How to Trade In a Crypto Bear Market?

As Bitcoin's (BTC) price plunged below the $20,000 milestone and with most cryptocurrencies being down 85% from peak prices, the crypto winter is upon us. Changpeng Zhao, Binance CEO – the world's biggest crypto exchange, thinks the crypto winter "will last for at least 2 more years." In this article, we will discuss some measures you can take on how to trade in a crypto bear market.

Whether he is right or wrong about the length of the current crypto bear market, we're going to share three tips to survive the crypto winter.

History of crypto bear markets

Crypto winters are nothing new to the crypto world. Bitcoin has experienced four major crypto bear markets since its inception in 2009. The first crypto bear market occurred between June and November 2011, when the price of Bitcoin fell from $32 to $2.

As you can see from the chart above, Bitcoin's price bottomed in November 2011 and rebounded by almost 3,000% in the following year.

The second crypto winter occurred in April 2013, when Bitcoin's price dropped from $140 to $50 in just a few days. After the second bear market, Bitcoin's price surged by 1,500% in the following six months.

The third bear market occurred between December 2013 and January 2015, when Bitcoin's price plunged from $1,100 to $200. After the third bear market, the price of Bitcoin soared by 2,000% in the following two years.

The fourth crypto bear market occurred between December 2017 and December 2018 when Bitcoin's price plunged from $20,000 to $3,200.

As you can see from the chart above, Bitcoin's price bottomed in December 2018 and rebounded by 80% in the following two months. As for the current crypto bear market, we can't be certain of the bottom, however, an 80% drop from the current all-time high would bring us to around $14,000.

As you can see, Bitcoin has always rebounded after each major crypto bear market.

1 HODL

If you're an unleveraged investor/trader, the best way to survive the crypto winter is to patiently HODL until the storm passes by. Along with that, you can also buy the dip using dollar-cost averaging. If history is to provide any guide, it's safe to say that Bitcoin always bounces back.

Dip buyers will profit handsomely when the crypto prices recover and surpass their previous peaks.

At Cryptohopper, we provide advanced DCA settings that you can add to your automated trading bot. Thus saving you the headaches of calculating when to use Dollar Cost Averaging.

2 Stay out of Margin Trading

Leverage is a double-edged sword, especially in bear markets due to the volatile nature of the crypto winter.

It's not uncommon to see over 20% slides in the crypto price on a bad day, which could easily wipe your leveraged position after you get a margin call.

3 Hedge Crypto Risk

Lastly, a smart investor would employ hedging strategies to reduce the overall loss and volatility of your crypto portfolio. The most common hedging strategy involves short selling, which profits when the price of an asset falls in value.

Bottom Line

Crypto winters are not the end. They are part of the overall market cycle as no asset class goes down in perpetuity while at the same as nothing goes up without corrections. Thus, if you play your cards right, you will come out of the bear market even stronger!