How to invest now?

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Bitcoin (BTC) has fallen almost 40% year-to-date, while most leading altcoins have fallen 50% to 70% since the beginning of 2022. So it is fair to say that we are in a bear market. However, that does not mean you have to leave the crypto markets just because we have a bad first half of the year.

Read on to learn how to cope with the storm in the current crypto-market climate.

What happened?

The crypto markets have cooled off earlier this year after posting a record-breaking 2021. Last year, we saw record-breaking crypto prices, an exploding NFT market with JPEGs selling for millions, and a burgeoning DeFi market that expanded beyond Ethereum (ETH) and became multi-chain.

Today the situation is different. We have fallen sharply from the heights of all times. While BTC and ETH have “only” lost about 60% of their value since their highs, several leading altcoins have lost more than 90%.

The recent collapse of UST and LUNA has caused prices to fall and made investors realize how risky cryptocurrencies can be.

Needless to say, crypto investors are uncomfortable. In fact, according to the Crypto Fear & Greed Index, they are “extremely scared.”

But that does not mean investors should leave the cryptocurrency and wait for the next bull market to re-enter.

What can crypto investors do now?

It has been a difficult year for crypto investors (and equity investors), especially those who have only recently entered the market and are now experiencing their first market downturn.

Let’s take a look at what investors can do in this crypto bear market.

Switch to reliable stack coins

If you fear that the bear market will continue and asset prices fall even more, you can move a large portion of your fortune to stack coins.

However, you should stick to trusted stack coins and avoid anything that is not supported by anything. USDC and BUSD have seen capital inflows, suggesting that investors trust these stack coins more than others. Meanwhile, the most popular stablecoin, USDT, has just proven that it can handle large redemptions.

Investing in dollar stablecoins increases your chances of protecting your portfolio from a sharp drop in value in the event of a market downturn, but also allows you to access buying opportunities when the market returns.

Invest in quality assets

If you are not so bearish and worried about missing out on a market turnaround, you can move your funds from small and medium-sized coins to higher quality assets like BTC and ETH.

While the bounce during a bull market may not be as great as that of recent Layer 1 chain (or base protocol) tokens, BTC and ETH have historically had less losses compared to smaller altcoins.

Alternatively, you can sell too much bitcoin and start dollar costs with an average of the cryptocurrency to slowly rebuild your digital wealth to arguably the highest quality asset in the crypto markets.

Buy put options to hedge against further price declines

If you want to hold on to the assets of your portfolio, but fear that the market will move lower, you can hedge your portfolio by buying put options on BTC and / or ETH.

Buying put options on Bitcoin allows you to sell BTC at a specific time in the future at a predetermined price.

For example, if you buy an option with a strike price of e.g. $ 20,000, and the price drops to $ 10,000, your options hedge will be “in the money” (since you sell BTC for $ 20,000 while you buy it for $ 10,000), to offset the losses in your crypto portfolio.

However, you must make sure that your coverage ratio is correct, ie. you need to buy enough put options to offset your potential losses. If bitcoin does not fall below $ 20,000, your option contracts will expire and you will lose the premium (ie the price) you paid for them. In a way, put options act as an insurance contract against losses in portfolio value.

HODL, diamond hands

Alternatively, if you are sure of the future success of the crypto networks you have, you can simply “HODL” your portfolio and wait for the bear market.

In addition to HODLing, you can also buy divers in the assets you believe in the most. This will no doubt be very difficult for beginners as it is difficult to see the light at the end of the tunnel during the first crypto bear market. But if history repeats itself, many of the cryptocurrencies, which have fallen over 90% since their heights, could reach new heights again. But as always, there are no guarantees for the future. Therefore, invest only what you can afford to lose.

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