Investing in cryptocurrencies can be a daunting process, especially during a bear market.
At bear dominance, traders usecertain strategies that allow them to survive even in difficult times of recession in the market, including the opening of short positions, HODL, constant investment and portfolio diversification.
Since the advent of Bitcoin, investorslearned how volatile the market can be. Throughout the entire existence of cryptocurrencies, bulls and bears constantly replace each other, and no one is able to predict or prevent their dominance.
The incredible growth that has ever metin the cryptocurrency market, occurred more than two years ago. Those who invested before bulran became rich, and those who invested in time lost their money. This was facilitated by the largest cryptocurrency collapse in the history of the market, which cannot be restored right up to the present day.
Now, according to forecasts by several experts, it’sit's time for the next bull rally. However, this has not happened to this day. Given the situation, investors have developed a number of strategies through which they survive during the bear market, making a profit, or at least not losing their savings. Next, we consider four strategies that work in such a situation, namely:
Short selling, or “shorts,” work on the basis ofpredictions of traders about the market decline. If the prediction is correct, they benefit from it. This is a strategy that works in different markets and is not limited to cryptocurrencies. The most famous example is when an investor named George Soros earned nearly $ 1 billion by predicting the fall of the British pound.
Short can be a pretty effective way.profit through CFDs or derivatives, as well as margin trading. Thus, traders trade assets that they do not even own, while borrowed assets are sold at current prices.
If the market moves and the price of an asset falls, theirthe position is growing. The next step is to buy at a cheaper price with a possible profit taking. Among platforms with support for margin trading are eToro, Bitmex, Binance and others.
Short positions can also be used tohedging goals. If you hold a large amount of BTC, then you can open a short position, thus reducing volatility. For example, traders who had an open short position for 25% of their assets in BTC would lose only the equivalent of 50% in dollars upon the collapse of Bitcoin.
HODL is a strategy that implies that investors will not sell their coins, even if the market goes negative.
The term is a trading strategy,which is used by those who are willing to wait. This is a long-term strategy, as well as the philosophy of numerous investors. According to Hodlers, it is better to wait until the bulls come to the market, and when the market stabilizes, they will receive a reward for trusting cryptocurrencies.
HODL has become part of cryptoculture, and the strategy has received great support from global investors. The strategy has great potential and can work in other markets.
Of course, it is impossible to predict the future. However, popular investors such as Jay Smith believe that HODL is the best option. He even commented on this belief, saying that he was convinced that cryptocurrencies would replace old stock markets and change the world. They will power machines, IoT, control systems, voting and, possibly, even the Internet itself. Although he admits that it will take years, maybe even decades, before this happens, he is still convinced that cryptocurrencies are the future.
Buy cheaper, sell more expensive
Naturally, investors always strive to getprofit. Therefore, when the value of cryptocurrency falls, many of them decide to sell coins. Only a few are willing to take risks and continue to buy, even if the price continues to fall. Most people buy near the top and sell near the bottom.
While some investors make salesdue to panic, others seek to average the price at the expense of the purchase. As always, any investor should conduct a thorough research before buying any coin.
Finally, do not forget about the possibilityportfolio diversification. It is impossible to predict the future of the cryptocurrency market, and any investment is a risk. However, investing in different coins will increase the chance of making a profit.