Managing Risk During a Crypto Bear Market

People might recall the market crash in 2020, when Bitcoin value plummeted all the way to the $3,000 range, only to have it spike all the way to the $60,000 USD mark a year later. It’s safe to say that many people made life-changing amounts of money from investing in crypto, especially because platforms like this website make purchasing crypto easier. While Bitcoin is unlikely to hit those lows anytime soon, the current bear market we find ourselves in presents a similar, albeit smaller opportunity for novice investors.

However, it’s important to consider the possibility that the whole crypto market is down by 50%, and this dip could plummet lower. This is a significant risk, but fortune does favor the brave. These are some pointers that can help you manage risk.

Utilize Dollar-Cost Averaging

The volatility and unpredictability of cryptocurrencies is what makes them inherently risky. In a bear market, it may be tempting to buy more of a coin on the assumption that the coin will appreciate in value soon. The problem is that most times, you’re likely going to be wrong, and your investment could lose a significant portion of its value in the process.

Dollar-cost averaging is an effective way to mitigate this risk without significantly hurting your gains. This method of investing is performed by investing equal amounts of your total investment capital over time. This also provides you with an option to stop investing if you see that your coin is performing poorly, without getting the entirety of your capital tied to the coin’s performance.

Diversify Your Assets

Whether you’re in a bear market or not, diversifying your portfolio is a good way to distribute the risk across your portfolio. This way, even if a particular coin underperforms, you have other coins that are able to store value better. A good example of a stable asset is USDT, which is a cryptocurrency that is tied to the value of the US dollar. USDT is significantly less volatile than most other cryptocurrencies, and this is what makes it a good store of value.

Exchange Your Assets for Safe Haven Assets

USDT is not the only safe haven asset (if it even is one). Many top crypto traders will take their investment out of crypto to trade it for gold while waiting for a bear market to end. Though, you do trade away the gains that you would have earned had you held onto your crypto during the bear market.

Focus On the Long-Term

Bear markets will test the resolve of all investors, especially when you see no signs of a market recovery, but they are part of a cycle, and most often, you may not even need to wait for  the markets to recover.

Accidents can happen at any time, other times you might simply have a bad day, but none of those things stops us from moving into the world and living. The same is true with crypto. It’s really a matter of managing risk.

Michael Caine

Michael Caine is the Owner of Amir Articles and also the founder of ANO Digital (Most Powerful Online Content Creator Company), from the USA, studied MBA in 2012, love to play games and write content in different categories.