During A Bear Market, There Are Three Ways To Trade Bitcoin And Altcoins
There is no doubt that everyone is a genius during a bull market, but how should one trade in a bear market?
Markets are currently in a state of uncertainty, and while the situation is likely to worsen in the near future, this does not mean that investors should sit back and watch from the sidelines.
There is no doubt that history has shown that one of the best times to buy Bitcoin (BTC) has been when no one is talking about it.
Do you remember the crypto winter that took place between 2018 and 2020? There is no doubt in my mind.
It was hard to find anyone, including mainstream media outlets, who were speaking positively or negatively about cryptocurrency at the moment.
During this period of a prolonged downtrend and a long sideways chop, smart investors were accumulating during this time in preparation for the next bull trend to come.
The fact remains that nobody knew “when” this parabolic rise would take place, but the example is purely meant to illustrate that even though crypto might be in a crab market, there are still great strategies for investing in Bitcoin.
I would like to take a closer look at three of them.
During A Bear Market, There Are Three Ways To Trade Bitcoin And Altcoin
Dollar-cost averaging is a method of accumulating assets
If you want to invest in assets over the long term, you need to be price agnostic when it comes to the price.
It is assumed that a price-agnostic investor is immune to fluctuations in value and will identify a few assets that they believe in and continue to add to the positions over time.
If the project has strong fundamentals, a strong, active user case, and a healthy network, then it makes more sense to just use dollar-cost averaging to get into a position based on dollar-cost averaging (DCA).
A two-year ago, an investor who used DCA to purchase $50 in bitcoins weekly over a two-year period is still in profit today, and with DCA, one no longer has to make trades, monitor charts, or subject oneself to the emotional stress that comes with trading.
Off extreme lows, you can trade the trend and go long
In addition to steady, reasonable dollar cost averaging, investors should also build a reserve fund of dry powder and simply sit on their hands waiting for the next generation of buying opportunities to arise.
It is typically a good idea to enter the market when it is deeply oversold and all metrics are in extreme regions.
This is usually a good time to open spot longs, but preferably with less than 20% of one’s dry powder.
It is time for investors to start looking around when assets and price indicators are two or more standard deviations away from the norm.
It is not uncommon for traders to zoom out to a three-day or weekly time frame in order to see when assets correct to higher time frame support levels or previous all-time highs as a sign that they should invest.
In addition, there are other traders who are looking for price to flip key moving averages such as the 118 DMA, 200 WMA, and 200 DMA back to support.
When extreme multi-year lows are reached, on-chain fanatics usually follow the Pull Multiple, MVRV Score, Bitcoin Pi indicator, or Realized Price indicator to see when extreme multi-year lows are reached as a sign of when to buy cryptocurrencies.
No matter what, opening long positions during extreme sell-offs usually turns out to be a good swing trade or even an entry point into a position that will last for many years to come.
The best thing to do is to do nothing until the trend changes
When the market is in a bear market, trading can be hard, and capital preservation and portfolio preservation are the top priorities.
Due to this reason, it may be best for some investors to wait for confirmation of a change in trend rather than attempting to predict it.
A good trader knows that “the trend is your friend”, which means that every trader is a genius during a bull market, so if that was you, then just wait for the next bull market to come along, and then you can be a happy-go-lucky genius then.
It is well known that downtrends, consolidations, and bear markets are notorious for chopping up traders and reducing their portfolio size, so it is unwise to trade against the trend unless one has experience with shorting and knows how to trade the trend during bear markets.
Crypto investors should not live in a vacuum when it comes to keeping an eye on the equities markets, as it is essential not to live in a vacuum.
Traders in the crypto space have a tendency to focus their attention solely on the crypto markets, but this is a mistake because there has been a strong correlation between equities markets and the BTC and Ether (ETH) prices over the past two years.
There is no doubt that the best way to keep up with BTC’s and ETH’s daily charts would be to keep the S&P 500, Dow Jones, or Nasdaq charts up alongside the daily charts of the S&P 500, Dow Jones, or Nasdaq.
During the most recent trend reversal, Bitcoin’s price action played a pivotal role as the canary in the coal mine began to chirp louder and louder as the United States Federal Reserve amplified its intent to raise interest rates.
There is a great potential for one to be misled by the minuscule movements that occur in Bitcoin’s four-hour and daily price charts, and one could easily be lured into some hefty positions based on the belief that Bitcoin is about to undergo a reversal.
If you are keeping an eye on the market structure and price action of the largest equities indexes, you will be able to gain vital insight into the strength and duration of any bullish or bearish trend that Bitcoin might exhibit in the future.
I would like to introduce you to Big Smokey, the author of The Humble Pontificator Substack and the resident newsletter author at Cointelegraph.
Big Smokey will be publishing market insights, trending how-to’s, analyses, and early-bird research on potential emerging trends in the crypto market every Friday.