Is Crypto in a Bear Market?

The crypto winter is here with us! But what is a bear market? Read on to find out and learn how to make money in a bear market.

Josiah Makori
By Josiah Makori
Marcel Deer
Edited by Marcel Deer

Published June 26, 2022.

A bear market is when a market goes through extended price falloffs. In traditional markets and crypto, it basically refers to a period when assets lose over 20% of their value from their recent highs amid extensive distrust and negative market sentiment.

Bear markets can be cyclical or longer-term. Cyclical bear markets last for several weeks to a few months, while longer-term bear markets last for some years to decades.

Is Crypto in a Bear Market?

It is evident crypto is in a bear market. We can’t hide the fact that crypto markets are experiencing a rough year. How long this period will last is not known. However, we are very bullish on the long-term future of crypto.

As mentioned, a bear market refers to a market that has lost over 20% in a given year. Bitcoin has shrunk by more than 40% in 2022, Ether over 55%, and most altcoins are down by more than 60%.

The crypto sell-off was ignited by a broader slump in stock markets, particularly technology stocks. The blood path was fueled by the collapse of Terra Luna and the UST stablecoin.

Assuming you have lost a large junk of your investment this year, you can potentially use DApps to make money in a bear market.

How to Make Money in a Bear Market?

While bear markets might be stressful for investors, they present good entry points to buy assets at discounted prices. Based on your risk tolerance level, you can profit from a bear market by betting on the overall market trend, making presumptions on micro-trends, or holding and generating passive income.

1. Shorting

Shorting or short selling is the opposite of purchasing an asset and anticipating its value to increase. Here, you start a short position at a higher price and close it at a lower price, hence buying low and selling high via high frequency trading.

2. Generating Passive Income

If your risk tolerance is low and you are not familiar with advanced trading techniques, you can survive in a crypto bear market by holding assets that generate passive income, such as staking and exchange coins. Staking coins guarantee 5-10% annual returns, while exchange coins offer multiple benefits on exchanges like minimal fees and profit-sharing.

3. Swing Trading

Swing trading exploits short-term price movements in an asset’s chart instead of considering the bigger macro trend. In a given upward or downward movement, there will always be small hills and valleys in the price charts. You can make money from these short-term movements by buying the dips and selling the peaks.