4 Strategies to Consider When Investing in a Bear Market
Main Takeaways:
Markets experiencing sustained or substantial declines are called bear markets.
Bear markets might be stressful for investors but they can be seen as good investment opportunities to buy in at lower prices.
In this article, you will learn what exactly defines a bear market, how you can prepare for it and how you can benefit from it.
Want to beat the FUD (fear, uncertainty, and doubt) when you find yourself in a bear market?
It's important to know and understand these trends to be able to make smarter investment decisions in your crypto journey. This is because different market trends can lead to dramatically different market conditions.
What Happens In A Bear Market?
A bear market is a period of a prolonged drop in investment prices in a financial market. Bear markets typically describe a condition in which prices drop 20% or more from the highest recent price, surrounded by general pessimism and negative investor sentiment.
While they can be stressful for investors and challenging for inexperienced traders to navigate, bear markets are also a key part of the investment cycle.
To learn more about the fundamentals of bear markets, check out our in-depth article on What is a Bear Market?.
How Long Does A Bear Market Last?
Bear markets can last months or years. Like we've said before, deep market downturns are unavoidable.
It may be easy to get caught up in the declining prices in a bear market, but they can be seen as good investment opportunities to buy in at lower prices.
4 Strategies To Adopt In A Bear Market
1. Make dollar-cost averaging your friend
Dollar-cost averaging (DCA) means breaking up your reserve funds into smaller portions and making several trades over time. In a bear market, committing to the DCA strategy means that you will be looking for investment opportunities when prices hit a certain target. This strategy allows investors to reduce the impact of volatility when buying a large amount of financial assets at a single given time.
At Binance, you can easily DCA with Recurring Buy. Recurring Buy is a hassle-free, automated feature that lets you easily buy a fixed amount of crypto over time at set intervals. Moreover, you can easily access the wider Binance ecosystem with a ready pool of cryptocurrencies.
To learn how DCA can grow your portfolio over the long run, check out our article here.
2. Consider Stablecoins
A common and simple strategy traders use in bear markets is to stay in stablecoins.
Since stablecoins are tied to underlying assets, they tend to be much less volatile compared to other coins.
During volatile market climates, stablecoins could act as a place for traders to hold their assets while they wait for the market to correct.
To learn more about stablecoins and how you can buy the most popular ones on Binance, check out our blog post here.
3. Diversify your investments
Diversifying your portfolio to include a combination of different crypto assets is another useful strategy, bear market or not.
Just like how there's no sure-win formula to predict the end of a bear market, it's also impossible to predict which cryptocurrency will recover the fastest or go on a rally after the market recovers.
Diversifying your portfolio might involve reducing your trade sizes, but in doing so, you'll reduce your overall risk. Just remember that it is important to DYOR and conduct rigorous due diligence on each crypto asset you decide to invest in.
4. Explore staking options
One way to increase your security and grow your crypto holdings during a long-term downturn in the crypto space is through staking.
Although staking may not be a popular strategy to adopt in a bear market, the initial investment cost to reach the staking threshold for certain crypto is much lower than in a bull market. By locking your crypto on a blockchain for a minimum amount of time, you are still making consistent small gains and generating passive income.
To stake your crypto, consider Binance Earn.
Subscribe to Recurring Buy Or Buy Crypto on Binance
Looking to diversify your crypto portfolio or get started with the DCA strategy? You can do so on Binance with just a few clicks.
To Buy Crypto
On Binance, you can buy crypto in two quick steps while enjoying low fees:
Step 1: Make a fiat deposit via an e-wallet transfer or bank transfer on Binance. Before you make a deposit, make sure to check the available fiat channels for desired currencies.
See in-depth guide on “How to Deposit USD via SWIFT”
Optional: Convert the fiat currencies to BUSD or USDT so that you can trade a greater variety of coins.
Step 2: Purchase your desired crypto through a user wallet purchase or directly with a credit/debit card.
To Dollar-Cost Average
Sign up for Recurring Buy on Binance. You can choose between bi-weekly, weekly or monthly plans and opt for the amount and crypto coin you would like to DCA. This means you will invest with caution even in a volatile market.
All it takes is four simple steps. Learn how to sign up for Recurring Buy on Binance here.
Conclusion
We've talked about what happens in a bear market, the duration and the different trading strategies you can use to thrive during this period
To summarize, a general rule is not to let your emotions get the better of you and make panic sell-offs. Instead, use this chance to DCA, buy the dip, or even research on new crypto coins and reevaluate your portfolio.
Studying the strategies we’ve discussed here, combined with an analytical mindset and practice may eventually provide you with an edge over the market. However, there is no single strategy that will lead to a sure-win. Always DYOR before participating in any trading and investment activities.
Ready to start your crypto journey with Binance?
Sign up for a Binance accountor download the Binance crypto trading app. Next, verify your account today. Once your account is verified, there are three main ways to buy cryptocurrencies on Binance using fiat: you can buy crypto with fiat from Binance via bank transfer, card channels or e-wallets options.
Buy BUSD, BNB and cryptocurrencies with a Debit Card, Credit Card, or via Bank Transfer
Linking your debit card, credit card, or bank account (available in many regions) is one of the easiest ways to buy Bitcoin and more than 200+ cryptocurrencies.
Disclaimer: Cryptocurrency investment is subject to high market risk. Binance is not responsible for any of your trading losses. The opinions and statements made below should not be considered financial advice and are shown to illustrate an example, and is not intended to serve as investment advice or recommendation.
Read the following articles for more information:
(Support) How to Buy Crypto with Debit/Credit Card on the Website and the App
(Blog) What is a Bear Market and How Can You Survive (and Thrive) in It?
(Blog) 3 Ways To Manage Your Crypto Portfolio With Profit and Loss Calculations
(Blog) What Is A Stablecoin? Here’s Where And How To Buy Them
(Academy) What Is a Bear Market?