Experts tell us what the three best strategies are for trading cryptocurrencies in a bear market
Trading crypto during a bullish trend is easy, as even buying Bitcoin on a consistent basis will generate notable profits. However, now the situation is just the opposite – digital assets are showing one of the worst dynamics in their history in terms of profitability, so earning in such a market is stubbornly impossible. However, the persistent falling charts should not be a cause for despair. On the contrary, a period of rather long “crypto-zima” can be of great benefit for yourself and your investment portfolio. All thanks to the three strategies discussed below.
Cryptocurrency averaging game
When it comes to long-term investments, asset prices should be the least of your worries. That is, an investor should not worry about failing to sell a particular cryptocurrency at a certain point on the chart. Also, there should be no “too expensive” or “too cheap” cryptocurrencies for him. All of this is necessary for a good averaging game.
Dollar-cost averaging, also known as dollar-cost averaging or DCA, is the constant buying of an asset for an equal amount at certain time intervals. That is, as a coin rises or falls, an investor buys it by, say, $50 each week. This way, at the end of the month his entry point into the market will be equal to the average price of the crypto for the month.
An example of DCA strategy
This strategy is illustrated in practice in the screenshot above. Investors who bought $50 worth of BTC every week for two years remain in profit today, and thanks to DCA, they don’t have to constantly make trades, monitor charts or subject themselves to the emotional stress that comes with trading.
It's funny how novice investors are afraid to buy into a bear market, even though many of them have bought coins at historic highs in their rates, among other things. DCA generally avoids this problem as well, as we are talking about buying for relatively small amounts here. This means that if the price of a crypto-asset drops after some time, the investor will be able to buy it at that level as well. After all, all his money will not be blocked in the position because he decided to spend it all.
How trend trading works
Any market provides the most opportunities for investors at the points of its global lows. Unlike DCA, trend trading does not involve constant injections into crypto. According to Cointelegraph’s sources, instead, an investor must wait for the best moment to change the global trend of an asset, i.e. a so-called market reversal.
How to spot it? Extreme deviations in the readings of technical analysis indicators can tell about it. The larger the time frame – or time interval of the candles on the chart, the more weight this indicator has in the long term. For example, the 200 period moving average on a 1 week chart is very popular with many traders. During previous bearish trends, it served as global support for Bitcoin prices, meaning that the rate did not generally fall below it. Well, traders used these levels to open positions.
Moving average on the 1-Week Bitcoin chart
Another popular way to determine the global lows is the so-called divergence between the price chart and the RSI technical indicator – the Relative Strength Index. If two local lows do not match the indicator, this is a good indication that a trend reversal is imminent. This is illustrated in the screenshot below.
An example of a bullish divergence on RSI on the Bitcoin chart
Several indicators can be used at once to confirm global lows. For example, a bullish divergence on the moving average 200 on the 1-Week chart becomes a good reason to discuss an imminent trend change.
The simplest trading strategy for cryptocurrency trading
If an investor is just trying his or her hand at trading and investing, this strategy may be suitable. Its essence is very simple: do not try to trade or invest in crypto at all during the “crypto winter”. You can enter the market after BTC price rebounds strongly enough and official confirmation of global trend change.
Correlation of Bitcoin with top indices of traditional markets
This confirmation will be an improvement in the global macroeconomic situation and growth of traditional markets’ indices. Until then, it is not a good idea to enter crypto trading with no experience because bearish trends are “very rich” with periods of low volatility, false bounces and other unpleasant things that will reduce a novice trader’s capital with “a thousand cuts”.
We believe that periods of so-called cryptozyme are indeed the best period to connect with cryptocurrencies, as the top coins sell for 60-90 per cent cheaper than their course records. Accordingly, it is better to accumulate them under these conditions than during price peaks. However, the important thing here is to support only those crypto projects that benefit the industry and can survive periods of global downturn in investment activity. Obviously, they will appreciate significantly more during a bull run.
Do you have your own winning bearish trend trading strategies? Share them in our millionaires cryptochat. Discuss other important developments from the world of blockchain and decentralisation there as well.
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