Huddling in during the worsts of crypto winters is something that most crypto traders are familiar with; as we leap for massive, seemingly unbelievable gains, most of us are used to seeing larger magnitude falls that would shock any typical trader outside of the digital assets market. There's no denying that crypto traders and enthusiasts have been trained to become ever-resilient in the face of losses and dips, expressions unchanging as they calmly recalibrate their minds and do an overhaul of their trading strategies to find pockets of opportunity to make gains during prolonged bear markets.
There's no telling how long the current bear will last, but there's no cause for immediate panic even as your screen fills with a sea of red — here are four ways you can survive the bear market, both on centralized and decentralized crypto exchanges, with either spot or derivatives trades.
(1) Buying the Dip or Short-Selling
This one might be a no-brainer, because who doesn't theoretically know to buy in at the lows and sell higher to make a profit? Buying the dip is certainly the simplest strategy for novice traders; there are plenty of both well-known and newer tokens that are seeing prolonged price fluctuations and overall downward trends, but more is at work than meets the eye. To maximize gains, the trader needs to avoid buying the dip prematurely. For example, not jumping at the first major price decrease while other indicators hint at further near-term losses, and also selling at an opportune time where you'll be able to make gains without being overly exposed to prolonged price fluctuations.
For seasoned traders, bear markets are optimal for short-selling on derivatives trades, be they futures, perpetual contracts or options. Crypto bear markets are typically accompanied by spurts of significant volatility. For traders looking to both maximize their gains via short-selling and hedge the risk of their larger portfolio, turning to derivatives trades and opening short positions will allow traders to plan their trading strategy and observe market movements while waiting for settlement.
(2) Moving Past Your Fears & Losses
The above sounds easier than it looks — in the ever-changing crypto sphere, the magnitude of price fluctuations and sometimes unexpected direction changes can throw anyone for a loop. Managing your fears and desensitizing yourself to a typical day in the crypto market is critical. Speculative buying and selling tends to increase a trader's overall loss, so novice traders can start with:
Studying Losses: Which trader hasn't made a trade (or a few) that resulted in unforeseen losses? Studying where you might have gone wrong with your trade and identifying indications of upcoming macro conditions that may affect the market you've invested in will go a long way in minimizing panic in your next trade
Checking Out Indicators: While pure technical analysis of charts and hard indicators aren't the sole contributors to market changes, looking at the numbers provides a clearer trading directive and should be used to bolster your macroeconomic and fundamental findings
Learn to Use Stop-Loss/Take-Profit: Most, if not all crypto exchanges, provide Stop-Loss and Take-Profit options, which will help you cut off unnecessary losses and rake in profits when your set conditions are met. Having greater control over when and how your trade is filled will get rid of some of that FUD
(3) Switch to Dollar-Cost Averaging (DCA)
If the above doesn't work, here's a long-term and low-maintenance approach that suits even the busiest and newest of crypto traders. With DCA, traders work at consistently buying a particular asset at a fixed time and amount over an extended period of time, regardless of the price of the asset at the time of purchase. Instead of watching the charts like a hawk and worrying about when is the best time to buy in or sell, i.e. purchasing a single lump sum and leaving your losses to a single trading point, spread out your investments and average better returns across several investment tranches. On selected crypto exchanges, a timer can ever be set to carry out this purchase regularly without much effort.
(4) Looking for Diversified Alternatives — Try a DEX
And while loss-prevention measures during bear markets can prove to be extremely effective, we also need to look for diversified gain-maximizing opportunities to weather out the winter. In recent years, traders have turned to decentralized finance (DeFi) and new revenue-producing models in the way of staking or saving products that see greater yield.
The logic is simple: If a trader is already trading or has deposited funds into their online wallet, why not earn interest or additional benefits while doing so? DeFi protocols, platforms and decentralized exchanges (DEXs) have introduced multitudes of earning programs that'll reward you for simply placing your funds on the platform's smart contract, or just trading, be it a crypto winter or summer.
DEXs like ApeX Pro, a non-custodial derivatives trading platform that provides multi-chain support and a Trade-to-Earn model, might be the next go-to solution as we wait for the bear market to end. Traders can:
Make Full Use of Short-Selling on Multiple Perpetual Contracts: with customizable order options that will reduce risks of losses and capture profit-making opportunities, especially with its 30x leverage option and deep liquidity
Earn Fuss-Free on Regular Day-to-Day Trades: Starting Nov. 21, 2022, the DEX's upcoming year-long Trade-to-Earn event allows traders to be rewarded weekly with a reward token $BANA that can be swapped for instant USDC earnings, week after week
Above all, DEXs have the added benefits of widened access, transparency and security in trades, plus the promise of full trader ownership. What this means is that traders will never miss a profitable trade due to issues like geographically-locked platforms or earning programs or the sudden suspension of critical functions such as withdrawals or trading for selected trading pairs.
As the crypto community continues to find opportunities while we are stuck in the depths of this bear cycle, it is prudent for traders to not only stick to tried-and-tested methods, but also venture into new ones — particularly in the nascent decentralized sphere.
Interested in knowing more? Learn about the latest DEX offerings here.