For experienced investors, a bear market is nothing out of the norm. It has happened in the past, and it will happen again — even in cryptocurrency.
The majority of new investors are in the middle of their first crypto winter, during which most digital assets have depreciated by more than 70% from their November 2021 highs. While a bear market is tough for everyone, it can be especially challenging for those who are new to the space and don’t have much experience dealing with market volatility.
That said, there are still opportunities to earn passive income during a bear market — crypto traders just have to know where to look. In this article, we will look at how Wall Street traders persevere and what simple things can be done to make money. Is it time to buy more assets? What are some of the easiest ways to generate cash in a recession? Are there any investment techniques that work during bear markets? What assets to invest in while Bitcoin (BTC) is in a bear market in 2022?
What is a bear market?
In traditional markets, a bear market is described as any time stock prices fall by more than 20% from a previous high. In cryptocurrency, a bear market refers to an extended period of time where prices fall significantly and market confidence plummets.
How long do crypto winters last? While there is no set time period, most people agree that a bear market in cryptocurrency lasts for at least three months. The current crypto winter began in November of 2021 and, as of this writing, shows no signs of abating. So, how long will this bear market last?
This is impossible to say for certain, but based on past trends, it could take a while. The last bear market in cryptocurrency lasted over two years, from 2017 to late 2020. If the current bear market follows a similar timeline, we might be in for a long winter.
More often than not, during a bear market, every asset falls in value with only very brief deviations. Later on, investors spot assets that are selling at bargain prices and purchase them, ending the bear markets for good.
Bear markets are defined by low investor confidence and pessimism. During a bear market, investors tend to ignore any positive news and sell rapidly to drive asset prices down. The cryptocurrency market has already seen three bull markets since Bitcoin’s inception in 2009 and is currently experiencing its third bear market, having declined by almost 70% from its all-time high.
Can you predict a crypto bear market? Predicting a bear market is nearly impossible, and most investors do not anticipate one until they have lost at least 5% of the value of their investment portfolio.
How to survive a crypto bear market?
Given the current market conditions of continued volatility and uneasiness about the future, it’s okay to feel overwhelmed as an investor. It can be difficult to make logical decisions or take any required actions when your portfolio is continuously taking a hit. When the crypto market becomes bearish, nearly all assets in the market begin to fall, even if they report positive news or developments.
The key to surviving a bear market is to have a long-term vision and focus on the project’s fundamentals rather than its current price. Although bear markets typically result in increased prices, many portfolios that were harmed by bear markets may take longer to recover. Some, on the other hand, never return. A bear market is a good example of how capital preservation is important in making investments.
However, as Warren Buffett noted, “you must be greedy when others are fearful” in the long run. As a result, there are advantages to the bear market. There are a number of platforms in the cryptocurrency industry that help earn passive income, which can help investors take advantage of the bear market, as explained in the below sections.
Benefits of a crypto bear market
Although a bear market can be discouraging for investors, it actually has some benefits. Here are some of the advantages of a crypto bear market:
- Buy low, sell high: When the price of something is falling, smart investors know that it’s a great time to acquire. They take advantage of the reduced prices by acquiring assets and selling them when the market rebounds and prices rise again. Although it may be difficult to find assets that have not been impacted by the market crash, there are still some digital assets that are selling at a discount.
- Investors learn to master their emotions: One of the most important lessons to take away from a bear market is how to manage your emotions while trading. It can be difficult not to panic when the value of assets is dropping, but it is crucial to remember that bear markets are temporary and prices will eventually rebound.
- Enables disciplined and consistent investors: A bear market separates the long-term, disciplined investors from those who are in it for the quick buck. Those who are able to weather the storm and continue to invest during a bear market are usually the ones who come out ahead in the end.
- Investors can gauge their risk resistance: A bear market is an opportunity for investors to test their risk tolerance. Those who sell all of their assets during a crash may realize that they are not as comfortable with risk as they thought. On the other hand, those who continue to invest may find that they are more tolerant of risk than they previously thought.
Ways to make passive income in a crypto bear market
Although it may be difficult to locate digital assets that have not been harmed by the market downturn, there are still a few methods to generate passive income in a bear market. The reverse of the adage is that there are still plenty of possibilities with a 100% Annual percentage rate (APR) and even more.
Below are a few methods of generating passive income in a bear market:
Staking
Bear markets are a reminder of the importance of holding tokens to generate passive income. Staking can be a great way to generate income, as well as increase your position in a project.
Staking is the process of locking your coins on a particular platform to gain interest. Most platforms provide two options: flexible staking (withdraw at any time) or fixed staking (where you commit your assets for a set period, like one month or more).
Tokens can be staked on centralized platforms such as Binance, Crypto.com, Kucoin or Bybit. In addition to that, there are many decentralized exchanges (DEXs) available such as Uniswap, Balancer and Curve, where investors can provide liquidity and earn a share of the trading fees.
