Cryptocurrency markets have a unique way of catching even experienced veterans off guard since each bear and bull market ( crypto bear market ) begins to show similarities to past cycles, only to take unanticipated directions and erase the wealth of new cryptocurrency millionaires.
Markets experiencing sustained and/or substantial declines are called crypto bear Market.
This was evident with the weak closing of 2021 that completely shattered the optimistic $100,000 BTC price forecasts that influencers and crypto analysts were constantly promoting.
At present, Bitcoin price is more than 50% lower than its all-time record of $69,000, and altcoins have performed worse as many have fallen over 60% in the last two months. In these times it is imperative for traders to rethink and reconsider their investment strategies instead of just purchasing every dip in price.
Below are the five methods that traders can employ to weather an unanticipated crypto winter and preserve as much value from their portfolio as is possible.
Reduce your exposure to volatile altcoins
When a market decline begins, the first step to take is to review the current position and decrease exposure to volatile assets.
The majority of the time, these are projects that have emerged from the hottest segments of the cryptocurrency market, like meme coins, NFTs , or Rebase projects such as Wonderland (TIME), due to the fact that a large portion of token holders are brand new to the community , and are not a long-term investors like the base of users for established projects.
An excellent way to start the process of evaluating is to look at the site’s GitHub account to check the amount of activity and the amount of developers working on building up the protocols.
If there’s not much growth despite flashy marketing tricks and huge promises, this project might be one that investors should stop when the market begins to lose steam.
Traders can then put these funds into stablecoins that can be used to stake to earn a profit or purchase future dips in the market.
The key to being able to weather the bear market is to stay positive and cautious.
Dollar-cost Averaging (DCA) refers to the practice of purchasing an asset in a series of tranches over time to add up the amount paid and take into account volatility-driven price fluctuations.
Although the DCA approach is viable method to boost exposure to solid projects however, it is recommended to wait until all dust is settled and a phase of consolidation is in progress.
The primary focus of dollar-cost averaging is on those projects that are experiencing active development and engaged communities. They should also have the roadmap that describes the way in which the project can continue to expand and be viable for the foreseeable future.
It is perhaps the easiest method to boost the value of your portfolio for the long run and relieves the stress of focusing on prices on a daily basis as the asset that is staked continues to earn tokens.
For gold, we have no ability to increase its inflation rate even when we want to. Maybe ocean floor or asteroid mining eventually, but who knows.— Lyn Alden (@LynAldenContact) January 31, 2022
For BTC, it's capped at 21M. Maybe quantum or similar existential threat in the future could rally the community behind a hard fork.
The majority of layer one protocols have the option of staking their native tokens on the network in order to generate a profit, such as Solana, Cardano, Polygon and Avalanche.
Ether holders may also put their Eth2 tokens in the chain beacon in Eth2 however it is crucial to keep in mind that staking rewards won’t be available up until Eth2 is fully operational.
There are a variety of alternatives to staking including gaming protocols like Axie Infinity or Illuvium to NFT marketplaces such as LooksRare and LooksRare, so after an in-depth study has been conducted and sound, fundamentally sound projects have been selected, staking can be an issue of setting it up and leaving it behind.
Find projects that are growing in their ecosystems and benefits
Initiatives that allow token holders to earn through the staking process, liquid staking airdrops and borrowing are to be considered as the market goes bearish.
Staking is the most basic method of doing this, as the number of tokens increase in time. Other options include token launchpads NFT marketplaces and protocols which are known for providing airdrops to members of the community..
One instance of a protocol in which early adopters are getting recognized is the ATOM Cosmos (ATOM) network and its expanding community of projects that are connected through the Interblockchain Communication Protocol (IBC).
ATOM stakeholders and others who have participated in OSMO and the Osmosis (OSMO) open source exchange (OSMO) have been awarded with an extensive list of airdrops by projects that are launching within the ecosystem to help to encourage activity in their communities.
Make a commitment to yourself
The most beneficial ways an investor can benefit during a recession can be to put money into themselves and learn something new.
This can not only assist investors not to be tempted to sell, and to miss the opportunity to make future gains However, it could be a catalyst for new ways to accumulate wealth.
Level up and invest in yourself:— Wealthy Tree (@WealthyTree) February 1, 2022
- read more books
- work out well more often
- spend time with family and friends
- take a course and learn a new skill
- invest in a hobby to share w/others
You get out of life what you put into it.
Find your values and invest in them.
Despite the downturn in the market and the rise of cryptocurrency, they continue to move in the direction of mass adoption and the amount of jobs within the blockchain space is expected to grow as time goes on.
If it’s learning the art of programming with Solidity or playing around with digital and graphic design, develop a new range of NFTs or simply conducting research to get a greater understanding of the different sectors in the industry.