Bitcoin (BTC) is down virtually 40% year-to-date, whereas most main altcoins have dropped 50% to 70% for the reason that begin of 2022. So it’s truthful to say, we’re in a bear market. However, that doesn’t imply you will have to exit the crypto markets as a result of we’re having a nasty first half of the yr.
Read on to be taught how one can climate the storm within the present crypto market local weather.
What’s been occurring?
The crypto markets have cooled off to begin this yr, following a report yr in 2021. Last yr, we noticed record-high crypto costs, an exploding NFT market with JPEGs promoting for thousands and thousands, and a burgeoning DeFi market increasing past Ethereum (ETH) and turning into multi-chain.
Today, the scenario is completely different. We have dropped sharply off the all-time highs. While BTC and ETH managed to “solely” lose round 60% of their worth since their highs, quite a few main altcoins have misplaced greater than 90%.
The current collapse of UST and LUNA has despatched costs crashing, as buyers obtained a stern reminder of how dangerous cryptoassets could be.
Needless to say, crypto buyers are feeling uneasy. According to the Crypto Fear & Greed Index, they’re truly “extraordinarily fearful.”
But that doesn’t imply buyers have to go away crypto and await the following bull market to bounce again in.
What can crypto buyers do now?
It has been a troublesome yr for crypto buyers (properly, inventory buyers too), particularly those that have solely entered the market not too long ago and are experiencing their first market downturn.
Let’s check out what buyers can do throughout this crypto bear market.
Move into trusted stablecoins
If you might be involved that the bear market will proceed and asset costs will transfer one other leg decrease, you would transfer a big portion of your property into stablecoins.
However, you’ll most likely need to persist with trusted stablecoins and keep away from something that isn’t backed by something. USDC and BUSD have seen capital inflows, suggesting buyers belief these stablecoins greater than others. Meanwhile, the most well-liked stablecoin, USDT simply proved that it could actually handle large redemptions.
By transferring into greenback stablecoins, you enhance your probabilities to shield your portfolio from a steep drop in worth in case the market collapses, nevertheless it additionally provides you the choice to bounce onto shopping for alternatives as quickly because the market turns bullish once more.
Move into high-quality property
If you aren’t that bearish and are fearful you would possibly miss out on a market turnaround, you would transfer your funds away from small and mid-capitalizations cash into higher-quality property, corresponding to BTC and ETH.
While the upside throughout a bull market will not be as excessive as with the newest layer-1 (or base protocol) chain’s token, previously, the BTC and ETH losses have been decrease as compared to smaller altcoins.
Alternatively, you would promote every thing for bitcoin and begin dollar-cost averaging the cryptocurrency to slowly rebuild your digital wealth in what’s arguably the best high quality asset within the crypto markets.
Buy put choices to hedge towards an additional drop in costs
If you want to to maintain onto the property you will have in your portfolio however are fearful concerning the market transferring decrease, you would hedge your portfolio by buying put choices on BTC and/or ETH.
Buying put choices on bitcoin allows you to promote BTC at a predetermined value at a particular time sooner or later.
If, for instance, you buy an possibility with a strike value of, let’s say, USD 20,000 and the value drops to USD 10,000, your choices hedge will likely be “within the cash” (as you’ll promote BTC for USD 20,000 whereas shopping for it for USD 10,000) to offset the losses in your crypto portfolio.
However, you will want to make sure that your hedge ratio is right, so you will want to purchase sufficient put choices contracts to offset your potential losses. Should the value of bitcoin not drop under USD 20,000, your choices contracts will expire, and you’ll lose the premium (i.e. the value) you paid for them. In a way, put choices act as an insurance coverage contract towards losses in portfolio worth.
HODL, Diamond Hands
Finally, in case you are satisfied of the longer term success of the crypto networks’ property you might be holding, you would additionally simply “HODL” your portfolio and wait out the bear market.
In addition to HODLing, you would additionally purchase dips within the property you consider in probably the most. This will arguably be very troublesome for newcomers because it’s arduous to see the sunshine on the finish of the tunnel in the course of the first crypto bear market. But if historical past repeats itself, most of the crypto property which have dropped over 90% since their highs could attain new highs once more. However, as at all times, there are not any ensures concerning the future, subsequently, make investments solely what you possibly can afford to lose.
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