How to Invest During a Bear Market - Moralis Academy

March 18, 2022
Guides , Moralis
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Learning how to survive a bear market is one of the best ways to avoid tears during periods of downward price action. The crypto space can be unforgiving at times. As such, understanding how to position yourself for volatility and uncertainty could help you to optimize your investment strategies and maximize gains. Furthermore, a bear market is an ideal opportunity to learn a thing or two about the revolutionary technology that underpins the cryptocurrency projects on which so many people speculate. Moreover, expanding your blockchain and Web3 knowledge could be the best way to pass the time during the crypto winter.

In this article, we’re going to explore some of the common techniques and strategies for navigating bear markets. We’ll look at how you can learn from your mistakes and position yourself to capitalize in the next bull market. Plus, we will discuss some of the ways you can improve your understanding of blockchain and Web3.

Moralis Academy is the number one Web3 and blockchain education suite online. Join our community of over 30,000 students today and begin your blockchain journey! Also, save our “Bitcoin Mining Companies” and “Top Crypto YouTube Channels” articles for further reading!

Bear Market vs Bull Market

Before we discuss how to survive a bear market, let’s first clarify some terminology. A bull market is when the price of assets rises and investors expect them to continue rising. Therefore, being “bullish” or “a bull” would suggest one has confidence in positive price action.

Bear vs. Bull market explained in our "How to Survive a Bear Market" article.

Conversely, a bear market is a prolonged period of negative price movements and market sentiment. Moreover, a “bearish” investor would be cautious about the current market conditions and would likely be looking for a trend reversal before entering a significant position.

How to Survive a Bear Market

When the thrill of the bull market comes to an end, many crypto investors are left with regrets. Greed, naivety, and a lack of discipline can result in unfortunate yet avoidable losses. Accordingly, learning how to survive a bear market can prepare investors for a crypto winter and position them to capitalize on the volatility in the markets. Below, we will consider some of the best ways to make the most out of market downtrends and brush up on your blockchain and Web3 knowledge.

How can someone survive a bear market? Bear balancing on bearish charts.

Research

Research is the first step for many investors when learning how to survive a bear market. While you’ve been watching your bags hit the floor, a lot has been going on in the crypto world. When was the last time you checked up on those promising projects that gave you a 10x last year? Trends and narratives shift quickly in the blockchain space. Accordingly, taking the time to research the latest developments in the industry could give you an edge in the future.

Learn how to survive a bear market by doing proper research.

Furthermore, technology advances at a phenomenal rate in blockchain, so talking points and proposals can quickly become a reality! Moreover, if you have incurred losses as a result of not conducting your own research, a bear market is the perfect time to look into new projects to seek out potential gems.

Education

During a long-term downtrend, speculating on price movements can be particularly risky. However, this is the perfect time to focus on learning about the blockchain industry. At the height of a bull market, it can be easy to get swept away by intraday price movements. Airdrops, token sales, and the latest yield farming opportunities are enough to keep any investor busy. However, these opportunities are often less fruitful during the crypto winter.

Invest in yourself so that you end up surviving a bear market.

Learning about the latest technological advancements in Web3 can put you at an unfair advantage in the job market. Furthermore, brushing up on your blockchain knowledge could give you the edge in future bull markets. Accordingly, ensuring your understanding of Web3 is up to date is one of the best ways of learning how to survive a bear market.

There has never been a better time to learn a new skill in an emerging tech field. Also, blockchain developers are in high demand sector-wide. If you want to learn how to become a blockchain developer, check out the JavaScript Programming for Blockchain Developers course at Moralis Academy.

This course breaks down the basics of coding for Web3 and will prepare you for our more advanced coding courses. Plus, we teach students how to build a decentralized exchange (DEX). Regardless of your current level of knowledge or experience, we have the perfect courses for you. Become blockchain certified with Moralis Academy!

Get a Job in Blockchain

You don’t have to be a developer to advance in a career in Web3. From human resources to media and marketing, blockchain companies are hiring! Accordingly, taking the time to find reputable companies with vacant positions could help you put your knowledge and experience of a niche subject to good use.

Build Something

A bear market is a perfect time to build something. If you’ve been learning how to write smart contracts or use open-source Web3 code, why not try and create a DEX or an NFT marketplace, for example? During the crypto winter, you have the time to iron out any kinks in your code or reimagine any outdated ideas for building a blockchain application.

Furthermore, a bear market is an ideal time to collaborate with other developers to create something big. If you have ideas for a Web3 project, getting the bulk of the work done during a bear market could help you prepare for the next bull run!

Refine Your Strategy

When it comes to understanding how to survive a bear market, many investors take some time for reflection. Establishing what strategies work and which don’t could help you to reduce unnecessary losses and double down on profitable scenarios. To help with this, a firm understanding of technical analysis (TA) and fundamental analysis (FA) is highly beneficial.

