A bear market tends to have more intense risks associated with crypto investments.
Cryptocurrency markets also go through cyclical waves like other assets. In a bear market, where the value keeps declining over an extended period of time, the downward trend lasts for a while.
There are a number of factors that can influence the market, including supply exceeding demand, macroeconomic conditions, changes in monetary policies, and others. The volatility of crypto makes bear markets more risky, and the risks associated with crypto investing are more intense.
It is possible for new investors to suffer from these situations if they do not have experience handling and managing their portfolios. In a crypto bear market, investors can stay safe by following these steps:
Avoid investing in low market capitalisation tokens
Cryptocurrencies generally decline during bear markets. It can be even more risky to invest in tokens with low market capitalization in such times. Due to the fact that those tokens are still startups, there is a high likelihood that they will shut down, as they are not yet well established, so they can grow or fall wildly.
A good idea is therefore to invest in tokens with high market capitalizations or blue chip cryptocurrencies such as Bitcoin, Ethereum, and others that have been able to maintain their positions since their inspection.
Do not panic sell
Whenever the market becomes volatile, investors tend to sell, which ultimately leads to regrets. As an example, Bitcoin has appreciated in value over the years as a digital gold store of value. Consequently, BTC has become one of the most popular long-term investments among investors.
BTC investors, however, tend to panic when the price starts falling and start selling their Bitcoin. After a few days, its price will rise again, so this reflex may be regretted later. The crypto slang for holding on for the deal’s life tells you to HODL (hold on for the deal’s life) rather than selling.
Diversification is the key
Investing in the wrong assets without diversification is the most common mistake investors make. A portfolio can go into the red if an investor invests all of their funds in one sector during times of volatility or bear markets.
To safeguard your portfolio, diversification and investment are important. The result will be a better risk-adjusted return for investors.
Keep an eye on community engagement
Creating a community around a token is of utmost importance in the crypto market, since it plays a critical role in pushing it upward. Most top cryptocurrencies have active communities, especially during weak markets.
Having a low level of engagement by the community means the token does not have any followers or drivers. Before investing in a project, check out its Twitter, Reddit, and Discord engagement.
Know about the demand and supply of the tokens
It is not a good idea to invest in a token that has less supply and demand, as it may not have a long-term future. Unless the demand for the token is high, it won’t be able to survive in the market for long. Tokenomics should always be taken into consideration when investing in tokens.
Plan and stick to a strategy
During the crypto bear market, it is important to have a good risk management strategy. Keeping a level head and avoiding emotional decisions can be beneficial for investors. The downward trend can also be reduced by doing this. In order to achieve long-term success, it is important to stick to a plan.
Do your own research
Additionally, analysts and researchers should always conduct thoughtful analyses and research during bear markets. A better decision can be made by considering matters such as purpose, supply and demand, tokenomics, community engagement, and upcoming upgrades.
