Crypto Asset Trading Strategy During Bearish Market
Crypto Trading When the Market is Bearish
Today’s crypto world is very attractive to both old and new investors. Because investing in crypto assets can yield huge profits. Although this investment is considered very challenging and high risk.
However, since the beginning of May 2022, the crypto market is experiencing a bearish or bear market condition. A bear market is a situation where the market price falls by more than 20 percent. Even crypto analysts say this phase is called the crypto winter or crypto winter.
Also read this article: Bear Market? Here’s an explanation and how to deal with it.
The unfavorable market conditions began with a decline in the value of the bitcoin. The price of bitcoin is down 70% from its high of $69044 to $17602. This price is the lowest bitcoin price of all time.
Other crypto assets such as Ethereum, TRON, SOL, and others have also suffered the same fate. The decrease even exceeds 70%. On the other hand, the TerraUSD (UST) stablecoin drama occurred which made the market panic even more.
As an investor, you can do a strategy to deal with a bear market. Here are tips that can be done in bear market conditions.
5 Crypto Trading Strategies to Face the Bearish Market
In bear market conditions, there are several ways that can be done to deal with a bear market. The following is a crypto trading strategy during a bear market:
Give time to do research
When a bear market occurs, generally traders or investors will contemplate the instability of falling prices. However, this time can be used to conduct research. You can learn new types of crypto assets or seek digital asset management investment skills with minimal risk.
Methodical research will make you reach your target in crypto trading. Do not use sites that are not guaranteed credibility. It is very important for investors and traders to do their own research (DYOR) well. Suggestions for doing research are to always look for credible sources and check the market regularly.
Buy the dip strategy
When the market is bearish, most investors decide to hold their tokens or coins. However, investors who still have investment capital can use the buy the dip strategy.
Buy the dip is a strategy where you buy crypto assets when the market is correcting or experiencing significant bearishness. This strategy can be a lucrative opportunity. According to professional traders when the market is experiencing a decline, loss, or inflation is the right moment to use the buy the dip strategy.
Also, read the article Crypto Trading Strategy: Counter Trend VS Follow The Trend.
Use Dollar Cost Averaging (DCA)
Dollar Cost Averaging or DCA is a strategy to divide reserve funds in smaller proportions and use these funds for trading in later days. It is difficult to predict the price of digital assets, so it is advisable to use investment funds regularly.
What this means is, that instead of directly trading in large amounts, you can use a smaller amount first and then determine whether the asset has good prospects in the future or vice versa. If you think the asset is profitable, then you increase your ownership of the asset little by little.
Short selling when the price drops
Shorting crypto is a strategy to buy crypto assets at a high price and then buy again at a lower price. This is contrary to the general principle of crypto traders, namely buying assets when prices are low and selling when prices are high.
To fulfill this strategy, you have to borrow crypto assets and then sell them at a high price. After that, you need to buy and pay back the loan capital when the price is down. So you benefit from the difference between the selling and buying prices.
However, this crypto short selling has a high risk, if it doesn’t match your expectations you actually have to buy crypto assets at a higher price to pay off the debt of crypto assets that have been borrowed. Therefore, it is highly recommended to do your own research (DYOR) before investing.
Diversification of crypto assets
In trading, there is a risk that you will lose. To minimize losses in investing in crypto assets, you can carry out a crypto diversification strategy. Crypto asset diversification is an investment strategy in which funds are split into several different crypto projects.
For example, you can start by investing in two or three crypto coins that you have analyzed. So if one or more have the poor performance you do not immediately get a loss.
There are currently thousands of cryptocurrencies available in the market. So you can analyze where you want to invest because it is difficult to predict how long the market will be hit by a bear market.
Don’t panic about selling assets
When the market is in bearish conditions it is difficult to manage emotions. Experts say managing emotions is the most challenging thing when trading. If you want to minimize losses, don’t be rash and stay calm. Want to return to your original goal of investing in crypto assets?
To increase profits, you can make an effective trading plan. Make sure you set a stop loss before trading to minimize the risk of loss. Because in the middle of a big road you are likely to be affected by the expectation of a bigger profit, but it can actually cause a loss. So make sure to always do an analysis every time you want to start trading or investing.