Anyone can make the most of the markets when prices are high and every project is going through the roof. But bear markets are what separate the wheat from the chaff. Experiencing your first crypto winter isn’t for the faint hearted. That’s why you need to dig in, prepare for the worst and check out our survival guide to get you through those frosty nights.
Every survivalist needs a bunker
When times get tough and volatility is high, you need to take action and make sure your assets have the protection they need. In short: you need to build your own bunker.
These days, you need four walls to protect you from forces of financial evil: inflation, the central bankers and low crypto prices. Thankfully, these walls are more virtual than physical. In this sense, any funds that you can afford to invest should be carefully invested in a protected environment. Make sure you’ve got a top-notch digital wallet to keep your funds safe and warm this winter.
Your wallet should be secure and give you access to a wide variety of digital assets. Make sure you can easily get access and manage your investments with an easy-to-use control panel. If you aren’t sure where to look, we’ll give you a hint.
Make a plan and stick to it
Day-to-day events in a crypto winter can be gruesome and you might feel like you’re losing sight of your long-term objectives. That’s why you’ve got to make a clear survival plan and carve it right into the wall of your bunker.
Everyone’s financial goals are different but here are some general themes to bear in mind:
- Remember to buy low and sell high, but not overnight - investing is about the long-term perspective. Pick the assets you believe in and hold on to them.
- Steer clear of the most volatile investments - any survivalist knows they need to avoid high risk situations. If you need to trade, consult your plan and consider reducing your size, given the current volatility.
- Now, no matter how hungry you get for gains this winter, never fall for the allure of a dead cat, no matter how hard it bounces.
A Dead Cat Bounce (or as we like to show it, a dead bear) is a short-lived recovery of an asset class during a bear market. It’s important to remember that just because the price is going up after a long slide, it doesn’t mean that the bear market is over for good. Check out this article we wrote to see the historical price differences through a bear market.
Surviving the bear market isn’t about looking for the latest tricks, trends and trades. It’s about minimizing risk and sticking to a plan. Keep any experiments for later and focus on maintaining what you have.
Diversify your supply
When the bears are pounding at the door, you need to make sure you’ve got enough supplies to keep you going until conditions improve. Consider your portfolio and assess whether the current mix you have is going to be a help or a hindrance.
A diverse portfolio is a good portfolio. While it’s true that most digital assets’ valuations are linked to the performance of Bitcoin, that doesn’t mean you should put all funds into one cryptocurrency. Sustainable investing is all about managing your risk. It’s understandable to that investing in Bitcoin is the best option because it is the top cryptocurrency. But that also means if the Bitcoin prices tumble for any reason, you have no way to balance that across your portfolio. Do your own research and consider a mix of crypto, stablecoins, gold and other assets. Don’t forget that, in times of crisis, cash is king.
This bear market is taking place as economists predict a recession. This is interesting for two reasons. The first is that Bitcoin was created as a response to what Satoshi Nakamoto saw as the mismanagement of the world economy, leading to financial crises, money printing and rising inflation. The second is that this is the first time the digital asset industry will undergo this test for real, as well as to how investors themselves will treat their assets through an economic downturn. Bitcoin has been the best performing asset of the last 10 years and we believe that its price could continue to perform well over a long-term investment horizon. Nevertheless, consider weighing your portfolio with recession-proofing assets like digital Gold (PAXG).
Pick your stablecoins carefully
Stablecoins now play an important role for the digital asset industry. For the first time, they offer a real opportunity to people get paid in a cryptoasset that won’t fluctuate in price. Stablecoins can be settled internationally in seconds and give people a credible alternative to fiat currency that cuts out the fees and delays created by middlemen. But not all stablecoins are made equal and some have more risk than others. Look at what every stablecoin is backed by. If it is backed by a volatile asset, such as another cryptocurrency, it is only as stable as the demand for its pegged asset. If the market decides that asset is worthless, so is your stablecoin. You only have to look at the fallout from Luna to see that. Fiat-backed stablecoins such as USCD or USDT have a lower risk exposure due to the relative stability of currencies such as the US dollar.
Bear markets are for building your camp
Don’t be fooled by the way bear and bull cycles work. For first time investors, it can seem like bull markets are the best time for investing and growing your portfolio. But that’s not quite right. All the noise from bull markets is made by people that laid the foundations for growth in the bear market. When the markets are low and no one is hyping the next projects, that’s the time to do your research. Investigate new projects that are solving the issues of the industry, learn about new areas of innovation and diversify your sources of information. Remember: the seeds of fortunes made in bull markets are sewn in bear markets. Use this time to build the strongest financial foundation you can and plan for the next cycle.
The rapid onset of a bear market can be frightening for new investors, especially if they joined during a time of high prices. But these periods of turbulence teach valuable lessons.
Surviving in crypto is mostly about managing your risk, investing responsibly and committing to holding on to assets you believe in for the long run. As long as you stick to a plan and keep a cool head on your shoulders, you’ll be just fine.
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