Investing in crypto is less about thriving in a bull market, but more about entering in a bear market. Bear markets create wealth-generating opportunities, while bull markets only create a lot of noise. Most investors enter the crypto during a bull market, not realizing that the market’s higher and lower highs limit profit potential. Bear markets, on the other hand, create lower lows and higher lows in the pool, making it the right spot for investors to enter the crypto market.
Here’s more on why bear markets favor investors and how to view markets as long-term opportunities instead of short-term gains.
Opportunity to Create Generational Wealth?
The one question that every investor asks is: whether it is safe to invest during a bear market, and the short answer is yes. This does not mean that one should blindly put their money in any coin. In fact, it’s more about following time-tested investment disciplines along with risk and portfolio management strategies. Markets cannot be timed. But, with some basic investment strategies and technical knowledge, one can make the most of a bear market.
Dollar cost averaging (DCA) is one of the great approaches to follow in a bear market. DCA is when an investor consistently invests money in nearly equal quantities throughout time. This approach helps to balance out the purchase price over time. It prevents one from investing all of their money into any crypto and avoids the chance of huge losses. This strategy encourages diligent saving by increasing the portfolio balance even as the crypto is falling.
Another approach is through portfolio diversification. Diversification in this context refers to the crypto portfolio’s exposure to DeFi ecosystems. Investing is not limited to crypto spot markets. There are DeFi ecosystems that offer yields on multiple cryptocurrencies. It is also known as yield farming. For example, investors can deposit their ETH in the DeFi protocol Aave and enjoy fixed yields on their holdings.
Bear markets put all investors to the test. While these times are tough to bear, history indicates that the market will likely rebound quickly. And, if one is investing for the long term, the bear markets will be remembered for the wealth gained along the way.
The Healthy Side of a Bear Market
While downturn markets are usually painful for people, they do not stop developments from happening. The latest bear market, for example, was harsh, but new ETH addresses did not decline considerably. There was just a 12% reduction. Furthermore, Arbitrum’s, which is a layer 2 blockchain, witnessed its daily on-chain transactions rising. This has been the case since the 2017 mega-bear market that gave birth to today’s best-performing DeFi protocols.
Bear markets also allow builders to refocus their efforts on building their products into a better version as there’s less noise of projects with poor fundamentals trying to pull the good ones down. Long-term thinking, hard labor, and planning have more room to reign supreme in a lean bear market. Similarly, bear markets clear the market of weaker projects that frequently operate as dead weights, distractions, or outright scams. It brings out genuine builders and projects that create something of great utility.
Umami, for example, is a utility project being developed during this bear market. It is a DeFi protocol that provides strategy vaults that create long-term, risk-adjusted returns on core crypto assets such as $USDC, $BTC, and $ETH. Exeno is another example of a project that provides utilities through its crypto-commerce platform. The platform is an online marketplace that offers a diverse range of products by allowing customers to pay in crypto. The platform is powered by its native exeno coin (EXN) which will be available through an IEO in mid september that investors can acquire at a discounted price.
Bear Markets are the Gateway to Bull Market Fortunes
Bear markets provide more opportunities than bull markets, and only those who see them through the lens of a disciplined investor can take advantage. A lot of factors go into analyzing the opportunities. It is a skill that can be learned by understanding the basic investment principles and crypto fundamentals. Bear markets are absolutely important, not just for investing, but also for clearing out scams and poor projects. It brings actual builders and projects to the spotlight, giving the crypto industry much-deserved recognition. In other words, it is the only gateway into the bull market fortunes
This article is sponsored by Venture369