Technical analysis is the process of forecasting price movements using historical data. This form of analysis uses chart patterns and indicators to establish probabilistic outcomes. This can help to remove emotions from trades. Conversely, fundamental analysis takes a broader approach to understanding market cycles. This can include time-sensitive geopolitical considerations, the effect of volatility in other markets, and institutional adoption of blockchain and cryptocurrencies.

Moreover, using a combination of TA and FA will enable you to make the most well-informed decisions. If you want to learn how to read chart patterns and remove emotions from your trading, check out the Technical Analysis 101 course at Moralis Academy. Here, we teach students how to create their own trading strategies and read market movements. Take your trading game to the next level with Moralis Academy!

Crypto Mining

If you have access to affordable or renewable energy sources, mining cryptocurrencies could be a profitable way to earn a passive income. Bearing in mind the initial costs for equipment and ongoing energy costs, mining crypto during a bear market can give you a better share of the available mining rewards if it becomes unprofitable in other regions.

Stablecoins

When taking profits at the highest of the bull market, many investors will cash out into a local fiat currency. However, one common tactic for navigating a bear market is cashing out into stablecoins. When your profits are on-chain, you can deposit them into a yield-bearing account or provide liquidity to a lending protocol. Accordingly, you can put idle assets to work during a bear market and earn passive income without exposure to volatility.

Short Selling

Shorting (or short selling) is a trading strategy that entails betting on the price of an asset going down. If you believe that there is a good probability of an asset going down in price, you can capitalize by opening a short position.

When opening a short position, a trader can borrow crypto assets from an exchange and sell them at the current rate. Once the price has dropped, a trader can buy the assets back and repay the loan, making a profit. Shorting is inherently risky. However, it enables traders to make a profit when the price of an asset falls.

Crypto Taxes

If you have made any losses during the bear market, you might be able to write them off against your taxes. This varies between countries and local authorities. However, in many places, you can write off some crypto losses to reduce your tax burden. If you’re based in the U.S., check out the Taxation of Digital Assets course at Moralis Academy. This course teaches students how to remain compliant with U.S. crypto tax laws and accurately report their crypto taxes.

Improve Your Skill Set

Regardless of how you decide to navigate a bear market, expanding your knowledge and understanding of Web3 in one way or another will undoubtedly put you in good stead for the future. This could be anything from watching educational videos, reading articles, learning a new programming language, or practicing technical analysis.

During bear markets, there is always the temptation to wildly speculate or stare at price charts wishing for a correction. However, learning a new skill or brushing up on old ones could be a more efficient use of your time.

Exposure to Alternative Markets

If you find yourself at a loss during a crypto bear market, it could be worth considering exposure to other markets. Despite the correlation between traditional stocks and crypto, many investment opportunities exist in unexpected places. For many investors, a crypto bear market is an ideal opportunity to learn about other financial instruments and gain exposure to assets outside of the crypto realm.

How to Survive a Bear Market? Live Life!

Like many of us, if you’ve been caught up in the crypto hype during the bull market, some aspects of your life may have suffered as a consequence. Taking the time to see friends, family, and loved ones may help you to break away from the crypto hysteria and focus on what really matters!

Why not take a walk outside, take up a new hobby, or do that job in the house you’ve been putting off all year? Or, take some time for yourself! The crypto markets will likely still be here waiting for you when you get back! A short break from the charts or a brief Twitter detox could give you some much-needed perspective heading into the crypto bear market and help you to formulate new strategies.

How to Survive a Bear Market – Summary

With any hope, the majority of people reading this will have life-changing gains from timing the tops perfectly month after month. However, the reality is that many people fail to make the most out of the opportunities put in front of them. Accordingly, taking profits on the way up and on the way down is one of the most common and effective strategies employed by seasoned traders to avoid risking capital.

Seeing the price of a crypto asset doubling day by day can be exhilarating. However, seeing the price fall through the floor shortly after the top can be heartbreaking. As such, realizing profits throughout the bull market is a proven methodology for mitigating losses. Of course, Moralis Academy cannot give financial advice. That said, we can suggest commonly-used methods for preserving wealth, making the most of a bear market, and avoiding getting rekt!

Moreover, we can offer tips on how to best position yourself for the future. Improving your understanding of blockchain and Web3 will likely help you think clearly when making important investment decisions. Instead of waiting for the next pump throughout the bear market, why not take the time to study and learn what could become the next big thing in the industry?

For more valuable tips on how to survive a bear market, check out the wealth of free educational content on the Moralis Academy blog. Also, don’t forget to follow us on Twitter @MoralisAcademy! We’d love to hear your thoughts on how to survive a bear market and how you make it through the crypto winter! Additionally, check out our “What is Phantom Wallet?” and “Most Expensive NFTs Sold” articles to further expand your understanding of blockchain and Web3!

The post How to Survive a Bear Market appeared first on Moralis Academy.

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