Crypto trading
Trading cryptocurrency during a bear market can be a good opportunity to buy at a discount and sell when prices rebound. Earning passive trading can be a great way to offset any losses during a bear market. Although finding profitable trades may be more difficult, those who are able to capitalize on market conditions may earn a significant amount of money.
How do crypto traders make money in a bear market? Investors can trade cryptocurrencies on a number of different exchanges, including centralized ones like Binance and Kraken or DEXs like Uniswap and dYdX2. There are also a number of social trading platforms, such as eToro and Robinhood, that can help investors get started in the market. Social trading platforms provide a way to learn from other investors and develop strategies for trading during a bear market.
Mining
Mining is another way to generate passive income in a bear market. Although the rewards may be lower than in a bull market, mining can still be a profitable endeavor.
Cryptocurrency miners can either go it alone or join a mining pool. When you solo mine, you’re trying to solve the next block by yourself. Pool mining is when a group of miners work together to find the solution faster and then share rewards based on each person’s hashing power contribution.
Affiliate marketing
Affiliate marketing is a form of business in which a person promotes a product or service and gets paid if someone buys the item as a result of their advertising. This may be achieved through various platforms, including social media, blogs and email lists.
Affiliate marketing in the cryptocurrency space is another way to generate passive income during market downturns. Many projects offer high commission rates and some even pay out rewards in the project’s native token.
Airdrops
Airdrops have become a popular way to generate passive income in down market conditions. Airdrops are tokens that projects give away for free to promote their project or increase awareness.
Investors can join airdrops on websites like Airdrop Alert, CoinMarketCap and Earn Crypto. It’s critical to remain vigilant against fraud since there are several fraudulent airdrops distributed in order to acquire people’s private keys. Only sign up for airdrops from reliable providers and conduct due diligence before giving any personal information.
Dollar-cost average
One way to make passive income is to dollar-cost average your investments. This means buying a fixed amount of an asset on a regular schedule, regardless of the price. Buying into an asset at different prices can mitigate the risk of buying in at the top and losing all. This approach may be used to invest in initial coin offerings (ICOs), buy altcoins or even acquire Bitcoin. In the long run, the average price of the digital asset will even out, and investors have a good chance of making a profit when the bull market returns.
Dollar cost averaging (DCA) offers numerous advantages for investors who use tax-advantaged savings vehicles on a regular basis. Contribution and employer match contributions account for about two-thirds of the amount, while investment profits make up the remaining one-third. This indicates that many 401(k) contributors may quickly replenish their accounts following bear markets.
Stablecoin investment strategies
Stablecoins are digital assets that are pegged to a stable asset, such as gold or the United States dollar. This means that they are not subject to the same volatility as other cryptocurrencies. As a result, stablecoins can be a great way to store value and generate passive income in a bear market.
Investors with a lower risk tolerance who are seeking a more dependable passive income during bear markets may find that pegged stablecoins, such as Tether (USDT) or USD Coin (USDC), fit their needs.
Why are stablecoins so important in a crypto winter? A sound stablecoin investment strategy accounts for market volatility. Stablecoins provide a shield against the inflationary trends and bear markets characteristic of the current economic climate. By doing so, stablecoins preserve an investor’s buying power while also generating competitive interest rates--a potent combination in today’s economy.
Stablecoins are not the most volatile category of digital asset but they are not without danger. The failure of the UST stablecoin in May 2022 is a case in point, demonstrating that even stablecoins have risk. When selecting a stablecoin for investment, it is important to consider the peg and do thorough due diligence on the project.
Create your own nonfungible tokens
Nonfungible tokens (NFTs) are digital assets that represent a wide range of items, including art, collectibles and in-game items. NFTs are stored on a blockchain and can be bought, sold or traded like other cryptocurrencies. One way to generate passive income with NFTs is to create your own. This can be done by minting NFTs with platforms like Rarible or OpenSea. Artists, photographers and other creatives can use these platforms to sell their work as NFTs.
Though you may not become a multimillionaire like the artist Beeple, if you’re intrigued by NFTs and have a great idea, why not learn how to create them?
Work in the crypto industry
Even during the bear market, there are opportunities to make money in crypto. One way is to find a job in the industry. With the growing popularity of cryptocurrencies, there is an increasing demand for workers with blockchain and crypto experience. There are a variety of jobs in the industry, ranging from marketing and social media to engineering and product management, many of which pay in cryptocurrency (which will rise in value when the bear market ends).
Be optimistic and look for ideal opportunities
There is no secret formula for generating money during a bear market, but there are several techniques that investors may employ to safeguard their investments and even make some money.
In any case, buying low and selling high may be an ideal way to make money from market downturns. Keep in mind that the crypto winter will come to an end and that there are always opportunities to profit from decentralized finance (DeFi) platforms. Trading volumes play a crucial role in turning a profit, but for those investors who don’t mind waiting it out, dollar-cost averaging may be a suitable strategy when the BTC bear market is over.
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