Crypto Trading: How Not To Lose Everything During a Bear Market (2024)

Crypto trading is known for its volatility and high potential returns. Yet with increased rewards comes increased risk. Those that go long on crypto expecting continual price increases can get a rude awakening when things go in the other direction.

But there are established ways to hold on to your crypto even during a bear market. How you manage risk effectively determines how wealthy you become, in fiat and crypto markets.

Why Most Crypto Traders Lose Money

Many crypto traders are losing money, and there are various reasons why this is the case. The primary reason is a general failure to understand portfolio diversification and asset allocation. Both of these are core tenets of financial investing theory that are commonly seen in the commercial arena.

In classical investing, your portfolio is not considered diversified unless you have 25 or more stocks in various industries. Aside from this, your portfolio should also have other assets, such as fixed income (bonds), cash, commodities, etc.

Most traders deal in a select number of cryptocurrencies, going long on them in the hopes of appreciation. But even with the correct risk management procedures, such as only investing smaller amounts of your funds and implementing stop-loss and take-profit techniques, it’s not enough to ensure long-term profitability.

Then there is the timeless issue of emotional investing. Crypto markets, in particular, are laden with hype and over-the-top marketing. “Shilling” is actually a legitimate term within the crypto sphere, where people are paid to hyper-market (“shill”) a given project and increase the price of a specific token, often so insiders can sell at a profit and tank the token. It makes it easy to trade a token that is supposed to change the world, but simply changes your bank balance towards zero.

In cryptocurrency, there is less economic data and historical information to rely upon as compared to the financial markets. So it’s easier to make mistakes and rely on lower-quality information.

How To Trade More Intelligently

Despite the pitfalls, there are many proven ways to trade more intelligently, minimizing risk and maximizing potential gains. Automated platforms can help greatly with all the problems typically associated with crypto trading. With automation, trades are only executed based on technical indicators, as opposed to online media hype.

Because you set the parameters of the trades beforehand, you are not involved in the actual execution, meaning there is far less emotional investing and user error. It is close to a “set and forget” strategy, though you will want to check in every two weeks or monthly. Remember the best-performing portfolios are owned by people who passed away since they can’t make continual changes, reducing the effectiveness and increasing fees.

There are certain automated solutions that help take the complexity and psychological pitfalls out of crypto investing. Stoic AI, for example, offers a hybrid approach which combines AI technology with market expertise of investment and quant-fund professionals. Active since 2015, the crypto-financial firm, Cindicator, has over $130 million in assets under management, from over 15,000 clients.

Customers can choose from three different portfolios within the Stoic AI mobile app – conservative, balanced, or volatile – to cater to their risk tolerances as well as expected market conditions. The portfolios are divided between three different strategies built from the ground up – Fixed Income, Meta, and Long Only.

The monetary investment comes at a fraction of the cost of a traditional hedge fund, with far greater APY potential. Each automated trading strategy has also been back-tested to properly gauge risk and rewards.

Bitsgap is another automated crypto-financial provider headquartered in Tallinn, Estonia. Established in 2016, Bitsgap recently added support for Dollar Cost Averaging within its algorithms, based on user feedback. This helps to avoid the highs and lows of the crypto markets and build long-term wealth, based on a consistent investment. The strategy reduces purchase price volatility, which is ideal when a bear market is just starting, where traders are potentially purchasing coins at their highest point.

Moreover, the platform claims to be twice as safe as an internet bank, with hardware security keys/FIDO2 as a 2FA method, and the latest in API key protection. Bitsgap trades on a large variety of exchanges, not just Binance and CoinBase.

Other Techniques For Surviving A Crypto Bear Market

There are many more ways to survive a bear market. If you think BTC and the wider market is going to decline, you can simply swap it for a stablecoin such as USDC or USDT. If you’re very confident and experienced, you could also consider shorting the market, but you’d better know what you’re doing.

If all of your savings are in crypto and you have bills to pay, then it’s prudent to keep some cash at hand. The classical financial advice has been to have at least six months of income in a cash account to deal with emergencies. This money can be kept in stablecoins so when you want to re-enter the market, you can do without the fees associated with purchasing crypto directly.

Ultimately, surviving a crypto bear market is about staying informed and taking decisive action before the event takes place. If you are “all-in” with cryptocurrency and have not diversified or put any savings away, then you have nothing to complain about when the market tanks. And all markets, eventually tank.

For those who are set on storing the majority of funds in cryptocurrency, the advice would be to diversify within the industry and ensure funds are stored securely, preferably with a good crypto investment automation provider to streamline the investment process.

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