Managing crypto assets during an extended downturn can test even the most level-headed traders. Sentiment may be running low, and fear and greed are off the charts. But certain strategies exist today that traders have used over time to stabilize their holdings and set up a portfolio that weathers the bear market storm.
Read on to learn the top strategies and tips for bear market portfolio management.
Buy the dip with DCA
Traders that want to take advantage of low crypto prices during the bear market can dollar cost average (DCA) as a way to buy the dip. This enables them to space out smaller buys over time so they don’t have to guess when a crypto is bottoming out or is ready for a reversal. Instead, they are steadily buying throughout the bear market.
Tip: With Quadency’s Accumulator Bot, traders can easily set up a DCA strategy with the option to set price limits.
There are three main ways to diversity in preparation for or during a bear market:
1 - Diversify your crypto assets by performing due diligence. Look at the fundamentals of the project behind a coin and monitor its price performance, ATHs, and other data to help determine if the project can weather the bear market.
2 - Diversify your risk by spreading your portfolio across multiple crypto asset classes, such as Bitcoin, Ethereum, Layer-1s, Stablecoins*, P2E coins, etc. Use Quadency’s Rebalancer Bot to easily set up your allocations. (Hopefully, a spot ETF will soon be available to traders as another type of risk-off asset.)
3 - Diversify your crypto accounts by never leaving all your holdings on one platform or exchange. Bear markets bring high volatility, and not all crypto entities will survive. Store what you can in cold storage and manage your assets on multiple accounts from a smart terminal like Quadency.
*Due to past events involving algorithmic stablecoins, be sure to do due diligence on any stables you are considering, and look for transparency around their reserves.
Offset future gains taxes
Remember that losses, however painful, may help you in the next tax season. Monitor any losses and check your region's crypto tax laws regarding crypto gains and losses. Many countries allow investors to use losses to offset gains taxes.
Create a plan and stick with it
Define a long-term investment plan that takes into account your goals, your time horizon, and your level of risk tolerance (remember, only invest what you can afford to lose).
- Determine your asset allocations by performing due diligence
- Create exit and entry strategies
- Use automation to plan out your trades
Once you have a strategy in place, stick with it - even during the darkest bear moments. It will help you avoid the dangers of emotion-based trading while lowering your overall risk exposure.
Use Technical Analysis
In a bear market, it’s helpful to have technical indicators that help you gauge when an asset has reached a bottom. The Relative Strength Index (RSI) indicator measures the magnitude of recent price changes, helping traders identify overbought or oversold positions.
Tip: Quadency’s Multi-Level RSI Bot goes an extra step by letting you set up multiple RSI levels, so if a price continues to drop, more automated buys kick in.
Neutralize emotions with automation
Once you have devised an investment plan, determined your allocations, and familiarized yourself with technical indicators, it is time to set up your automated trading strategy.
Quadency’s pre-built bot automations are simple to use and available across multiple markets and exchanges. Visit the Bots page today to create your own bear-proof automation strategies.
- Trading automations made easy with Quadency
- Beginner’s Guide To Crypto Fundamentals
- Discover QUAD tokens and start staking!
Quadency is a cryptocurrency portfolio management platform that aggregates digital asset exchanges into one easy-to-use interface for traders and investors of all skill levels. Users access simplified automated bot strategies and a 360 portfolio view with a free account.
Disclaimer: The content of this article is for general market education and commentary and is not intended to serve as financial, investment, or any other type of advice.