Best Bear Market Strategies to Immune Your Project
Cryptocurrencies have always been known to be a highly volatile market. As a result, huge dips are bound to happen now and then. However, it is important to differentiate whether it is a short market correction, a bear market, or a crypto winter. These terms differ in terms of severity and effect on the crypto price. Generally, a crypto bear market is often met with pessimism and fear. It causes investors to lose confidence in crypto and rethink their investing decisions. As a result, it can affect crypto projects if a bear market comes into effect. Moreover, short market corrections are more prone to happen than a bear market. Here, we will discuss the differences between a short market correction, a bear market, and a crypto winter, along with the best bear market strategies for protecting your project from a bear run.
What is a Crypto Bear Market?
A crypto bear market occurs when the price of a crypto asset falls at least 20% or more from recent highs and continues falling over time. However, such dips can also happen on a given bad weekday.
On the other hand, short market corrections occur when crypto can recover from the dip and happens more often. Due to crypto volatility, these highs and lows keep fluctuating until the correction is made. Sometimes, a short market correction can take a few months to help the crypto recover from its dip.
If the crypto price falls consistently over time, it is defined as a bear market. Once the price tapers and is no longer moving significantly, it is a crypto winter. The term defines that the market has frozen and may or may not recover.
How to Identify Crypto Bear Markets?
In the event of a short market correction, a bear market, or a crypto winter, a typical behavior is noticed among investors. They limit their purchasing habits and become diligent during trading or investing in a crypto project. This is also when they are more likely to go for staking, as it has fewer risks than active trading. Some of the ways to identify a crypto bear market include the following:
Most crypto bear markets can be identified with the help of the Crypto Fear and Greed Index. It is a specialized tool that helps to identify whether crypto is going through a short market correction or towards a bear market. There is an overall score of 100, where lower scores represent fear. If the score is between 50-100, then the market is on an optimistic run. If the score is below 49, the market is seeing a lack of confidence from the investors. Hence, lower scores mean that investors are in greater fear of crypto trading and investment.
Lower Trading Volume
When the price of a crypto asset starts dipping, investors often go into a state of panic. Many of them will try to sell to avoid major losses. As a result, the trading volume also falls and doesn’t change significantly. When the trading volume appears like a flat line with minor changes, it reflects the onset of crypto winter.
Unfavorable Macroeconomic Conditions
Like the stock market, ongoing economic conditions also affect the crypto market. The inflation rate, interest rates, inverted curve yields, and availability of money affects the trading volume. The combination of factors mentioned above is also the reason behind a crypto winter. As a result, real-world economic conditions lead to a crypto bear market.
Best Bear Market Strategies to Immune Your Project
Many crypto projects cannot survive or even fail during a bear run. This is due to the lack of financial aid from investors. The first step to protect your project during a bear run is to think about how an investor behaves during the period. Awareness of their behavior will help strengthen your project and keep it enticing for the investors. Hence, here are some ways to protect your project in a bear market:
1. Active Engagement and Development
During a bear market, an investor generally re-investigates a crypto project. During this re-investigation, they aim to determine if the project is still active and developing. They find this by checking the project’s size of the community and if they are engaging or not. Hence, you should ensure periodic updates to your community to show how far along the project has come. This includes social media updates, answering user queries, and overall response time with the community. Follow this guide to engage your Web3 community.
2. Realistic Roadmap: Best Bear Market Strategies
Another important reason for an investor to re-investigate is to find out whether the project is headed in the right direction or not. They will try to understand if your project is moving in a different direction from what you proposed earlier in the roadmap. If they find projects to pivot or deviate from their roadmap, they will not pay attention to those projects. Therefore, you should ensure that your project has a realistic roadmap and does not deviate from it. In case of any deviations or developments, make sure to let the community know about the same.
3. Realistic Profits: Best Bear Market Strategies
During a bear market, an investor will invest more meticulously. As a result, they will not invest on impulse or trends and will make careful decisions. Hence, a project promising lots of returns in the future during a bear market is a likely scenario they will not believe. To overcome this, you need to ensure that you showcase realistic profits. It will further help to back your claims with the help of accurate reports and data to back your claims.
4. Avoid High Valuations: Best Bear Market Strategies
Investors tend to avoid crypto projects with high valuations during a crypto bear market than a bull market. Hence, ensure that your financial structure is continuously updated and corrected from time to time. Keeping a high valuation during a bear market could mean failure to secure funds from new investors. If your project’s valuation does not seem to change from what it was during a bull market, ensure that you have relevant data to convince investors that the project is on the right track. This will help investors to gain confidence in your project and secure your fundraising goals.
5. IDO/ICO Performance: Best Bear Market Strategies
Funding a crypto project is a significant event that will decide the project’s future. Make sure to follow all the steps outlined for a successful launch. This will help you to stay afloat even during a bear market. If your project succeeds in securing enough funding, it will continue to stand out during a bear run. Investors will have confidence in your project and development and continue to invest in the project.
6. Stick to Project’s Goals: Best Bear Market Strategies
A bear market acts as a pathway to weed out poor-performing crypto projects. As a result, bad crypto projects tend to fail during this period. Therefore, sticking to your project’s original goals and objectives is essential to stay on the pre-planned path. This will ensure that your project will be in sound health and your valuation will not be hampered during a bear market. Hence, investors will continue to support your project without fail.
7. Risk Management: Best Bear Market Strategies
As a project founder, your main goal during a bear market is to assess the current situation and manage risks as much as possible. The main problem during a bear market is handling finances and how to use them optimally. Due to a lack of funding, many crypto projects fail without a proper financial allocation. Therefore, it becomes essential to identify when a crypto bear market is in effect and how to allocate funds accordingly. Doing so will help your project to continue developing even if there is a lack of funds.
Despite being in a bear market, crypto projects can still strive if they keep their community informed about their latest developments and stick to realistic roadmaps. Investors are more likely to invest in projects and staking than in crypto trading. Therefore, ensuring your project is up to date and following the devised path is essential.
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