Crypto bear market

3 trading strategies for this crypto bear market

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It’s winter season in the cryptocurrency space and currently we are in the longest bear market ever experienced. After hitting an all-time high near $20,000 in mid-December 2017, the value of bitcoin, the flagship cryptocurrency, has been dropping throughout 432 days and counting. The cryptocurrency ecosystem has so far lost about $700 billion from its peak.

This, as in January 2018, the market cap of all cryptocurrencies surpassed the $815 billion mark, and currently the value of all cryptocurrencies combined stands slightly below the $132 billion mark.

Notably, this is the sharpest and longest depreciation bitcoin has endured in its 10-year history. The previous record for downward bitcoin price movement was between late November 2013 and mid-January 2015 – when BTC’s value declined from about $1,100 to only $200 after the largest crypto exchange at the time, Mt Gox, went down. So how can you be profitable in this kind of market?

Short selling

Bitcoin short selling
In a bear market one could start short selling

For new traders, this could be risky and it’s very wise to do some research on it first. In my opinion, stay away from trading with leverage on crypto platforms like Bitmex, you will lose over there! The idea of short selling is to sell an asset when the price is high and buy back in at lower levels. The common trend in the markets is downwards and traders are expecting lower price levels in the near future. If you are a more advanced trainer it’s possible to short with leverage. Trading platforms like Bitfinex offer possibilities to borrow USD or EURO and buy for example bitcoin with it. With the leverage offered you can then make a profit on a trade which goes down in price.

Buy bounces

Bitcoin buying bounces
Buying when price is oversold

Bear markets will typically bring a lot of volatility into the markets. This means that crypto assets will be trading well outside of their normal ranges, which is great for day traders. If you are not familiar or confident with going short on an asset, there is still plenty of profit to be made to the long side in a bear market. Coins that have big pullbacks, mostly the midcap coins like ZEC or WAVES, will almost always have a large bounce at some point.

Coins don’t just go straight down forever in a bear market. Just like coins pullback when they are in an uptrend, crypto assets will spike when they are in a down trend. When crypto assets get over extended to the downside, they will often have nice bounces. This strategy works especially well when a coin has had several consecutive down days. Keep in mind that this type of trading setup is not something to marry. You are just going for the quick counter trend move, and then quickly taking your profits. Once the coin bounces, it could start to fade off again and you may end up breakeven or with a losing trade.

Stay on the side

Stay in cash
Exit crypto postion, go in dollars

Knowing when not to trade is essential for achieving success as a crypto trader in the long run. In bear markets, coins will not just go straight down every month. They will sometimes consolidate sideways, and not have an obvious trend. They will start to trade in a tight range, and there will not be much money to be made because there is no volatility or range to profit off of. During these times it is crucial that you stay on the sidelines until one of your go-to setups presents itself. Patience is crucial during these periods.

When you look back at your trades at the end of every week and add up your PNL for the week, you will see how much overtrading can hurt you. Even if they are small losses, boredom trades are a complete waste of your physical and mental capital. In order to be a successful bitcoin trader, you need to have the discipline to only trade when your edge is there. In a bear market, you cannot be expecting the market to dump huge every day. You need to wait for an obvious trend and volatility to come back into the market before making trades.

If you are interested in trading or want to profit out of volatility, I recommend starting trading on Binance here. Also, I would like to know what your trading strategies are, so don’t be shy and post below!

Related : 4 common strategies for starting trading cryptocurrency

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