With Bitcoin and Ethereum trading well below their highs of 2017, many cryptocurrency traders want to know how to profit in a crypto bear market. Bitcoin dominated the financial news headlines in 2017 when it traded above $20,000, which was a 13,000 percent increase from its low of $152 toward the end of 2015. During times like those, it did not take an advanced degree in finance to earn huge returns.
The cryptocurrency climate today is far different. Just like with any investment, there are ebbs and flows. For the most part, cryptocurrencies are in a bear market. Although Bitcoin is still up nearly 4,400 percent from its 2015 low, the online currency and its counterparts saw sharp corrections in their prices near the end of last year with very little recovery to the upside.
Profiting in a Bear Market
Now that most of the hype is over and clear thinking is starting to return, smart investors are using this bear market to study profitable strategies for the next bull market. The days of watching cryptocurrencies reach all-time highs nearly every day are over. Smart currency traders now know that profits today will come from small movements in price.
During bear markets, most equities are trading at cheap levels. The same holds true for cryptocurrencies. However, smart traders know they will need to do some digging to find that needle in the haystack. Bear markets are a perfect time for digging and spending time on research since lower trading volumes mean there is no rush to start buying.
In the midst of the correction, there were probably a handful of cryptocurrencies that were unfairly knocked down by 70 percent or more. There is no rush to jump right back in and start trading on a daily basis to earn minimal profits. A bear market provides the perfect opportunity to examine coins closely and find that diamond in the rough.
Some investors believe that cryptocurrencies may never recover, or at least not any time soon. Therefore, they may start shorting cryptocurrencies to earn a profit. Investors can short altcoins by trading on margin. For example, a trader could borrow a certain amount of their current holdings and use that money to bet on a downfall in the price of cryptocurrencies. However, trading on margin requires a level head and some self-control due to the inherent risks.