What to Do When there is a Bear Market.

The crypto market can experience both bullish and bearish phases. This guide outlines actions to take and avoid during a bear market.

What is a Bear Market?

A bear market is defined by a significant decline in asset prices.it can be characterized by a drop of 20% or more in major U.S. stock indices, like the S&P 500, from their peak. 

According to Marci McGregor of Merrill and Bank of America Private Bank. When prices fall 20% or more for an extended period—typically two months or longer—the market is considered bearish, in contrast to bull markets that trend upward.

Bear markets can be long-term (lasting years or decades) or cyclical (lasting weeks or months).

Investors can profit during bear markets through short selling, put options, and inverse ETFs. 

Short selling involves selling borrowed shares to repurchase them at lower prices, though it carries significant risk and potential for substantial losses if not managed properly.

The four phases witnessed during a bear market are:

• The first stage is when the market is influenced by high prices and investors sentiments. Then when the market gets to some desired point, the investors pull out their funds and make lots of profit.

• The second stage is seen when investors begin to panic and sentiments fall. This is due to the drastic fall in prices of stock. The economic indicators which was once positive, start to become below average. 

• The third stage is when there are speculations which begin to raise some prices and trading volumes.

• In this last phase, prices of stock continue to drop slowly. This attracts investors again and consequently, a bull market is delivered.

Tips on how to endure a bear market.

• Avoid rushing in to selling off your assets when the market looks bearish because this might lead to a permanent loss of capital. You should rather take note of time in the market and not market timing. 

• During a bear market, make sure to open your position at the exact right time. This creates opportunities for traders to go short and make a profit if they predict correctly. However, it is important to effect a risk management strategy.

• It is of utmost importance to revisit your goals especially when you have invested largely on a particular asset. This is because it is riskier when your portfolio is not diversified. Therefore, to reduce the effect of the bear market, invest long-term and diversify your portfolio.

• Using a dollar-cost averaging is a form of systematic investing that potentially can offer efficiency when the market has fallen. Dollar-cost averaging is making regular weekly or monthly fixed contributions to your portfolio.

• Make use of the Volatile Index (VIX). The VIX charts the volatility in the market which is a great indicator for investors sentiments. When there are panic, doubts, and sell-offs, the VIX helps to predict it.

Learn the need to diversify as a trader. 

• Discover and invest in assets that even in the volatility of the market still strive. However, be aware that there is no guarantee that they will maintain this status quo.