear market:

Chart data source: Coinmetrics.io.

It’s safe to say we know a thing or two about navigating a bear market both as individuals and as a Bitcoin-focused company. Things can get really tough, and you often find yourself questioning your beliefs and start to give up on your optimism.

But there are two clear facts we have learned from the past bear markets

First, Bitcoin always recovers and emerges stronger than ever before.

And second, patience and long-term outlook pay off.

What’s the best strategy for the next Bitcoin bear market?

In 2017, many people thought Bitcoin was going to drop back to sub-$1000 levels, but it never happened. Lesson learned: don’t try to time the market and predict Bitcoin’s price moves. You’ll only end up with less bitcoin and more regrets.

The best strategy to build up a solid Bitcoin position over the past years has been to dollar-cost-average (DCA) – to buy bitcoin regularly, no matter where the price stands at the time. Below is an illustration of the same investment of $2,100 deployed either in a lump sum or a DCA ($10 purchases every week) fashion, starting from 2017’s ATH of $19,500.

DCA strategy would have generated more than twice the gains of the lump sum investment.

Adopting the DCA approach essentially means saving in bitcoin – preserving the long-term purchasing power of your earnings in the global neutral money. The main benefit of this strategy is the shift in your mindset: you no longer stress about the volatility and the fluctuating value of your stack in fiat terms; instead, you rejoice over the ever-increasing amount of bitcoin in your wallet. As DCA requires a long-term outlook, it stops you from panicking during dramatic price drops – to a certain extent, you start to welcome such opportunities to stack cheaply! The popularity of the DCA approach can be felt in many bitcoin-centric products offering it – soon Trezor users will be able to DCA with Invity, the Trezor Suite-native exchange aggregator, as it opens up DCA all its users!

Besides DCA, there are a few other important rules to safely navigate you through the next bear market:

The satoshi mindset. We are used to accounting in full bitcoins, but did you know there are 100 million satoshis in one bitcoin? Switching to the satoshi mindset helps a lot with appreciating how much bitcoin you really have. Being a millionaire sounds better than having 0.01, right? Every satoshi in your wallet matters; take good care of them and they’ll take good care of you in the future.

Image credit: Lucho Poletti.

Do not trade. First-time traders usually aim for “buy low, sell high”. But somehow, they end up doing the opposite – because their emotions get in the way. Trading is a very stressful zero-sum game, where most people lose their money: a recent Business Insider article pointed out that between 70-97% of day traders end up losing their money! Only experienced traders (who learned their lessons the hard way) and exchanges end up in profit.

Do not leave your coins on exchanges. During a tumultuous time such as a raging bear market, exchanges can end up insolvent. This has happened many times in the past, with Mt Gox, Quadriga, and Cryptopia being only the largest ones. Not your keys, not your coins always – always – applies. Use a battle-tested open-source hardware wallet such as Trezor if you want to stay safe.

Do not rely on Bitcoin pumping in the short term. If your personal or business plans are conditional on bitcoin pumping, you may be setting yourself up for a huge disappointment. Remember that a bear market can strike at any time. If you need money for paying for near-term personal or business expenses, don’t keep it all in bitcoin!

Don’t obsess over ATHs – look at the yearly lows for a change. This change of perspective should make it obvious that Bitcoin makes tremendous progress over the years, even if it’s a bumpy ride sometimes.

Bitcoin will make it – will you?

There is one thing quite certain: whether or not a bear market is upon us, Bitcoin will survive. So don’t worry about Bitcoin as such, worry about your bitcoin – how you’ll leverage the opportunities that a bear market brings. Keep a level-headed approach, follow the few simple rules outlined above and you will emerge with a better Bitcoin position and stronger hands to keep a hold of your fortune.

Whether you choose to DCA your way to Bitcoin fortune or try to buy all the dips, don’t forget the ultimate rule: safeguard your coins with an open-source hardware wallet. An investment into best-in-class security will pay itself many times over in the future.