We already had a look at what exactly a crypto bear market is, and today we are having a deeper look at what is the best thing to do if you fall into one.
On one hand, selling your asset during a downtrend seems like a logical thing to do. On the other hand, you will lose some of your investment, and could also miss some potential profits, if the market rebounds.
How to be sure that the crypto market is in a bear phase?
There are some factors, that helps us tell that the crypto market is in a bear phase:
Volatility - Significant price drops and high volatility are signs of a bear phase. Most traders panic and start selling when they notice a sign of a price decline;
Volume - The low trading volume is another sign of a bear phase in the crypto market
Sentiment - The market is in a bear phase when negative sentiment. You can notice it in online forums, news, social media, etc.
What to do if you fall into a bear trap?
Fortunately, there are some ways to protect your assets and minimize the losses, when you find yourself in a bear market. There are three main things you can do - sell off your assets, hold them, or buy more.
If you decide to sell, you are able to minimize your losses. Keep in mind that once the bear market recovers, you may not be able to get back at the same price.
If you decide to hold, you must be sure that you can afford to cover the expenses in case of a prolonged bear market.
If you decide to buy more, you must be careful. There is a possibility that the cryptocurrency will increase in value, but it is also possible that this doesn’t happen.
Should you sell your assets in a bear market?
Most traders start selling their assets, once they notice a bear trap. As anything else, it has its pros and cons, let’s see:
Pros:
Selling your assets during a down market trend, can help you avoid bigger losses;
If you sell some of your assets, you can reduce your exposure to price fluctuations;
If you have already made some gains, you can lock them, by selling
Cons:
It is possible to miss some future price increases, if the market rebounds;
Selling usually comes with taxes and fees, you might have to pay, and this can eat into your profits.
Bear market phases
It is never easy to decide what to do with your crypto assets, when the market is going down. Important thing to know is, that there are some different phases of a bear market and each comes with its own recommendations:
Accumulation phase
In this phase, investors start buying assets in a discount, waiting for a future bull market. To be a successful investor, you must accumulate assets during this phase.
Distribution phase
This is the phase to start selling, because there is a possibility that the market is going down.
Capitulation phase
At this phase, everyone starts selling, as they think the market is never going to recover. Successful traders start buying at the end of this phase.
Trading during a bear market
It can be challenging, but can also be successful if you manage to distinguish between the different stages. Of course, there is only one piece of advice we can give you - always do research, before making an investment.
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