How to manage a crypto bear market


Bitcoin is almost back to $30,000, a fall of more than 50% since the peak in November 2021. Additionally, 40% of bitcoin holders are now underwater with their investments, according to Glassnode. If you are new to cryptocurrencies and recently started investing, this can be a brutal new emotional experience. Here are some tips to manage the current bear market and for the future.

Have a long-term perspective

We have had multiple bear markets in the past where cryptocurrencies lost 50%+ from the peak but over time they have always managed to find a new high. Bitcoin was around $20,000 in late December of 2017 and one year later close to $3000. Then in 2022 we saw bitcoin reaching almost $70,000. If your investing timeframe is on the longer side, negative price movement can be viewed as being temporary.

Don’t fall for FUD

FUD refers to a negative market sentiment caused by rumours, news or an influential figure expressing concerns about a market such as a cryptocurrencies. This can have a negative effect on the price as investors expect further prices decreases driven by emotions not logic.

Diversify and only trade within your means

Don’t be overexposed to cryptocurrencies but seek to diversify your investments across different asset classes, such as stocks, bonds and alternative investments. You can set a goal for yourself that your crypto investments can’t reach for example more than 20% of your total investments. Ultimately, make sure that you don’t put in more than you can afford to lose and don’t want to be in a situation where you’re losing sleep.

Consider staking

With staking you can earn daily interest on your crypto investments and this can be done with bitcoin and altcoins, including stablecoins. This is particular great during bear markets as you will be able to earn a stable annual rate of 5%+, giving you some cushion and passive income.

Dollar-cost averaging

An investment strategy where at regular intervals, you invest a fixed amount, no matter if the crypto market is up or down. This is a great strategy during a bear market as you will benefit in the long-term, assuming the market will later reverse back to a up-trending market.

Why should you care?

Investing in cryptos is an emotional rollercoaster and especially difficult when the market is in a bear market. Using the tips above should hopefully relieve some of that pain. With Moonbit, risk management is a critical part our investment strategies, so we always seek to move into stablecoins during a bear market to protect your portfolio from losses.