How to make money through investing in crypto during a bear market

Background

In 2021, the price of Bitcoin experienced a sharp decline, followed by inflation, the US hawkish policy, and a large amount of hot money being withdrawn, causing Bitcoin to fall all the way to a low of 15K. This bear market continued until 2023 and has not yet ended.

Bear markets are the best time for investment, not bull markets. In bull markets, asset prices rise, and ordinary retail investors do not know when the bull market will end. Greed leads to long-term holding of a coin, resulting in being trapped. Because the cryptocurrency industry has huge fluctuations in value, long-term holding and appreciation are not suitable for the cryptocurrency industry. For example, when Bitcoin fell from 65,000 to 15,000, funds would be trapped and unable to flow. The huge changes also lead to psychological difficulties in adapting.

The idea of buying Bitcoin and holding it for the long term is outdated. This is because the price growth space of Bitcoin after each halving is getting smaller and smaller. This is because the money in the market is limited, and Bitcoin has been in a stage of increasing supply. Halving can only control inflation, but cannot change the state of Bitcoin’s increasing supply. The answer to when it will stop increasing supply is 100 years later. 100 years later, according to the current scale of altcoins, even if Bitcoin exists, it will no longer have a market share of 45.29% like it does now.

The biggest risk of Bitcoin lies in this.

Therefore, do not fall in love with a specific cryptocurrency. Instead, love your money and protect your assets.
Strategy for investing in Crypto during a bear market: Invest at the beginning of a bull market

Because the risk of investing in Crypto for retail investors is higher in a bull market than in a bear market, the bear market is the best time to invest in Crypto. “How to Predict Bitcoin Prices” explains that it is impossible to predict the bottom of a bear market, so it is not recommended for users to try to catch the bottom. However, the idea of investing immediately upon hearing about a bear market is even more incorrect.

While it is impossible to predict the bottom of a bear market, the beginning of a bull market is often recognizable. How can you tell when a bull market is beginning?

Strategy for investing in Crypto during a bear market: Invest at the beginning of a bull market
Because the risk of investing in Crypto for retail investors is higher in a bull market than in a bear market, the bear market is the best time to invest in Crypto. “How to Predict Bitcoin Prices” explains that it is impossible to predict the bottom of a bear market, so it is not recommended for users to try to catch the bottom. However, the idea of investing immediately upon hearing about a bear market is even more incorrect.

While it is impossible to predict the bottom of a bear market, the beginning of a bull market is often recognizable.

1.1 Characteristics of the beginning of a bull market

A drastic drop in Bitcoin price due to a “black swan” event, which produces a bottom higher than the previous one. For example, during the FTX crash in the previous cycle, Bitcoin price dropped to 15486. Many users were hesitant to buy at that level because of the risk of Bitcoin dropping below 15000 to 12000. However, in 2023, when Silicon Valley Bank closed and USDC depegged, Bitcoin dropped to around 19000, which is significantly higher than the previous bottom of 15486. This is a clear signal that a bull market is approaching. However, this is still not a bull market, because what determines a bull or bear market is not Bitcoin price, but the market’s hot money. Without hot money, there is no money to buy Bitcoin.

Price hits new highs without rebounding. Bitcoin started to stretch on March 17th and has continuously set new highs. The price broke through the previous resistance line of 24893 and did not rebound below it.

The first data shows signs, and the second data confirms that the bull market has indeed started. The key point is that the beginning of a bull market is not the same as a bull market. Without hot money, the price will oscillate back and forth. If negative news breaks out in the market, the price will fall but will not drop below the previous low of 19000. Following the previous 15K and this time 19K, if Bitcoin encounters a black swan event at the beginning of a bear market again, it will only fall to around 24K, and it is impossible to go below 24000.

The problem is that if there is no black swan in the market, Bitcoin will continue to set new highs due to the release of hot money after oscillating. If there is a black swan, users who buy at the current price of 27K and then fall to 24K will definitely panic and sell. Additionally, this round of bear market oscillation will last for several months. The probability of a black swan is still very high. Therefore, it is not recommended to chase after highs at the current position. This is an incorrect investment method.

2. Investment strategy for a bear market turning into a bull market

Because the overall environment is the beginning of a bull market and not a full-blown bull market, the investment strategy should still be very conservative. Effective capital management is essential.

• The first step in capital management is to determine how much capital can be used for investment. This capital should not affect your daily life, otherwise, in the event of an emergency, withdrawing funds during a bear market can often result in losses.
• The second step is to split the capital into 6 portions if only investing in Bitcoin.
• The third step is to buy spot Bitcoin with 1/6 of the capital and simultaneously open a contract, setting stop-loss and take-profit at 20%. If there is a loss of 20%, then purchase another 1/6 of the spot Bitcoin. If take-profit is reached, be patient and wait for a pullback. The method for calculating the pullback price will be shared in the next section. Simply put, it refers to several previous prices of decline in the weekly line. Whether the price rises or falls, Bitcoin follows the same logic of rising and falling.

For example:

Suppose there is only $1000 of capital. Split it into 5 portions, which is $200 per portion. Buy spot Bitcoin first with $200.

The current price of Bitcoin is $27,460. According to the previous data of rising, $27,400 is a critical price position and a resistance line. Bitcoin is fluctuating at this position and has slightly broken through. Therefore, open a position for a contract with only $200 and 1x leverage, or $40 with 5x leverage. Set stop-loss and take-profit at 20%, which means that the profit or loss is only $40.

If the price falls by 20% to $21,968, then a loss of $40 is incurred, and quickly buy another $200 worth of spot Bitcoin and open another $200 contract.

If the price rises by 20% to $32,880, then take-profit and wait for a pullback, then buy another $200 worth of spot Bitcoin.

If this strategy leads to consecutive profits several times, then it is a bull market. Investing $1000 can yield a total return of $2195.

Then sell the Bitcoin and exit.

In summary:

This investment strategy does not aim for bottom-fishing, but can only earn the minimum profit of Bitcoin during the bear-to-bull market transition. It uses the theory of four waves of Bitcoin’s rise. It is believed that Bitcoin will experience a major drop after the fourth wave. At the same time, if Bitcoin’s price soars 5 or even 10 times, the income that can be earned is only about 3 times. The key point is that this strategy is relatively stable.

The above suggestions do not constitute any investment advice. Bitcoin is a high-risk investment, and the above content is for reference only.