Safest Crypto Bear Market Strategies in 2023

Despite its relatively short history compared to other asset classes, the cryptocurrency market is no stranger to a variety of different investor sentiments. Once again, we have found ourselves in what many refer to as a bear market, which poses challenges for traders. Yet, as we head towards the new year, there is a lot that we can learn from looking at previous bear market cycles and leading crypto bear market strategies.

While this article does not provide investment advice, it does explore the crypto bear market strategies that have proven successful in the past and are likely to be common practice in 2023.

Understanding bear markets

Traders and pundits often discuss cryptocurrency trading in terms of bear markets and bull markets, but these are not terms that are exclusive to the cryptocurrency industry. Instead, they have long been part of the conversations that surround the stock market as well.

Bear markets are broadly defined as situations in which the market’s value has lost at least 20% of its value from its 52-week high. As a comparison, bull markets are identified by the market rising at least 20% over the same period of time.

While markets are not always rational and there is often no clear way to predict why they behave the way they do, many investors do attribute the current state of the cryptocurrency market to broader economic factors. One factor in particular that many people point to when theorizing about the current bear market impacting the cryptocurrency industry is that people tend to shy away from making bold investments during times of economic uncertainty. Often, people refer to this as a shift in sentiment in which investors are more risk-averse than they would be during times of economic prosperity.

In this sense, many people argue that the current geopolitical situation is likely playing an active role in the market value of cryptocurrencies. After all, the world is currently experiencing a global economy that has been rocked by conflict, a pandemic, rising costs of living, and significant rates of inflation.

Studying previous crypto cycles

This is far from the first time that investor sentiment in the cryptocurrency market has been referred to as a bear market. In fact, there have already been at least five prior long-term cycles in which observers have referred to it in the same way

It is worth noting that the industry’s previous bear market cycles have been followed by massive price increases enjoyed by many cryptocurrencies. In fact, when Bitcoin reached $32 USD per coin in 2011, onlookers were blown away that the asset had become so valuable. However, Bitcoin later plummeted to around a single cent. It was not until 2013 that Bitcoin returned to, and subsequently broke, its $32 record.

As part of that 2013 bull market, Bitcoin went from $1,000 USD per coin later in the year to as low as $170 at the beginning of 2015 during its bear market phase. Yet just a couple of years later, in 2017, the cryptocurrency market as a whole exploded in value. Bitcoin led the charge, having briefly reached around $20,000 USD per coin.

2018, however, was not as favorable for the cryptocurrency market. The price of leading cryptocurrencies and altcoins began to drop, with Bitcoin returning to less than $3,200 USD a coin by the end of 2018. At the time, many people feared that cryptocurrencies would never return to the all-time highs that had been introduced the previous year.

Fortunately, 2020 ushered in another bull run for the cryptocurrency market. By 2021, Bitcoin’s price reached higher than $63,000. Other cryptocurrencies enjoyed similar gains, with Ethereum reaching an all-time high of over $4,600 USD per coin.

That brings us to now: a period of time in which cryptocurrency values once again appear to be impacted by a bear market. While there is no way to predict the future, some feel that understanding the history of the cryptocurrency landscape’s bull and bear market cycles provide potential insight into its future.

Leading crypto bear market strategies

So which crypto bear market strategy would be your best bet for navigating the current landscape? The truth is that there is no one strategy that could offer you the safest option. While this article is not providing financial advice of its own, here are some leading strategies that are making a comeback during the ongoing bear market and are likely to be used by investors in 2023.

Dollar-cost averaging

Dollar-cost averaging (DCA) is a method in which investors make frequent periodic investments in order to reduce their chances of losing money during a volatile market. At the same time, it can increase their odds of catching price spikes without attempting to calculate and deliberately time the market.

Put simply, DCA works by investing a set amount of money in a cryptocurrency or stock at the same time on the interval you set. As a non-specific example, you might decide to invest a specific amount of money every fortnight on Friday evenings or every week on Mondays. You would proceed with this trade regardless of whether or not the asset is up or down that day, taking emotion and guesswork out of the equation.

What makes many claim that dollar-cost averaging is a safer investment option is that it can minimize losses that would have occurred if someone had made a large investment right before a crash. As a result, many people swear by this method as an efficient way to escape volatile markets and trade safely during difficult-to-predict periods of time.

Investing in cryptocurrencies with large market caps

Much in the same way that large-cap stock investments are popular in the traditional investing world, some choose to specifically invest in cryptocurrencies with large market caps during bear markets.

The reason that this is viewed by some as a safe crypto bear market strategy is that a cryptocurrency’s market cap can sometimes be interpreted as an indicator of its sustained popularity and proven resilience. For instance, cryptocurrencies with the largest market cap in the industry today such as Bitcoin and Ethereum have been around for years and have become incredibly popular even beyond the crypto landscape.

As a result, some people believe that these types of assets are safer than smaller cryptocurrencies which are seen as being less likely to regain their value and survive a bear market.

Staking

Staking is a way for investors to earn passive income without having to make risky trades during a bear market. When you stake a cryptocurrency, you contribute your device’s resources to a network through an automated process and earn passive income in exchange.

When it comes to staking, the only perceived risk lies in the fact that you often need to stake a minimum amount of a cryptocurrency in order to become a staker. This minimum stake amount varies between projects , with some cryptocurrencies being remarkably practical for anyone to start staking with regardless of their budget if they have the right hardware device.

During a bear market, you often have the opportunity to begin staking at a far cheaper price due to asset prices being lower. Still, if you do not wish to stake a significant amount, you also have the option of using a staking pool to lower the amount that you would have to stake in the network.

AVADO’s plug-and-play staking hardware

AVADO is a Web3 company that is making it incredibly easy for all types of traders to stake popular and emerging cryptocurrency projects. With lower barriers for entry during the current crypto bear market, now is a great time to start staking so that you can easily earn passive income.

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