Bitcoin’s narrative appears to have changed in just a few months. Threats of rising inflation rates, global markets under pressure, and an ongoing conflict between Russia and Ukraine have raised the question – is this a bear market for cryptocurrencies? In the first two months of 2022, there were three flash failures. As a result, Bitcoin was currently trading at a 50% discount when compared to its all-time high.
Cryptocurrency analysts and advocates believe that the ‘crypto winterr’ should continue until the overall macro outlook starts to improve. “Looks like a bear market” to be exact, were the words used by research firm Glassnode last week. report.
Bears are scary, can we call this the beer market? It would be much more fun. #crypto
— Lark Davis (@TheCryptoLark) February 20, 2022
Typically, bear markets can last between 1 month and a full year, depending on the severity of the macro outlook. The situation can scare new and sometimes even experienced investors. With that being said, there are different ways to make money even when prices are dropping. Here are some of the popular strategies you can employ during a bear market.
Shorting or short selling is a bet placed against the market. Traders who sell short expect the price to fall and make profits as a result of their bets. However, the same is risky as the potential for loss can be limitless if a reasonable stop-loss is not maintained. For a quick guide on how to sell short, readers can take a look at Avalanche’s latest price prediction piece.
Buying put options
Put options are preferred when bearish on a particular cryptocurrency. The option gives the holder the right to sell the cryptocurrency pool at a specific price and date. You can buy a put option at a specific ‘strike price’. When the value of a cryptocurrency drops below the strike price, the put option becomes more valuable. Investors should be aware of different premiums when buying these options. More information on trading put options can be found on here.
Identifying market funds or demand zones
You may have encountered the term ‘buy the dip’ during market corrections. The phrase can often lure novice investors into a trap as the market tends to fall during bearish cycles. The right way to ‘buy the dip’ is to identify important bottoms or demand zones on the chart. Demand zones are areas where buying activity replaces selling activity. They form on the basis of a strong uptrend or downtrend.
For example, Binance Coin’s demand zone is between $260 and $210. The area was responsible for a 100% rise in BNB between late July and early August. A buy order placed in these areas can offer a greater chance of a bullish reversal than, say, Binance’s current $340-$320 support zone.
Betting instead of trading
Staking is a popular way to earn passive income without exposing your portfolio to deep losses. You should evaluate your options as different currencies offer different interest rates for staking. Keep in mind that some coins require investors to stake their coins for a specific period of time before any revenue is generated.
Have a long-term perspective
Finally, it is important to look at the cryptocurrency market from a long-term perspective. Bear markets are an essential part of market cycles and they do not last forever. Instead, one should do independent research into Bitcoin’s macro outlook and all the different factors that could affect its long-term price. Factors such as higher adoption, higher higher, new partnerships and an active development team can lead to faster recovery.