4 Moves to Make in a Crypto Bear Market

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Here’s how to keep your head when prices are dropping.

Key points

• Bear markets are prolonged periods of price drops. While they can be stressful, they are also part of investment cycles.
• It’s important not to panic and to focus on your long-term investment goals.

In the stock market, a drop of more than 20% is often judged as the mark of a bear run. But that definition doesn’t really apply to cryptocurrency as it’s so volatile, prices can rise or fall by 20% in a matter of days. It’s most accurate to see a crypto bear market as a long period of consistent price declines. The opposite of a bear market is a bull market — a time when prices are increasing and confidence is high.

Prolonged and extreme price drops are some of the most testing times any investor can face. Especially when cryptocurrency prices lose as much as 50% in a matter of months — as they have at several points in the past decade. But sadly, investments do sometimes decrease in value and bear markets are something we all have to deal with.

Here are four moves every investor should make when everything seems like it’s in the red.

1. Don’t panic sell

It’s extremely tempting to try to cut your losses when faced with huge price drops. But if you do, you won’t benefit when prices start to increase again. Moreover, selling after a huge drop flies in the face of the oldest rules of investment: buy low and sell high. Granted, this is easier said than done as it can be hard to time the market. But selling at a loss will lock in your losses.

Take a deep breath and remind yourself of why you invested in cryptocurrencies in the first place. Perhaps you believe blockchain technology can transform the way we manage money — or that Web 3 will be the next generation of the internet. Look at why prices have fallen, and ask yourself whether your original investment thesis still holds true. If so, now is not the time to sell.

2. Keep your eyes on the long term

Another way to keep this latest drop in perspective is to focus on your long-term objectives. Cryptocurrency is volatile and we’ve seen drops like this before — and we’ll likely see them again. But if you invest with a five- to 10-year horizon, it’s much easier to hold when times are turbulent.