Finding success in the crypto bear market
It’s no secret cryptocurrency has been in a bear market for quite some time now, as it has caused widespread doubt and panic among many investors. But is this panic justified? Not entirely. While short-term volatility has caused a degree of uncertainty in crypto, it’s not a bad thing when it comes to the long-term outlook of the industry. Experts believe that while crypto is highly volatile right now, it will continue to grow year-over-year as adoption increases. Here are some key points to consider in navigating the bear market and continuing to find success amidst the uncertainty.
The outlook is still positive
Despite the recent shortcomings of crypto, this isn’t the most significant bear market we’ve seen yet. During one period between 2013 and 2015, bitcoin prices dropped 82 percent and eventually recovered to a high of $19,600. The average bear market lasts 15 months, so patience will ultimately benefit those who can wait out this underperforming period.
While crypto’s short-term history doesn’t look great, its value will ultimately continue to rise as more people begin using it – which is inevitable. 94 percent of the change in bitcoin’s value the past four years has been purely due to user growth. Institutional investors are starting to enter the market, as well, which is a good sign for its future. As more legitimate businesses enter the market and crypto starts being able to be used in more transactions, adoption will continue to rise.
There are a few strategies investors can utilize to set themselves up for success once we come out of the bear market.
Recognize trends and indicators
When investing, it’s essential to keep emotion out of the equation. You need to rely on the numbers and objectively analyze trends and key indicators to set yourself up for the best chance at success. This is certainly easier said than done in today’s environment, as social media, family, and friends have made it easier than ever to become influenced by outside sources. Still, it’s important to understand that long-term trends are more indicative of where the market is headed than are random fluctuations.
Investing in cryptocurrency is a great way to diversify your overall portfolio alongside stocks and bonds, but you also need to diversify within your crypto portfolio itself. This balances out your level of risk and keeps you from having to rely too heavily on one specific currency or asset class. There should be a mix of long- and short-term investments that combine high-yield and low-risk components. Too strong of a reliance on any one asset will result in poor overall performance if that asset tanks.
Accept the volatility
If you can’t get used to the volatility of crypto, you’re going to have a rough experience while investing. We can’t entirely control the market, but we can control how we react to its up and downs. Sometimes its best to do nothing during a period of high volatility. This strategy is known as HODLing – a willingness to wait which will pay off when the market enters its next bull period. Warren Buffett once referred to the stock market as “a device to transfer money from the impatient to the patient.” Educating yourself on recognizing and navigating volatile periods will pay dividends when things turn around.
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