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Three ways to trade Bitcoin and other cryptocurrencies in a bear market

Accumulating Crypto
Accumulating Crypto / Image Credit: CRYPKYP
1662197469 03 Sep / 09:31

Although the current state of the markets is frightening and will probably only worsen, this does not mean that investors should remain passive. Indeed, history demonstrates that one of the ideal times to purchase Bitcoin (BTC) is when there isn't any conversation about it.

Do you recall the crypto winter of 2018–2020? Almost no one was discussing cryptocurrency positively or negatively, including the mainstream media. Smart investors accumulated during this period of protracted downturn and protracted sideways chop to be ready for the following bull trend.

Of course, no one could have predicted "when" this parabolic surge would occur. Still, the example is only intended to show that even in a volatile cryptocurrency market, there are excellent ways to invest in Bitcoin. Let's examine the first three.

Through the dollar-cost averaging, accumulation

When making long-term asset investments, it is beneficial to be Price agnostic. A price-agnostic investor will choose a few assets they think of and keep adding to their investments. They are immune to value changes. It makes more sense to simply dollar-cost average (DCA) into a position if the initiative has solid foundations, a robust, active use case, and a robust network.

Investors who invested $50 in BTC automatically every week for two years are still in the black today, and DCA eliminates the need for trading, chart-watching, and related emotional stress.

Trade the trend and buy when it is at an all-time low

Investors should be accumulating a war chest of dry powder and merely sitting on their hands. At the same time, they wait for generational purchasing chances, in addition to consistent, moderately sized dollar-cost averaging. It is usually smart to open spot-long positions when the market is severely oversold, and all metrics are extreme, but only with less than 20% of one’s dry powder.

It’s time to start shopping when assets and price indicators deviate by two or more standard deviations from the mean. When assets decline to higher time frame support levels or prior all-time highs, some traders zoom out to a three-day or weekly time frame to look for an investment opportunity.

Some watch for the Price to return to support at crucial moving averages such as the 118 DMA, 200 WMA, and 200 DMA. On-chain enthusiasts frequently monitor the Puell Multiple, MVRV Score, Bitcoin Pi indicator, and Realized Price to choose when to buy.

In either case, taking spot-long positions during sharp sell-offs is a solid entry point for a swing trade or even a multi-year position.

Until the pattern changes, do nothing

Trading in a bear market is challenging, and the top priorities are to protect your capital and portfolio. Because of this, some investors find it better to wait for proof of a trend change. The trend is your buddy, as the phrase goes. If that was you, wait for the next bull trend to arrive and be a happy-go-lucky genius. Everyone is a genius and a great trader during a bull market.

It is not advisable to trade against the trend unless one has a PNL-positive approach for trading during bear trends and some shortening proficiency. Downtrends, consolidation, and bear markets are known for slicing up traders and lowering one’s portfolio size.

Cryptocurrency investors must keep an eye on the stock markets and avoid living in a bubble. Since stock markets and the values of BTC and ETH have exhibited a significant correlation over the past two years, it is a mistake for crypto traders to concentrate exclusively on the crypto markets. It is smart to have the S&P 500, Dow Jones, or Nasdaq charts up alongside the daily charts for BTC or ETH in one’s preferred charting software.

BTC’s price behavior was the canary in the coal mine in the most recent trend reversal, starting to chirp louder and louder as the US Federal Reserve emphasized its intention to raise interest rates. The minute movements on Bitcoin’s four-hour and daily price charts are easily deceiving. It is simple to be seduced into taking some sizable bets assuming BTC is about to reverse.

The strength and duration of any bullish or bearish trend that Bitcoin may exhibit can be determined by monitoring the market structure and price movement of the biggest equity indexes.

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