How to Survive a Crypto Bear Market

Prepare yourself for the next bull market.

A bear market occurs when a market experiences prolonged price declines. Traditionally, it can be described as when the price of securities falls 20% or more from their recent highs.

Bear markets are often associated with declines in an overall market, like the crypto market, but can also be connected to individual assets. For example, when Bitcoin experiences several months of downward price action, this can trigger a crypto bear market. 

While a dip in price can be daunting, especially for new users, there are opportunities in this slower and lower market phase. Here are five strategies on how to make the most of bear market times.

Key Takeaways:

• Learn about the four phases of crypto markets and their cyclical nature
• Use downtime during the bear market to educate yourself and make informed decisions
• Utilise Crypto.com’s in-app features to automatically buy or sell at your target price to time the market
• Learn how to Dollar Cost Average (DCA), a popular strategy with documented success for traders with long-term investment plans
• Develop a long-term plan 

1. Understand That Crypto Markets Are Cyclical 

If we take a look at the historic price movements of the cryptocurrency market, we see that a bullish period is typically followed by a bearish period. 

The crypto market cycle is generally defined by four phases: the accumulation, markup (bull market), distribution, and markdown (bear market) phase.

Accumulation is the first phase of most market cycles. It starts after the end of the previous cycle when sellers have exited the market and prices are perceived to begin stabilising. In this phase, the market volume is typically lower than average, as interest in the market remains low. Therefore, no clear trend emerges, and assets typically trade within a tight range. 

Commonly referred to as the bull market, the markup phase is when the market moves higher in price at an increasing rate. During the markup phase, new groups of market participants tend to enter the market; and with that generally comes a notable increase in volume at the beginning of this phase. 

At some point, after a bull run, some buyers become sellers. This is the distribution phase, where the buyers and sellers in the market are perceived to be at equilibrium. 

The markdown phase, or the bear market, can be the most volatile phase for most market participants. It starts as soon as the supply exceeds the demand in the distribution phase, and is a period that’s fueled by fear in the market, as the outlook becomes increasingly negative. 

In other words, the market goes through waxing and waning cycles that will repeat over time, and traders expect another bull run after this bear market.

2. Use Market Downtime to Educate Yourself

A bear market is a time when you have the opportunity to learn more about crypto at a slower pace to set yourself up for the next bull market. With less FOMO (fear of missing out) than during a bull market frenzy, use this time to learn about blockchain and cryptocurrency, and DYOR (do your own research) on projects you are considering. 

Educational resources on Crypto.com include the university, biweekly AMAs (ask me anything) with industry professionals, and research reports with deep insights for advanced crypto users.

For a detailed analysis of crypto bear markets, see our in-depth research report.

3. Step Away From the Charts

While the market is volatile, FUD (the crypto acronym for ‘fear, uncertainty, and doubt’) can tempt us to stare at the charts day in and day out in hopes of executing an order at the ideal price. If timing the market is your preferred strategy, you might wish to automate the process.

Crypto.com’s Target Price feature allows users to sell and buy a cryptocurrency at their target price. Simply input the preferred parameters, and when they are met, the order will execute. 

How to Set Up a Target Price Order on the Crypto.com App

1. Under Open Orders, tap ‘Buy.’
2. Select a cryptocurrency you would like to purchase and enter the target price you wish to order at.
3. The target price entered should be a cryptocurrency amount that is available in your Crypto Wallet, lower than the market price at that time, and within the order limit.
4. Tap ‘Confirm’ and enter your passcode to place your order.

Once you’ve completed the order, it cannot be changed. If, prior to the transaction being executed, you’ve made a mistake or would like to change your target order, click the Lion logo, and from there you can select ‘Target Price’ to cancel the order or create a new one. 

Timing the market isn’t the only strategy, and many seasoned traders prefer another approach known as DCA, especially during times that tug at the heartstrings.

4. Use Dollar Cost Averaging to Your Advantage

Dollar Cost Averaging (DCA) is the act of purchasing an asset at regular intervals for a fixed dollar amount (e.g., US$100 every week). Research shows that over the long term, DCA can yield better results than trying to time the market.

Users can conveniently automate the DCA strategy on the Crypto.com App with the ‘Recurring Buy’ function and purchase crypto on a weekly, biweekly, or monthly schedule.

Instead of trying to time the bottom perfectly, users can lower their average overall buy cost throughout a bear market to position themselves favourably.

How to Set Up Recurring Buys on the Crypto.com App

On the Crypto.com App, you have the option to use ‘Recurring Buys’ on 50-plus different tokens. 

Here’s a step-by-step guide on how to set up a Recurring Buy:

1. Open the Crypto.com App
2. Choose the coin for which you wish to set up a recurring buy; e.g. CRO
3. Select ‘Recurring Buy’
4. Select ‘Setup CRO Recurring Buy’
5. Choose the ‘Frequency’, and ‘Pay With’
6. Once you’ve made your choice, select ‘Confirm Schedule’

For more details on Recurring Buys, see our Help Centre article.

5. Focus on the Long Term

While no one knows when a bear market will end, previous bear markets in both traditional finance (TradFi) and crypto have consistently been followed by a bull market.

Many traders develop a long-term plan that is not influenced by short-term fluctuations in the market; it ensures they neither buy more assets than they can afford nor run out of liquidity when they would like to purchase.

The highs of bull markets are exciting, just as much as the bottom of a bear market is daunting. These events can stir strong emotions, especially in those new to the crypto market. Keeping a level head both through the dips and peaks has proven to be a successful trading strategy.

Check out our article on portfolio management to see how to develop a long-term trading strategy.

Conclusion

As much as things may slow down during a bear market, it’s important to stay active, whether that be through DCA or taking the time to become more educated on different aspects of crypto. These are building blocks that can help you to succeed during the next bull run. As the saying goes, a quick buck can be made in a bull market, but wealth is built in a bear market when purchasing prices are low.

Due Diligence and Do Your Own Research

All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, or offer by Crypto.com to invest, buy, or sell any digital assets. Returns on the buying and selling of digital assets may be subject to tax, including capital gains tax, in your jurisdiction. Any descriptions of Crypto.com products or features are merely for illustrative purposes and do not constitute an endorsement, invitation, or solicitation.

Past performance is not a guarantee or predictor of future performance. The value of digital assets can decrease as well as increase, and you could lose all or a substantial amount of your purchase price. When assessing a digital asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility.