How to make money in a crypto bear market?
The crypto market is in a downtrend. Although it may be challenging to identify advantages in this situation, this does not necessarily mean that investors should give up on the idea of profiting from digital assets.
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One of bitcoin's worst years was 2022 because it was the first time since 2013 that BTC experienced four consecutive quarters of losses. Market sentiment is already on the verge of panic. Furthermore, even though it is much more challenging to make money in a bear market than it is in a bull market, it is still possible.
Today, we'll examine three strategies that can prevent losses and provide you with the chance to profit during a downtrend.
Buying the dip using the DCA strategy
One of the most popular and successful investment strategies in the cryptocurrency market is buying during drawdowns. Historically, it usually takes bitcoin three years to reach its previous high. As a result, those who purchased Bitcoin at the bottom and held onto it for a long time always made money.
It is better to buy the dip with several trades using the “dollar cost averaging” (DCA) strategy. The essence of it is splitting the deposit into several portions and making periodic purchases.
Suppose you have $1,000 to invest. Split the sum into 10 equal portions instead of investing it all at once, and purchase the desired asset for $100 periodically.
The value of a portfolio can be negatively impacted by making large investments at the wrong time. It can be challenging to predict with accuracy when a price will reverse (or bottom). Rather than spending money all at once, it is better to buy an asset for a small amount and wait for the price to rise. This will be a good opportunity to buy again if the price drops further. The DCA strategy is therefore more appropriate to pay off drawdowns over the long term.
Crypto deposits in stablecoins
The majority of centralized exchanges accept cryptocurrency deposits. Additionally, they offer users to stake their USDT and USDC.
Compared to bank deposits, bond investments, and even real estate, the terms of such offers are more profitable. For instance, the WhiteBit exchange allows users to lock their USDTs for 360 days at a rate of 30% a year. Asset returns vary depending on the length of the lock-in period. Both bitcoin and most altcoins can be locked at interest.
Profitability of crypto deposits on WhiteBit. Source: WhiteBit
This method of earning has several nuances that should always be considered.
1. It is risky to keep money in a single stablecoin because, during times of market volatility, coins lose their peg to the dollar and some of them fail to recover. This is demonstrated by recent events involving UST and USDN. As a result, it makes sense to keep value in both USDT and USDC. Exchanges also offer competitive interest rates on USDC deposits.
2. Even the biggest exchanges can be hacked or go bankrupt. Therefore, it is reasonable to lock funds at several platforms rather than just one. Even if one exchange is compromised, your funds will still be available on other exchanges. ByBit, for example, provides high interest rates on stablecoin deposits. A user can earn 8% APY by locking USDC with a flexible staking period.
Investors can diversify their income stream and utilize free capital by staking. Locking stablecoins can be a good way to generate passive income in the current market, where trading and investing are not as profitable as they are during a bull market.
Forks, airdrops, launchpads
If you already own a particular currency, there are ways to profit in the cryptocurrency market with very little or no investment. However, the profits from such activities are not huge.
During the latest Ethereum hard fork, users received an ETH PoW token at a 1:1 ratio to their ETH. Furthermore, tokens issued on the Ethereum network were duplicated on the Ethereum PoW network. As an illustration, if a user had 100,000 USDT on the Ethereum network, they would receive an additional 100,000 USDT on the new network.
Unfortunately, the ability to sell USDT on the Ethereum PoW network was only available on a few DEXs, and a trader could withdraw only $80 from a balance of 100,000 USDT on Ethereum PoW. Even though it's not much, it's still better than nothing.
Launchpad is an exchange activity that allows aspiring cryptocurrency projects to raise funds for further development. They provide users with the opportunity to profit from early investments in startup crypto projects.
In a bull market, the return on investment in tokens on launchpads is typically much higher than in traditional crypto investments, let alone the stock market. For instance, the profits from MATIC, EGLD, and AXS tokens have exceeded 3000%. Crypto holders usually sell off their tokens received on launchpads during a bear market.
Most major exchanges offer such activities. To participate in the ByBit launchpad, for example, you must have at least 100 USDT or 50 BIT (ByBit's native currency) on your account. You can earn from $20 to $40 from each launchpad for keeping $1000 in your account without the risk of losing it.
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