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Bear markets are tough. They are designed to shake you out of your positions so that a more savvy investor can accumulate at a better price. Or worse, they flush out some of your coins into the abyss, never to return. If you have been in crypto for a while, you’ve likely experienced this.
I drafted my current top 5 tips to survive a bear market. The foundation for building wealth starts with decision-making at the bottom.
Fail To Prepare, Prepare To Fail
Everyone needs a plan for a bear market, that’s what this intro is about. If your plan is to just wing it, you have already failed. Some plans are simple, like to just HODL and do nothing else. This is perfectly fine and is recommended for most investors. Beyond HODLing, there are countless other ways you can take a stab at a bear market. Is your expertise in rebalancing? Dollar-cost averaging? Gem hunting? Shorting? Staking? Whatever it is, become an expert at it and stick to it. Good fortune favors those that are prepared and patient. The bear market is not a time to learn crypto, it’s your time to show what you know.
Look Away And Don’t Look Back
This advice is for your mental sanity and clarity. For most investors, it makes sense to ignore the bear market until it passes. In a practical sense, this means moving your coins to cold storage, deleting your tracker app, and turning off the news. To execute this strategy, you need high confidence in your bags. A happy medium is doing your best to ignore FUD as it comes and remember why you purchased crypto in the first place. If you believe that Bitcoin is a hedge against inflation or that Ethereum is the money behind the world’s most programmable blockchain, then stick to that narrative. Value has nothing to do with price. Protect your conviction.
Stake It Till You Make It
Staking isn’t for everyone, as it’s sort of like putting a ring on your long-term holds. Staking works differently depending on the coin and platform and can be a great strategy to fight off declining value. There are a lot of decisions to be made when it comes to staking. First and foremost you need to assess your level of conviction and willingness to hold. If you are ready to stake, you’ll need to consider what platform works best for your risk tolerance and if you wish to compound your rewards. The main options to pick from are centralized staking, direct staking, synthetics, or yield farming. Centralized staking is suited for investors with a lower risk tolerance and is a good place to start. The passive income from staking can be a lifesaver. Use it to pay bills or stash some cash for a dip. Every penny counts.
Find Shelter In Strength
Bear markets are not a good time to get cute and risk losing it all. If you are deploying a dollar-cost averaging strategy, it’s best to buy only the strongest coins i.e. Bitcoin or Ethereum. During most bear markets, the majors are susceptible to +80% drops and alts are susceptible to +90% or more. The difference between recovering from an 80% drop and a 90% drop is huge. Take two coins that are worth $100. If coin A drops 80% to $20, it needs a 5x to recover. If coin B drops 90% to $10, it needs a 10x to recover. It becomes exponentially harder to recover from just a few more percentage points.
Stash Some Cash
If all of the other steps were how to survive a bear market, this one is how to thrive. Bear markets are the reason you keep cash on hand. Without cash, your hands are tied. An even worse situation is being the investor that has a strong portfolio who is forced to sell because all of their savings are in crypto. Cash is your weapon against a crashing market. As assets fall, your cash becomes more valuable. Yes, inflation is real and your cash is losing value, but falling assets will always outpace the dropping value of your dollar. In the end, successful investing is really just about being on the right side of things and sometimes that means being cash-heavy. Just keeping 10%-15% of your portfolio in cash is a game-changer. Don’t be left out when big opportunities present themselves.
Good luck, we are all in this together.
In This Issue:
- How To Survive A Bear Market
- Bitcoin Thoughts And Analysis
- Altcoin Charts
- Anchoring Bias
- Tesla Still Believes In Bitcoin
- VanEck Prepares To Launch NFTs
- My Recommended Platforms And Tools
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