Crypto bear market guide: how to beat the beast
The crypto market is continuing its extended winter slump, with the price of Bitcoin and other cryptocurrencies staying at relatively low levels, especially compared with the all-time highs they saw towards the end of 2021. Hodlers who were looking to cash out at this time may find themselves wondering whether to cut their losses or hodl on for dear life until the next bull run, but is there a way to make money on the bear market? As any experienced trader will tell you, there certainly is. Trading tactics for crypto bear markets are similar to those used in the stock market or on fiat currency financial exchanges. In this article, we'll talk about some strategies for bearish times.
A short call or option is trading terminology for basically betting on an asset's price going down. The term hit the mainstream thanks to Michael Burry and his 'Big Short' strategy. Burry saw the signs of the dot-com crash, and later, the subprime mortgage crisis, and bet against overvalued companies in both cases, shorting their stocks and winning value for his hedge funds in the bear market. Just like with companies' stocks, a short strategy can also be carried out for a profit with crypto during a bear market.
So, how can crypto be shorted? StormGain offers a few different ways. A StormGain client recently had some success with this strategy. Predicting that the market downturn would continue, our client decided to open put options on Bitcoin (BTC). Even when the price of BTC dropped below $37,000, our client reserved the right to sell at the strike price of $40,000, marking a profit of $3,000 per BTC from the downturn.
Even without using put options, profit can be made in a bear market by short selling. This is when you sell an asset and wait for the price to drop before buying it back, keeping both your asset and the price difference as profit. The most famous example of short selling comes from George Soros, who made a short sale on the pound in 1992. Soros' fund bought and sold every pound it could get its hands on, throwing the Bank of England into chaos before buying back the pounds after their value dropped and keeping the $1 billion difference in profit.
Short-selling cryptocurrency works the same way. In fact, crypto's high volatility can make short selling especially effective. Take Shiba Inu (SHIB), for example. One StormGain user opened a short position of SHIB at $0.00006129 per coin and closed it at $0.00002055. He made thousands of dollars in profit and told about this success in his social account.
Buying the dip
If you don't feel comfortable betting against crypto, you can still use the bear market to bet on crypto's success in the long term. In the 'buy the dip' strategy, price drops are not disasters but rather signs that it's time to accumulate and hodl until the next bull run. In that case, price drops are a chance to pick up more assets for the portfolio at a discount while they are 'on sale' and wait until they are profitable to withdraw.
Shorting, hodling and more with StormGain
A bear market can be just as much of an opportunity to make money as a bull market, just using different strategies. StormGain provides all the tools you need to profit in both rising and falling markets, thanks to our advanced analytics and easy-to-use platform. Don't forget that the StormGain Bitcoin cloud miner continues to reward active users with Bitcoin, regardless of market conditions! To find out how to profit from the crypto bear market with StormGain, sign up in just a few seconds and open a demo account to try out these strategies risk-free in simulated real-market conditions!