Top Crypto Investment Strategies when the Crypto Market is Bleeding

The bull and bear market has been a norm since the advent of investing nearly a century ago and they apply as much to the crypto market as they do to traditional investing.

Bull and bear markets are normal and unavoidable. You need to have a concrete plan to deal with both if you want to become a successful player in the crypto investing game.

Right now we are in what is called a crypto winter. Crypto winter is a term coined to describe a crypto bear market that extends for more than a couple of months. The first month of 2022 saw more than $300billion getting wiped out from the crypto market. But this trend started in December of 2021 and we truly are in a crypto bear market.

Is this new and should you be worried?

If you are a seasoned investor in the crypto market, a crypto winter is nothing new for you. But if you have only just begun, the previous months may have been terrifying for you. But you don’t need to worry.

There are plenty of strategies you can deploy to come out of the crypto bear market without a bloody nose. And if you do your research and play your cards right, you might as well come out of this phase stronger than you had imagined.

What exactly is a crypto bear market?

A traditional bear market is defined as a phenomenon where the market prices fall more than 20% from the previous high. But if you invest in crypto this definition does not serve you well.

Crypto markets are known for their daily volatility and historical highs and lows can be seen within weeks if not days. As such, a crypto bear market can be best described as a prolonged time where the market prices are falling and the supply is greater than the demand. This prolonged period can be 3 months or more.

How long can a crypto bear market last?

There can never be a specific answer to this question. We can only look at the history of the crypto market and make out own conclusions. On average, BTC takes around 1000 days to recover.

But this too can be looked at from a different perspective. Though BTC is down from its historic highs, it still is up by $10,000 from the beginning of the 2021 financial year.

The reason behind the crypto bear markets

Bear markets are as normal as bull markets and they are a consequence of various market factors working in combination. If we can understand these market indicators, we can predict the bull and the bear markets to a degree. Though nothing is ever a guarantee, there still is a possibility for a good forecast with the right knowledge.

• When investors take too much leverage: Markets always become volatile when investors take too much leverage. By taking too much leverage, we mean that investors take more risk using debt to finance futures products.
• Crypto security breaches: Crypto market like a traditional market depends on the feelings of the investors. If news comes out of a blockchain security flaw or that a large exchange is hacked, investors generally get cold feet. At this moment many investors start moving funds and selling which makes the market as a whole more volatile.
• New crypto regulations: Just like the news of a hack, the news of changing regulations in the crypto markets also results in fluctuations. When China banned crypto mining in 2021 the market became volatile and now that we are hearing of more US government regulations in the crypto market, the volatility has also increased.
• Stock market trends: While one can say crypto markets are very different from stock markets, the investors in both markets are more or less the same. And hence the fluctuations in the stock market do affect the volatility of the crypto market. 
• The meltdown of a crypto exchange or token: Whenever there’s a big crisis with a crypto giant like FTX or Terra Luna, it sends shockwaves across the industry, resulting in fear among investors. As the investors rush to liquidate their positions, the market crashes, giving rise to more uncertainty and panic.

How to navigate the crypto bear market in the best way?

While it can be horrifying for a new investor to face his or her first crypto bear market, some strategies can serve you well during this period. This fear can become even more brutal if you have invested in the crypto market during the peak bull days, but never mind as no two days are the same.

For a seasoned investor, the crypto bear market opens up unique opportunities and if you can keep calm and think the right way, you too can take advantage of these situations. Here are the best strategies to navigate a crypto bear market.

• Buy when the price is down:

  As Warren Buffet famously quoted, “when there’s blood on the streets, you buy”, this applies to the crypto market as well. Many investors wait for the bear market so that they can buy when the prices are low and sell when the market becomes bullish again. This strategy serves well not only in the traditional market but also in the crypto market.

• Dollar-cost averaging is a must:

  You don’t know when the price will be the lowest during the bear phase. Many investors buy at once during a bear market but that is not the best practice. You should rather divide your entire reserved capital into smaller sections, and buy at different times of the bear market. This will give you a better chance at tapping into the lowest prices.

• Diversify your portfolio:

  It’s always safer to place your eggs in different baskets. There are more than 17000 cryptocurrencies right now in the market to choose from. It’s always better to choose a few of them rather than going all-in on one currency.

• Don’t invest randomly:

  While you need to diversify your crypto portfolio, it doesn’t mean you close your eyes and simply place your bets on your gut feeling. Use market indicators such as previous all-time high value, past performance of the cryptocurrency, and roadmaps of the crypto assets before investing.

• Use losses to reduce your tax bills: You can use your losses to your advantage if you live in the US. There is no limit on how many investment losses you can offset against your capital gains. You can also carry forward any losses you don’t use indefinitely. Take advantage of these situations and lower your tax bills.

When you invest in the crypto market, play the long game. Do not panic at every price drop and do not celebrate every time the price of your crypto property goes up.

And one thing that you should keep in mind above all else, is never invest more than what you are willing to lose. If you do your research well, and keep a calm head over your shoulders, crypto winters will come and go and you will remain unscathed.