- Crypto market trading is more difficult in prolonged bear market cycles.
- Smart investors enter into an accumulation drive in bear markets.
- There are three strategies that investors can use to trade in a downtrend.
It’s fairly easy to generate profits and feel good during a bull market since traders can almost pick any stock and make a profit when everything is going up. What most aren’t aware of, however, is that history has proven that the best time to purchase bitcoin (BTC) is when no one is talking about it.
In fact, periods of prolonged downtrend and lengthy sideways chop are when veteran investors step in. A classic example is the 2018-2020 crypto winter. In this period, smart investors were practicing the law of accumulation to prepare themselves for the next bull run.
Of course, it is near impossible to predict when the next parabolic move would take place in the crypto market. Here are three great investment strategies that can be used for investing in Bitcoin in the bear market.
The first strategy is accumulation through dollar-cost averaging. Now, it’s helpful to be price agnostic when it comes to investing in assets over the long term, and a price agnostic investor is immune to fluctuations in value. Instead, this type of investor will identify a few assets that they believe in and continue to add to their positions in the selected assets.
Second, is trading the trend and going long off extreme lows. Generally, entering the market when it’s deeply oversold and all metrics are extreme is a good place to open spot longs. A good rule of thumb is to use around 20% of your trading capital for this approach.
When assets and price indicators are at least two standard deviations away from what’s normal, then it may be time to start looking for some trade opportunities.
The last strategy is to do nothing until the trend changes. Since trading during a bear market is difficult, and capital and portfolio preservation are a top priority, it is best for some investors to wait it out until there is confirmation of a trend change.
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