How to act wisely in a bear market
Analysts employ a lot of factual data to forecast market performance. Still, they also need to consider “market sentiment,” which includes factors like participant psychology and news coverage tenor. As a result, investors frequently believe gains are sure to occur, for instance, during lengthy bull markets. However, during downturns, such as the current one, when BTC is down 40% for the year, an equally unwarranted level of pessimism can take hold. Although no one can predict how long a downturn will persist, there are several potentially wise decisions you can make to position yourself for the next bull run. Let’s look at a couple of them.
- Dollar-cost averaging (DCA), which involves buying a smaller amount of an asset every week or month regardless of price movement, is an alternative to trying to time the market. If you think the price of cryptocurrencies will generally trend upward over a longer time horizon, this is a wise course of action. Traditional investors have used this tactic for decades to deal with stock market volatility, despite DCA being a popular way to purchase cryptocurrency. Anyone with a crypto trading account can easily set up automatic recurring purchases for any listed asset.
- With collateralized stablecoins, earn interest. For instance, holding USDC on certain platforms can yield you 0.15 percent APY, which is more than twice the average interest rate on savings accounts in the United States. It is a terrific method to increase the interest on some of your savings without locking your money up in a difficult-to-exit investment. Your money will be available if you come across a lucrative trading opportunity.
- Utilize the low gas costs to gain new cryptocurrency abilities, such as signing up for an Ethereum Name Service (ENS) domain. ENS registrations reached a record month in May with 356,652 new.eth domain names, even though ETH prices have been trending downward for most of this year. So why choose an ENS name? The goal is to register a name that can be read by people, such as [enter your nickname]. In place of the lengthy alphanumeric strings that make up a typical wallet address, your web3 username will be eth, which will enable you to send and receive cryptocurrency and NFTs. Your ENS domain will act as your identification for a wide range of online services, according to proponents, as web3 continues to develop.
- Learn how to DYOR, or “do your research,” in the time and mental space provided by the down market. Learn the fundamentals, read cryptocurrency news, explore the whitepapers of projects you’re interested in, and explore analytics. Never give up using common sense, regardless of what you learn. There is no yield without danger, so only invest what you can afford to lose if you see double-digit interest rates when banks only pay fractions of a percent.
Why it’s essential
Nobody can foretell the future. Still, almost all successful investors concur that during down markets, you make the decisions that will position you for success during the next upswing. You’ll be prepared to profit when markets swing by taking care of the fundamentals now, whether that means steadily DCA-ing into BTC or ETH. At the same time, prices are low, expanding your expertise or taking advantage of low gas rates to experiment with DeFi.