Feb 9, 2022 · 3 min read · cat
Disclaimer: The above article represents the author’s personal views alone and no one else. It is not meant to be taken as financial advice.
Most people don’t know that even a bear market brings with it opportunity. There are many who believe that the biggest fortunes in crypto are founded on work done in the bear market. Today we’re going to look at two strategies that can be applied to a bear market, one long-term and one short-term.
The first and least risky way to invest in crypto during a bear market is accumulation. The price of crypto is down, so now is a good time to buy, right? Generally yes, but there are a few rules you should be aware of to help guide your accumulation.
Firstly, and most importantly, you should be investing in tokens that you feel will still be around in a few years time. Bull markets are a great time to target the wild short-term swings that certain alt-coins see. However, during accumulation, you are buying something that might not see a dramatic price increase for years.
With this in mind, you should target relatively safer crypto investments, such as the majors like Bitcoin and Ethereum. Targeting smaller caps is still a viable strategy, but a lot of research is required to ensure that they have a good utility and a good team that will see the project through a lean couple of years.
Ideally, you should aim to dollar cost average (DCA) over the course of the bear market. This means investing a set amount of money each month into your chosen token. This will mitigate any downward price movements and allow you to secure your investment at the average bear market price which will generally be quite low.
One more consideration about this kind of investment is whether or not you can stake the tokens. Staking allows you to earn passive income on your investments which is ideal if you plan on leaving it for a few years. Currently, Ethereum can be staked in advance of this year’s merge which, considering it’s the second-largest crypto on the market, is a significant consideration.
Although accumulation becomes a good long-term strategy in a bear market, it will not yield any substantial windfalls until the bull market resumes. If a market enters a long period of downwards or sideways movement the most lucrative gains are made by the traders.
Trading is a higher risk, high reward strategy and, as such, requires a lot more skill and research than accumulating Bitcoin or Ethereum. However, the biggest gains of the bear market will be made by traders.
If you’re serious about trading through a bear market, the first thing you need to be able to do is to read the charts. This will allow you to predict the moves of the market and give you an edge over your competition. Many different variables are studied including the average price over a defined period, the volume of trading that accompanies certain moves, and the shapes that are made on price charts.
There are many online resources that can help you out in this regard, including Binance Academy and Investopedia. It’s a complicated process but once you have a strong understanding of the market, you can profit off every movement. Leverage can be used to make a large profit from a small up-swing in the market, while shorting any pumps is a reliable way to profit in a bear market. All of these features are included on many centralized exchanges such as Binance and Kraken.
However, because the majority of crypto enthusiasts are dedicated to building a decentralized financial system, decentralized protocols like Linear Finance have become much more popular over the last year.
By creating synthetic assets tied to crypto-currencies and real-world assets’, Linear offers spot and perpetual trading with no slippage. Because it is a delta-one asset protocol, synthetic assets are tied completely to the asset that underlies them.
Trading, especially using leverage, is something only the experienced should partake in but, if you’re good, it is the most lucrative investment strategy of the bear market.
Generally speaking, the investment strategy of any crypto holder can roughly be divided into one of these two concepts. If the prospect of a bear market is confirmed and you’re interested in staying involved in crypto, which strategy are you going to choose?
About Linear Finance
Linear Finance is a cross-chain compatible, decentralized delta-one asset protocol that allows users to get synthetic exposure to various assets, including cryptocurrency, commodities, and market indices. Users can utilize our cross-chain swap functionality to instantly swap assets across leading blockchain environments and DeFi protocols with unlimited liquidity and zero slippage.