Since their emergence, cryptocurrencies have had many cycles of growth and decline. Just like you have to know what to do in a bull market, it’s also important to have a strategy for when things take a turn.
A bear market doesn’t mean your crypto journey has to come to a halt. In fact, there are still plenty of ways to generate profit even when prices are going down. With that said, let’s look at a few proven ways to make money during a down crypto market.
Short-Term Trading
Investing in cryptocurrency often means purchasing tokens and holding onto them long-term. However, when the market dips, the traditional buy-and-hold approach may not necessarily work.
That’s where short-term trading comes in. Rather than betting on the overall direction of the market, you can profit by trading the price swings that happen during periods of high volatility.
This approach, which has proven to be effective when prices are moving quickly and unpredictably, involves getting in and out positions quickly, realizing small gains in every move you make.
When trading short-term, you want to rely on technical analysis and market timing as much as possible. You also need tools like moving averages, relative strength index (RSI), and candlestick patterns to identify the best times for entering and exiting trades.
Additionally, it’s a good idea to set stop-loss orders to prevent large losses and avoid going all in on one trade. This approach is all about making consistent small gains rather than going after big wins. Over time, your profits will add up and your portfolio will grow.
Short-term trades also offer a good opportunity to become familiar with the newest crypto on the market. They’re ideal assets for short-term trading, and there’s always the chance to spot a promising project early. If you do so, you could end up locking in solid profits before the rest of the market catches on.
Buying During Drawdowns
Crypto prices going down doesn’t necessarily mean disaster for all investors. In fact, many seasoned traders see times like this as an opportunity to acquire more assets. Following a downturn, the growth potential can be quite substantial. In the past, some digital currencies went up by several hundred percent after rebounding.
For example, in April 2021, Bitcoin reached an all-time high of around $64,000, but it dropped to around $30,000 by July. While many had fears over the direction in which crypto was going, some veteran investors saw this as an opportunity to acquire tokens at a relatively low price.
In November of the same year, Bitcoin was up again, surpassing $68,000. It took just a few more years for it to reach $100,000 for the first time.
Of course, this isn’t going to be the case with every single digital currency out there, but drawdowns are a great time to pick up assets you strongly believe in. It might take some time for it to reach its previous highs, but history has shown that patience can lead to significant rewards.
If you opt for this method, it’s important to do thorough research and identify the right cryptocurrencies to invest your money in. Consider both established and new digital currencies that have recently entered the market.
Don’t Fall Prey to FUD
Market downturns can be difficult, especially for inexperienced investors. Seeing all those sensational headlines can stir up fear, uncertainty, and doubt or FUD, as it’s known in crypto terms.
FUD is often amplified in times like this, and it spreads quickly through social media and unfavorable news articles. All this negative information can cause you to start questioning your previous moves and make hasty decisions.
It’s important to understand that no one can predict the future, and no one’s advice is better than doing your own research and coming up with plans of your own.
Therefore, the best way to fight FUD is to equip yourself with knowledge and conduct thorough analysis to make accurate assessments of your assets. So, rather than reacting impulsively to the market going down, take the time to zoom out and look at the broader picture.
Cryptocurrency is a highly volatile asset, and downturns, while uncomfortable, are a natural part of its cycle. Just because the market is down today, it doesn’t mean the situation will be the same tomorrow.
This doesn’t mean you should hold onto all of your assets. Instead, it’s all about doing your research, observing the market, and making decisions based on logic.
By staying informed and thinking strategically, you’ll be in a better position to make a profit.
Final Words
Making a profit during a down market isn’t easy, but it’s entirely doable. All you need is a good strategy and the right mindset. While the process may be challenging, it’ll also help you learn and grow as a trader.
