How to Survive Crypto Winter
Bitcoin is in a bear market, trading at about a third of its all-time high. It’s fair to say that crypto winter is upon us. To make matters worse, rampant inflation is causing colossal price hikes, with experts warning a global recession is coming.
The picture for Bitcoin investors looks bleak right now. However, many of us have been here before. As Binance CEO Changpeng Zhao (CZ) points out, historically, crypto prices have moved in four-year cycles of two years of a bear market followed by two years of a bull market.
A protracted bear market can be pretty scary for new investors. But volatility and price drops are a normal part of the game. While some people may be tempted to cut their losses by panic selling, it’s rarely a sound financial strategy.
Selling locks in your losses. It’s the polar opposite of “buy low, sell high.” The history of investment is littered with people who got out too fast and regretted it once the market rebounded a few years later.
So, how can we all survive the crypto winter while we wait for sunnier days ahead? Follow our top tips.
1. Only use secure and trusted crypto platforms
Every crypto winter has some casualties. The majority of them are smaller coins and projects that don’t have good visibility or support. However, this bear market has already taken down some very prominent players in the crypto space.
It all started with the terraUSD stablecoin. When that collapsed, the contagion spread to exchanges, lending platforms, and even some crypto hedge funds.
Voyager, Celsius, and Three Arrows Capital have all filed for bankruptcy. Additionally, some significant exchanges — like Vauld, Zipmex, and CoinFlex — have paused withdrawals, leading people to speculate they have serious liquidity issues.
Having your investments locked up on an illiquid exchange or lending platform is a nightmare. The infamous MtGox bankruptcy is only being resolved now, and their liquidation proceedings began in 2014!
A bear market poses a significant risk to the value and safety of your coins. It’s essential to use trusted and secure platforms, like LocalBitcoins, to buy your crypto.
Instead of keeping money on an exchange or other crypto platforms, you can buy Bitcoin with credit card, Paypal, bank transfer, or a whole host of other methods. Once purchased, you can store it safely in your cold or hot wallet.
This bear market is far from over. There is a good chance we’ll see further dips that could take down some big players. Coinbase, Gemini, Crypto.com, BlockFi, and Bullish.com have all laid off staff recently. Let’s hope those cuts are enough to keep them going strong.
2. Focus on solid investments
Crypto is generally considered a high-risk investment because of its volatility. During a bear market, the risk of losses sharply increases. So what should investors do during challenging times? Seek refuge in solid investments.
There is a reason why Bitcoin is the most popular crypto — and it’s not just because it was the first one. It has huge brand recognition, loyal supporters, and many institutional and retail investors.
Sure, the price has gone down, but it’s still hovering around the $25,000 mark. All this goodwill and support means it has much more substantial support levels than altcoins.
You need to be cautious during a bear market. Keep things simple. Don’t over leverage, and don’t speculate. Play it safe while the market is uncertain.
3. Other sources of income are important
We don’t know how long this bear market is going to last. Some people say it could be a few years; others suggest it could be even longer. It’s the same with the stock market, with some experts saying it could be years before we see 2021 levels again.
All this underlines the importance of making sure you have some income coming in. Yes, investing in crypto has freed many people from having to work. Still, that number is unlikely to grow in the foreseeable future.
The next few years could be a rough ride for anyone trying to live off their crypto portfolio. Inflation has bumped up the price of everything, which means you’ll eat into your stack quickly. If the price keeps dipping — which it might — you could destroy your holdings.
So make sure you have income and use this opportunity to buy the dip. Even small, steady purchases when you get your paycheck each week or month can slowly build up, leaving you in an excellent position once the market recovers.
With LocalBitcoins, you can buy Bitcoin with PayPal, credit card, or bank transfer just a few sats at a time. Even a small portion of your income could turn into a windfall when the market bounces back.
4. Only invest what you can afford to lose
Only invest what you can afford to lose is a piece of advice that everyone has heard. But during a bull run, it’s easy to get blinded by the lights. Some people have learned their lessons the hard way.
We hear many horror stories during a bear market about people taking out loans to buy crypto, spending their kid’s college funds, or shoving their life savings into some meme coin.
So be careful when you buy Bitcoin with credit card. Don’t overextend yourself. As we’ve seen over the last year, anything can happen, including further dramatic price dips.
5. Practice a long-term mindset
Investment isn’t a get-rich-quick scheme. It takes forward planning and discipline. Almost all the top investors practice long-term strategies that take years to pay off, with five and ten-year timelines not uncommon.
Stressing about the price of an asset on a day-to-day basis will drive you mad. If you believe in the future of a project, you need to practice a long-term mindset. Checking prices during a bear market is never fun.
So stop stressing about short-term losses and look toward the future. Whatever you do, don’t panic sell. If you’ve only invested what you can afford to lose (see point #4.), you won’t need to pull any money out before your investment bears fruit.
6. Dollar-cost average
It’s hard to time the market, even for seasoned investors. Instead, dollar-cost averaging is a strategy where you invest the same amount of money in an asset at regular intervals. This process can dampen the effect of volatility.
For example, you could buy Bitcoin with PayPal once a month with, say, $100. When all your purchases are taken together, it’s unlikely you’ll be buying at the top.
The last year has been challenging for users who bought Bitcoin near its ATH. However, let’s say you purchased $1000 @ $60,000 last year. At today’s prices, you’ll have a long way to go before your break even. However, if today you bought $1000 @ $20,000 to add to your ATH purchase, your break-even point would suddenly be $40,000.
So, if you got near the ATH, you can use LocalBitcoins to buy Bitcoin with PayPal, credit card, bank transfer, etc., each week and gradually decrease your overall entry point. You’ll be up big if the market bounces back to $60,000!
7. Don’t try to short the market
When Bitcoin is going up, it’s easy to make money. Now that Bitcoin is in a downward spiral, you might be tempted to short it. Our advice is: don’t do it!
When you go long on Bitcoin, the most you could lose is whatever you stake, while your potential wins are unlimited. However, when you short Bitcoin, your losses could be endless.
Sure, you can set stop losses. But the problem is that crypto is so volatile that it’s hard to really know what will happen next. Even the best technical analysis gets on the wrong side of a trade a lot of the time.
The crypto markets aren’t like stocks and shares where you can often trade based on fundamentals or particular events. Bitcoin and other altcoins prices can change based on sheer sentiment or news that you won’t be the first to hear.
Keep things simple; just keep stacking sats, and things will turn out OK when the market bounces back.
8. Take care of yourself
A crypto winter can be challenging. Compulsively checking your portfolio hoping that today is the day the market turns around isn’t good for your health. So, consider using this downtime to take a bit of time away from crypto altogether.
Exercise, spend time with friends and family, or get out and enjoy the countryside. Take a little time for yourself and do things that you love. Crypto will still be there when you get back — and hopefully, the market will look a lot healthier.
Conclusion
The crypto winter is bad news. But it could also be an opportunity to buy Bitcoin at a considerable discount. Now is a good time to stack sats — which is really easy, fast, and secure with LocalBitcoins.
LocalBitcoins supports over 150 payment methods. You can easily buy Bitcoin with credit card, PayPal, bank transfer, and more. And all on a safe and secure platform that works in almost every country worldwide.
En español: https://es.blog.localbitcoins.com/c%C3%B3mo-sobrevivir-al-criptoinvierno-62c4210f6354
