8 Tips to Make the Most of Crypto Winter

We all enjoy seeing our investment portfolios turn green as numbers hit all-time high levels, however, the crypto market has a cyclic nature, which means that there are periods of time when users also have to tolerate losing their funds. 

Unfortunately, the crypto community found itself exactly in this position since the market has officially made a downturn. Even though it is unbearably hot outside right now, we all have to come to terms with the fact that crypto winter is here.

As a matter of fact, the entire capitalization of the crypto market has decreased by a little more than two-thirds since November 2021. Historically, the BTC price has never fallen below the peak of the previous cycle. In all previous bear markets this trend has held true, but this time the pattern has been broken, since the asset has recently hit a low of $17,600. 

Due to these irregular circumstances, numerous analysts predict that the current bearish cycle will be quite protracted when compared to previous ones. Basically, the primary goal for the investors during this tough time is to keep calm and do everything possible to make this situation work for us, not against us.

To understand exactly how you can extract maximum benefits and effectively survive crypto winter, make sure to read today’s material. I have prepared a shortlist of the best tips that will come in handy right now. 

The nature of the Bear market 

However, before we will go over some essential pieces of advice on how to profitably reach the end of the market downturn, let’s get acquainted with the specifics and nature of bearish cycles.

Crypto winter is characterized by a drop in prices of assets and a pessimistic mood prevailing in the market. The term “Bear” in cryptocurrency is borrowed from Wall Street. It means that a trader or investor believes that the prices of a particular cryptocurrency or market will fall, and wants to profit from the price drop.

Source: The New York Times

As a rule, a bearish market has reduced liquidity, since a lot of inexperienced users are losing their faith in cryptocurrencies and selling their assets at a loss. In my opinion, this panic is the major enemy during the crypto winter. Investors should keep their minds cool and collected, making well-informed and rational decisions. 

Now, I will present you with 8 tips that will be useful during this unpleasant but natural market cycle.

DCA for projects with strong fundamentals

Dollar-cost averaging (DCA) refers to buying assets in stages over an extended period of time. This approach helps offset the effects of price changes due to market volatility by averaging the purchase price.

Source: StreetFins

While this strategy helps investors focus on projects with good potential, it also allows them to wait for the consolidation period to begin. Investors who choose to average dollar value should look for projects with a strong community, active development, and realistic roadmaps that demonstrate the company's plans for the future.

Invest only the amount you can afford to lose

Crypto is an inherently high-risk game, and there is no way around this fact other than only investing funds that you can afford to lose. While adopting this approach, it will be much easier for you to accept negative trends in the prices of the assets you have invested in.

Learn to "short" cryptocurrency

Essentially, shorting means selling a cryptocurrency at a high price in order to buy it again later at a lower price. The goal is to open a position in anticipation of a price decline. Short selling can be an optimal solution to capitalize on a cryptocurrency's falling price, as the probability of a loss is roughly equal to the probability of a profit.

Source: TradeSanta

It is crucial to choose the right time for short positions, so take your time to learn more about this tactic and determine when it is more likely to provide you with the desired results. 

Diversifying your cryptocurrency portfolio

I would also strongly recommend diversifying your portfolio during bear market periods and not investing solely in cryptocurrency. Investors with a diversified portfolio are less prone to serious losses when the price of a single asset decline. However, cryptocurrency investors can also diversify their crypto portfolios by investing in new projects and coins with a good history. 

Source: Gold Avenue

Cryptocurrency projects at an early stage of development can potentially yield high profits. The newest of such ideas are MAOs, in which each participant can contribute to the construction of the project and subsequently share in the profits from its operation. Proper attention and a thorough initial study of the projects is crucial to building a strategy for behaving in a bearish cryptocurrency market.

Controlling emotions

As I mentioned previously, a bearish cryptocurrency market evokes a range of emotions in investors. The constant changes in the market increase the risk of potentially unprofitable decisions made under the influence of emotion. 

To state the obvious, fear and greed lead to bad decisions so it's extremely important for investors to keep their wits about them. By combining smart averaging and diversification strategies, traders can protect themselves from potentially unprofitable emotional decisions.

Low-risk strategies 

During the crypto winter, it is an excellent idea to choose less risky investment strategies, such as staking. It is a simple strategy that can increase the long-term value of a portfolio during a downtrend in the cryptocurrency market.

Additionally, staking helps reduce the stress of daily price movements. When investors react emotionally to every jump in price, the risk of making bad decisions increases markedly.

Source: Arbismart

Sending your assets to staking allows you to make additional profits in a bear market, as well as protect yourself from making emotional decisions. In order to maximize your returns, first, make sure to choose projects with solid fundamentals and then develop your own staking strategy.

More disciplined trading

From my own experience, the majority of today's market participants are short-term traders. Increasing stop-loss levels will help lock in more profits from trades while the price is at an optimal level. In addition, during a downtrend, it is important not to expect huge profits, but to record modest profits from time to time. 

Never let greed deprive you of even minor earnings. While there may be fewer sizable gains, there will still be profitable trades. Relying on speculative price increases is not a good idea, because they are often unstable.

Do your own research

To wrap up the list of tips, I would like to encourage you to do your own research and identify new untapped opportunities. It will help you to gain more expertise in this topic as well as provide you with valuable lessons, which will be useful during the future crypto winters.

Source: Leverage Edu 

Despite the downturn in the market, cryptocurrency is still growing at an astounding rate. The blockchain sector is experiencing strong growth, with many new projects popping up every month. 

Crypto winter and periods of bearish markets will inevitably occur in the future, as it is part of the process. However, I hope that after getting acquainted with this article, these market cycles will be less stressful for you.