Best crypto investment strategies to adopt during this crypto winter

Crypto trading platform, Gainium has highlighted some of the best trading strategies to adopt when trading Bitcoin (BTC) and other blockchain-based digital assets, especially during the bear market.

The crypto bear market

Trading during a crypto bull market can be fun. In that period, most investors make a lot of money due to the fact that most coins are on the up in terms of price action. However, the circumstances surrounding investing during a bull market can give new investors a false sense of security, especially when the market becomes less bullish.

It becomes tricky even for seasoned investors when the prices begin to fall and maintains that level over an extended period. That period is known as a bear market.

Many people in the crypto space believe that investors should hibernate when there’s a crypto winter. One could give credence to that logic due to the uncertain nature of prices in a bear market. However, crypto bear markets present a rare opportunity to accumulate holdings and position yourself to outperform by prudently managing your risk. 

Despite the opportunities in the bear market, many investors fail to make gains during this period. A big reason is an apparent need for more knowledge regarding what constitutes a bear market and a failure to learn how sophisticated investors navigate bear markets and make profits from them.

With help of trading experts at Gainium, we’ll take a look at some of the best strategies that new investors can adopt when navigating the crypto trading space.

For the uninitiated, a bear market is when a market experiences prolonged price declines. It typically describes a condition where securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment. The causes of a bear market may include a weak, slow, sluggish economy, bursting market bubbles, pandemics, wars, or geopolitical crises.

2022 has fulfilled all the conditions possible for the emergence of a bear market, so it’s safe to say that we’re currently experiencing an extended crypto winter, or a bear market.

Do your own research (DYOR)

Perhaps one of the most used terms in crypto jargon, DYOR, as the name implies, refers to doing adequate research before buying any token. 

Doing enough research and conducting fundamental analysis before investing in a project is vital because bad actors and even popular influencers often use shilling or Sybil attacks to get new investors to buy fake tokens or fall into a rug-pull scam.

Shilling is a common practice in the cryptoverse, a situation where people advertise their own coins to affect the price positively. However, quite often, it can be difficult to distinguish the difference between a shill or an unbiased post. Therefore, deciding on your own before investing is essential when purchasing any cryptocurrency, not just because someone else has said it is worth it.

Sybil attacks are widespread on social media platforms such as Reddit, Twitter, and Facebook. People with malicious intent can quickly create multiple fake accounts, attempting to trick investors into purchasing a cryptocurrency based on a “popular” post within a social media platform.

Set your portfolio allocation/diversification

Investing in a single cryptocurrency can be risky, even if an investor decides to invest in the best cryptocurrencies, such as Bitcoin and Ethereum. According to experts, diversifying your portfolio can help you minimize losses and take advantage of gains in growing markets. It’s essential to choose the right balance of high and low-cap tokens and stablecoins.

In addition, investors should continuously diversify their portfolios according to their risk tolerance. That’s why investors should do enough research to know which tokens to invest in according to their risk tolerance.

Automating purchases with DCA bots

Dollar-Cost-Averaging (DCA) Bots are automated trading Bots that traders can use to automatically buy and sell crypto at regular intervals over a preset time frame.

DCA trading has long been used by investors who aim to gradually leverage the volatility of prices and accumulate/decumulate positions. This allows users to average the price of their tokens by buying a set amount over a certain period.

DCA trading bots like the one Gainium offers follow an effective strategy to lower the acquisition cost of the user’s assets. They split the investment and buy at more favorable prices. This strategy can reduce the risk of investing in one lump sum.

Gainium has identified three main DCA strategies, namely, Time-DCA, Price-DCA, and the third, which involves combining the two strategies, the Double-DCA strategy.

Track your portfolio and rebalance when necessary

Rebalancing your portfolio is the most effective way to stay on track with the percentage of your portfolio held in different investments. 

There are two reasons to rebalance. One is to restore the proportion of asset types you designed your portfolio to have. Another is to modify that proportion because your investment goals have evolved, and you want your portfolio to reflect those newer choices. 

To personally track your portfolio might be a tough ask, especially for new investors. It is advisable to use portfolio tracking apps to make the whole process automated and seamless.

Define your exit strategy

A clear plan that specifies the circumstances under which investors would sell their cryptocurrency holdings is known as a crypto exit strategy. An exit plan should enable traders to profit beyond their initial investment while safeguarding them from substantial losses if the market moves against them.

It is essential for investors to know when to sell.

Closing thoughts

The laid-out strategies for investing in crypto are undoubtedly one of the best options, especially for new investors, but only some of these strategies work overnight. Trading cryptocurrency requires a lot of research and patience to be able to master the rudiments.