As a smart investor, what should you do in the current bear market? This is quite a tricky question that has no direct answer.
Over the years, the global crypto market has had peaks and troughs moments, also known as the bull and the bear market. Making fool-proof decisions when it comes to investing one’s money in crypto has been exceptionally difficult. Recently, the bear’s grip on the market has become so tight that many major and minor crypto’s values have eroded, plummeting to the ground. Even the confidence of the toughest and most optimistic investors has been dampened. This begs the question: are bearish markets good investment opportunities? Let’s find out!
A brief insight into the bear market
Many investors dread the bear market for a reason. Simply put, the bear is a grim reaper. In a bear market, prices fall as fast as the confidence of the investor. This group of pessimistic investors who believe there are no chances for prices to rise, leading them to sell their holdings, is referred to as “bears.” In the bear market, the new inexperienced investor is a sitting duck.
How does a bear market begin? Usually, when there’s a 20% drop in market prices or more. This leads to capitulation periods where panic selling becomes the order of the day. However, don’t take our position in this article as an authority, as there are other tools used by market analysts to recognize bearish signals.
Taking advantage: Should I invest in a bear market?
The first thing you know is never to enter the market because of social hype. Though the crypto market offers great opportunities to make money, they are highly volatile. Bear markets, specifically, make a good opportunity as assets shed their values, making them affordable for many. Shorting assets and coins become a profitable venture. Here are tips that will assist your decision-making.
1. Buy the dip
This is a popular phrase among crypto investors. It means buying up a significant amount of cryptocurrencies in the bearish market in the hope that prices will skyrocket soon. This is an intelligent decision to make because when prices eventually go up, you’ll be on the winning side. However, this does not mean you should throw all your weight behind the decision of investing all your money in the bearish market. The best decision is to implement dollar-cost averaging (DCA). What is it?
Let’s imagine you have a reserve fund of $2,000, and you want to make trades. The DCA states that you divide that money into five or ten tranches of $400 or $200. Use this amount to place trades. This is because it is difficult to tell which of your investment will eventually pay off.
2. Diversify your investments
There are over 17,000 cryptocurrencies. No one can tell which of them will recover or rise faster than the others. You need to be careful and do your homework before choosing what crypto asset to buy. There are some factors to consider before staking your money on a particular crypto asset. These factors include: what was the asset’s past performance? What was the asset’s previous all-time high like? This may be tentative, but then it will give you a clue into what you’re about to buy. Finally, apply DCA and invest in several crypto assets after doing your due diligence.
3. Take deep breaths
New inexperienced investors usually freak out in the bearish market. Their emotions get messed up, and soon they start making poor market decisions. Benjamin Graham once opined, “Individuals who cannot master their emotions are ill-suited to profit from the investment process.” Nothing could be truer than those words.
Always take your time so you don’t end up making snap judgments that will lead to more loss.
Conclusion
The crypto market is highly volatile. And, to make profits from it is very difficult. But, one thing is certain, you’ll beat yourself up mentally if you didn’t take advantage of the crash this time by buying a dip. However, as you think of making investments, remember never to empty your reserve fund!
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