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What's the Best Long-Term Strategy for Bear Markets?

Cryptocurrencies have gained significant attention over the past decade, taking us on wild rides from soaring peaks to dramatic dips. Extended dips are commonly referred to as “bear markets”. It’s that market phase when crypto prices plunge by at least 20%, affecting trading and dampening investor spirits.

But what’s behind this freefall? It could be anything from a government’s stern glare, sneaky cyber hacks, the world’s economic pulse, or just the market feeling it’s bitten off more than it can chew.

However, with the right strategy—like staying updated on crypto trends, smart diversifying, mastering the art of dollar-cost averaging, and grounding yourself in solid fundamentals—you can navigate the bear market phase.

And here’s the point: bear markets aren’t bad luck. They’re nature’s way of weeding out the weaklings, making space for the next crypto superstars. So prepare for the bears and maybe even make them work for you!

First, let’s look at the past crypto bear markets and then the most effective tactics inspired by some early adopters and industry leaders to navigate through a bear market successfully.

Understanding the Nature of Crypto Bear Market

As mentioned earlier, cryptocurrency bear markets are notably volatile and influenced by various factors including regulatory changes, security breaches, and broader economic conditions.

For instance, the first major bear market in 2011, triggered by the Mt. Gox hack and regulatory uncertainties, emphasized the need for security and regulatory clarity.

Later, the 2013-2015 and 2018-2019 bear markets, driven by further regulatory changes and security incidents, showcased the market’s vulnerability to external factors and the importance of market sentiment.

The 2017 bull market, in particular, fueled by ICOs and retail interest, was followed by the ‘Crypto Winter’ of 2018-2019, marking a severe market contraction. The most recent bear market in 2022, influenced by environmental concerns and financial stability issues, further highlights the crypto market’s sensitivity and the necessity for investor education and adaptability.

This historical pattern shows us that these downturns are a recurring part of the crypto landscape. Therefore, understanding it, staying informed about the regulatory and technological landscape, and maintaining a flexible approach are essential for navigating the volatile crypto market and seizing opportunities even during bear markets.

Disclaimer: Invest Responsibly in Cryptocurrencies

Invest by only allocating as much capital as you can afford to lose, given the market’s volatility, susceptibility to large value fluctuations, and risks like hacks and fraud. Ensure your investment forms only a small portion of your total capital, steering clear of reckless financial behavior witnessed in the sector.

The market is still immature, lacking regulation and facing technical challenges, which necessitates a cautious and well-considered investment approach. With that out of the way, here are some approaches for investing during a bear market.


HODL,” a misspelled version of “hold,” is a popular strategy in the crypto community. It involves holding onto your investments regardless of market conditions, banking on their future potential. Bitcoin, for example, has faced numerous bear markets since its inception in 2009, yet early adopters who held onto their Bitcoin have realized substantial gains.

For example, Kane Ellis, an Australian entrepreneur and the co-founder of the popular CarSwap app, once spent 2-4 Bitcoins on a McDonald’s meal in 2011. After that, however, Ellis’s overall Bitcoin investment remained substantial. He later sold a small portion of his holdings to purchase a $200,000 Maserati, demonstrating the significant appreciation in Bitcoin’s value over time.

It was a story of a very early adopter. Now let’s move to Javed Khan, a trader who entered during the bear market in 2018, when bitcoin’s price was only $3,000.

Javed adopted a cautious investment strategy, purchasing Bitcoin during quieter market periods and only investing what he could afford to lose. His approach paid off in 2020 when he cashed in his Bitcoin profits to buy a Bentley, showcasing the lucrative potential of Bitcoin and emphasizing that opportunities can arise unexpectedly.

Dollar-Cost Averaging

Dollar-cost averaging involves buying a fixed dollar amount of cryptocurrency at regular intervals, irrespective of its price. This strategy helps to reduce the impact of volatility and can lower the average purchase cost over time.

In 2021, Bitcoin experienced significant volatility, reaching a high of $60,000 and then dropping to nearly $30,000 within a few months, influenced by external factors like Elon Musk’s tweets and an FBI raid on Russian hackers. Despite this bear market, Adam Traidman, a director at Coinbase exchange and the CEO of BRD, has been a notable proponent of this DCA strategy, investing a fixed amount regularly in Bitcoin.

He consistently employs this strategy for his Bitcoin investments, reducing psychological stress from price volatility and avoiding the common mistake of trying to time the market. He views Bitcoin as a long-term investment, regularly converting a portion of his paycheck into Bitcoin, and emphasizes the strategy’s long-term benefits, noting that Bitcoin’s floor price has historically risen after each rally despite short-term fluctuations.

Diversify Your Portfolio

Diversifying your investments across different assets helps to mitigate the risks associated with individual coins.

Those who spread their investments during the 2017 cryptocurrency boom, particularly in emerging projects like Ethereum or Binance Coin, generally saw positive outcomes, especially when certain assets performed well during downturns.

In an interview in 2021, Mark Cuban, a billionaire investor, said that he is bullish on crypto’s future, holding a diversified portfolio consisting of 60% Bitcoin, 30% Ethereum, and 10% in other cryptocurrencies. Elon Musk also shared his crypto holdings, which include Bitcoin, Ether, and Dogecoin.

Seek Fundamentally Strong Projects

Investing in projects with robust use cases, strong teams, and clear roadmaps can be a smart move, especially during bear markets when hype fades away. Ethereum is a prime example of a fundamentally strong project that has rewarded investors who backed it even during bearish phases.

Staking and Earning Passive Income

Some cryptocurrencies offer staking rewards for holding and supporting the network, providing a source of passive income that can be significantly useful during bear markets. Cryptos like Ethereum, Cardano, Tezos, Solana, Polkadot, Polygon, Avalanche, Cosmos, Algorand are some best examples of assets that offer staking rewards.

Avoid Panic Selling

Acting on emotions can lead to selling assets at a loss. It is vital to stick to a predefined strategy and avoid making hasty decisions. Those who panic-sold Bitcoin during its late 2017 crash missed out on its subsequent rise to new all-time highs.

Stay Educated and Updated

Engaging with communities, reading whitepapers, and understanding technological advancements in the space are crucial during bear markets. Early adopters of DeFi projects, for example, were well-positioned to capitalize on the DeFi boom of 2020.

Rebalance Portfolio

Bear markets can be a good time to reassess and rebalance your portfolio, ensuring that you are not overexposed to any particular asset. Investors who rebalanced their portfolios in late 2018 and early 2019 experienced substantial gains during the subsequent booms in emerging sectors like DeFi or NFTs.

Conclusion: Be Ready When Bear Turns to Bull

Bear markets are a challenging yet inevitable part of the investment cycle. The strategies outlined above, coupled with patience and diligent research, can help navigate these downturns, setting the stage for potential future gains.

Investing in cryptocurrencies is risky like any other investment, and it’s important to do thorough research and consult with financial advisors before making any decisions. Remember, the key to success in bear markets is preparation, diversification, and a strong focus on fundamentals.

Jinia Shawdagor

About the Author

Jinia Shawdagor

Jinia is a fintech writer based in Sweden focused on the cryptocurrency market and blockchain industry. With years of experience, she contributes to some of the most renowned crypto publications such as Cointelegraph, Invezz and others. She also has experience writing about the iGaming industry.

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