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Despite the fact that over 70% of digital assets have depreciated in the last year, crypto traders can still earn income. Working in a so-called bear market is more nuanced than in a rising market, but that doesn’t mean you can’t earn passive income. You just need to know what to look for.
The bear market and how to profit from it
In traditional stock and currency markets, a bear market is a period when a stock’s value drops more than 20 percent from its previous high. In the cryptocurrency market, a bear market is called a fairly long period of time when the market is uncertain, and stock prices are falling very much. The so-called period of cryptowinter is coming.
The duration of a cryptowinter may vary, but experts agree that it usually lasts at least three months.
Let’s look back to the past to assess the duration of the previous crypto winters. In 2015, the bear market period was 12 months; in 2017, the bear market started in November and lasted almost more than two years, that is, until the end of 2020. Thus, we can say that the current crypto winter will be quite long.
The time of the bear market is characterized by the pessimism of investors. They sell their shares more often and faster in an attempt to lower asset prices. Predicting the emergence of a bear market in cryptocurrencies is almost impossible. However, even this situation can be turned in your favor and provide yourself with passive income. However, many investors feel lost and don’t know how to do this. Let’s take a closer look at the strategy of behavior in a bear market.
How to handle a crypto bear market
It’s worth saying right away that, in terms of emotional attitude, you need to accept the fact that you have reason to feel depressed during times of unrest in the market. It is necessary not to let doubts get in the way of making logical and informed decisions to save your crypto portfolio. Accept the fact that during the crypto bear market, all assets lose value.
Your main task is to assess the long-term perspective of the coins. Even if today the current price of the coin is much lower than before, it is necessary to assess the prospects for the development of the project of this coin as a whole.
A bear market will sooner or later lead to higher asset prices, but many investors will be rebuilding their portfolios for a long time to come. And some of them will leave the market altogether as a result of large financial losses.
It is cases like this that are a good example of the importance of preserving your capital in the process of investing.
Despite the generally pessimistic mood, the bear market has a number of undeniable advantages, which we will discuss next:
- During a bear market, many investors sell their assets in order to save capital. This decision was caused by doubts about their own investment abilities. Smart investors know that a bear market is a great opportunity to buy assets at a low price. It will be necessary to endure the process of restoring the crypto economy, but after that, as the crypto market grows, you will be able to sell these assets many times more expensive.
- A bear market is an opportunity to test your endurance and discipline. Unfortunately, many potentially talented investors, faced with the first difficulties, give up this business. Their abilities for deep analytics and analysis of the crypto market ultimately remain unfulfilled due to the lack of self-discipline. It is important for a crypto investor to learn not to panic and make informed decisions, otherwise your investment portfolio will lose value whenever there is unrest in the market. Not to mention the situation when a bear market emerged. The bear market provides an opportunity for persistent, forward-thinking and consistent investors to break into the top.
- A bear market can open up new facets of your personality in you. You may find yourself in a situation where, during the turmoil in the crypto market, you become part of this disturbing crowd, although you previously considered yourself a measured and consistent investor. Conversely, if you were suddenly very afraid of the emergence of a bear market, you may find yourself making logical decisions with a cold mind. The bear market is your chance to take a fresh look at your personal development.
Sources of passive income in the crypto bear market
During the crypto bear market, almost all currencies suffer a lot of damage, however, there are still several ways that have already proven to be effective and can provide passive income. Let’s consider some of them.
Universal method: stakes
In times of the crypto bear market, it is more important than ever to take care of the safety of your coins and receive passive income. One of the highest sentiments is the stakes. This method follows in that you block your funds on one of the selected crypto platforms and achieve efficiency for this interest. Each platform has its own conditions: some offer bets with the ability to turn off assets at any time, while others choose bets for a constant time. It all depends on the site. Most popular exchanges offer the ability to place bets, such as Binance, Crypto.com, Kucoin, or Bybit.
Crypto trading is quite common, but no less effective. Crypto traders aim to buy a coin at a low price or at a discount, and then sell it when prices recover. That is, when the crypto bear market period ends.
This method of generating passive income can be great to help you out in times of crisis. The main thing in this case is to evaluate, as we said earlier, how promising the project is and to purchase coins at a bargain price. It is convenient to engage in crypto trading during the bear market on platforms such as Binance and Kraken, or DEX, Uniswap and dYdX2eToro and Robinhood. To date, there are many guides and articles from crypto trading experts that allow you to quickly master this strategy and achieve a stable passive income.
Income from affiliate program
The essence of this method of obtaining passive income is to help a company promote its product, service or service. In the case of the crypto market, these can be crypto exchanges, thematic sites, IT services, analytics services, thematic media publications, etc. Usually, companies ask you to post links and promotional materials on their social networks, or distribute them by email, on your website or in a messenger. As a result, the more people you can attract a partner to your company, the greater the percentage of deductions you will receive.
In the crypto market, payment can be charged, including in the form of tokens.
Use of stable assets
One of the tools that every crypto investor should master is the stablecoin. This is a type of asset that is consistently active. Such a stable asset can be gold and the US dollar. Such coins are more stable in moments of crisis, for example, in a crypto bear market. The use of instruments in your portfolio allows the investor to acquire their capital and receive passive income even in a pessimistic forecast. The purchasing power of investors thanks to the stablecoin can be maintained, thereby supporting the market. However, it is worth remembering that despite being tied to a classic type of currency, a stablecoin can also be unstable. For example, in the spring of 2022, such a stablecoin as UST collapsed. Before you buy a stable coin in your investment portfolio, you need to conduct a thorough analysis and study the forecasts of experts.
Promising areas for investment
During the crypto winter, you need to pay attention to a variety of tools. Like DeFi for example. This is a special financial instrument, which is presented in the form of a variety of services and applications that work on the principle of blockchain.
These applications and services are a decentralized financial system that allows investors to get loans without going through the bank, as well as significantly save on fees, transfers and deposits when working with crypto assets.
Prediction and analytics are the best tools
Every crypto investor should understand how the global financial system works and know what data to focus on when buying coins and planning their financial portfolio.
One of the main indicators that you need to keep in mind when working in the crypto market is the Fed (FED rates). This is the so-called federal reserve, which is headquartered in the United States. This is a network of financial institutions that receive information from the US central bank.
The Fed’s bet is immediately on the state of Bitcoin, which, due to its capitalization, has become dependent on the traditional currency. Changes in the Fed rate directly correlate with the price of Bitcoin. That is why, if you want to get a deep understanding of the cryptocurrency market, you need to study in depth the topic of the impact of the Fed rate.
Knowing the impact of the Fed on the crypto market will allow you to better analyze coins during a crypto bear market.
Having considered the main features and nuances of the crypto bear market, we can dispel the myth that it is impossible to make a profit during this period. Despite the fact that the market is extremely unstable during the crypto winter, and the cryptocurrency rates are very low, the investor, more than ever, needs to arm himself with logic, analytics, and a cold mind. The crypto investor needs to arm himself with alternative tools that allow him to receive passive income even during the crypto bear market.