For months, analysts have been warning about another crypto crash. Amazingly, the entire crypto market stood its ground. Hacks, failed launches, bugs and FUD only brought temporary setbacks to price movement. Although slightly lower, price remained stable for months.
The deceptive stability of crypto price all changed last week due to multiple factors. These downward factors include the extended fiscal easing policy, geopolitical unrest, China factories’ pandemic closures, meagre earnings reports and loss of confidence due to the recent Terra Luna issue.
Like it or not, the bear market is finally upon us.
Now that the bear market is here, what actions should you do? Read on to find out 8 of our recommended actions: (Disclaimer: This is not financial advise and each person has their own financial circumstances so please do your own research and do not follow suggestions blindly)
1. Enjoy and Value Life
First and foremost, you have to realise that the money you may have lost does not define your entire existence. Multiple reports have surfaced of people attempting suicide because of the huge losses they incurred. No matter who you are, someone loves you and you are important to them. Be there for them. Investments lost can be earned back but you won’t be able to do that if you are dead. Understand that you are important and live your life fully despite your losses.
2. Stay Invested
In almost all instances, actual losses will only be incurred when you sell your losing investment. Therefore, unless you invested in a rug pull or highly questionable instruments, it is better to stay invested and ride your way through this bear market. Hopefully in a few months/years a bull run would appear again and you are able to recover any paper losses that you may have initially incurred.
3. Be Selective
Not all projects will be able to survive a bear market. Projects with few resources may want to exit to minimise losses. Scam projects may be unable to maintain their Ponzi schemes during a bear market so they may want to cash in their wins so far. Therefore, it is prudent to move your investments to projects that have a strong team, a good track record, other sources of income, and noticeable progress on their plans. In short, look for projects that will be able to survive and continue development through a few years of possible bear markets. This will help you avoid losses from weak or scam projects.
4. Protect Your Investment
Put most (if not all) of your crypto investment under the protection of a hardware wallet. If this means that you need to move your coins out of exchanges, do so. Some people do not want the added expense, responsibility, and learning curve of using hardware wallets. However, this has proven to be an effective protection against loss. Historically, some owners of scam exchanges chose to run with their customers’ coins during bear markets when money isn’t flowing in anymore. Putting your coins in a hardware wallet protects them even the exchange closes or if your computer has malware.
5. Manage Your Emotions
Bear markets may stay for years before a recovery happens. If you have been following our blog, you will know that we recommend having a 6-month or more emergency fund before even considering doing any investment. If you did this, you will be able to better manage your emotions and not be tempted to panic sell during a bear market.
6. Consider Doing Nothing
Part of managing your emotions is realising that doing nothing is an option. One of the biggest mistakes of new traders is thinking that they always need to do something to earn money. This leads to more losses as they incur hefty transaction fees in a stagnant bear market. If you can stake your coins and earn passive income like with Cardano, that should be enough. Learn to understand that doing nothing when the situation is not favourable is part of a good investment strategy.
7. Continue Dollar Cost Averaging (DCA)
Investing a small amount of money on a regular basis is called Dollar Cost Averaging (DCA). This is a good strategy especially during bear markets as you are sure to realise gains when the bull run comes again. I do not suggest putting in a large lump sum all at once. If you are already practicing DCA, consider investing smaller amounts than you would normally would right now as analysts estimate that prices may still go down lower throughout this year.
8. Learn Lessons From The Market
It is during bear markets when it is perfectly clear to you which investments you should have sold at its peak and which investments are good to hold in the long term. These learnings are particularly important especially if this is the first time you encountered a bear market. Remember your reflections so that when the market turns bullish again, you can act rationally and implement the lessons you have learned.
In summary, the bear market is finally here. If you have invested wisely, you should be able to weather this storm until the next bull run. If you have not followed our earlier blog suggestions on proper allocation, you are still not be too late. Just follow the suggestions above and hopefully you will be in better shape at the end of this.
WISH Pool is the creator of Cardano SPOT Check, an online resource for Cardano Stake Pool Operators for maintaining their nodes. We are part of the Ardana ISPO and are actively helping several Cardano communities. We were a recipient of the IOG delegation in 2021 and the Cardano Foundation delegation in 2022. If you like this article, we greatly appreciate if you will delegate your ADA to WISH Pool. You will be earning interest rewards while indirectly helping the lives of disadvantaged children. This is because we pledge to give at least 10% of our own profit to educational charities so that successful students can help get their families out of poverty. Let’s help grow the community together!