5 tips to survive a crypto bear market

Updated: Nov 3, 2021

Since the creation of Bitcoin in 2009 the cryptocurrency space has not only grown but it has evolved and matured to become the trillion dollar market that we see today. Bitcoin, Ethereum and other established crypto coins and tokens are slowly but surely being given the recognition that they deserve and the “funny internet money used by terrorists and drug dealers” narrative is slowly diminishing.

The sector has clearly demonstrated over a 12 year period that these assets have and continue to be the best performing assets the world has ever seen. The market is however very cyclical in nature, which can be extremely disconcerting for the average investor. So, in this article I will give you some tips and advice how you can best survive a crypto bear market as a newcomer to the space.

What is a bear market?

Financial markets that experience either sustained periods of growth or substantial growth are called bull markets, whereas the opposite where markets experience sustained periods of decline or substantial declines are called bear markets. Each presents its own set of opportunities and pitfalls

Regardless of what market it is, be that cryptocurrency, stocks, real estate, or any other asset, markets are invariably characterized as either being in a bull market or a bear market. Simply put, a bull market is one where the prices are a rising and a bear market is one where the prices are declining. Due to the inherent nature of markets they invariably experience periods of volatility and that can be experienced day-to-day or even during much lower times frames of hours or even minutes. However in the context of bull and bear markets these terms are generally reserved for much longer periods of mostly upward or downward movement in price.

When considering traditional markets a significant upward or downward swing in price of 20% within a 60-day period is the regarded as the accepted figure that denotes the market conditions. However, when compared to these markets, cryptocurrency markets are smaller and thus more volatile. Therefore, it is quite common to see stronger and prolonged crypto bear markets, where 85% price drops are not that rare. Even in a bull market cycle having the price of a cryptocurrency coin or token drop 50% is not unheard of.

Any downturn in a market is indicative of investor pessimism related to a loss of confidence in the overall performance of the market prices and indexes. In response to pessimistic market sentiment, investors start selling their holdings, further impacting the falling prices and often leading to capitulation periods. Pessimistic investors who believe prices will continue to fall are, therefore, referred to as “bears.”

It’s notoriously difficult to predict when the bear market might end and when the bottom price has been reached — as rebounding is usually a slow and unpredictable process that can be influenced by many external factors such as economic growth, investor psychology, and world news or events.