9 Strategies To Survive The Bear Market

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2 years ago

Like it or not, the bear market is upon us now in glorious full force — all mainstream cryptocurrencies and stocks are headed for a free fall, with the bottom yet to be in sight. The Bitcoin Fear & Greed Index is pointing at extreme fear now, reflecting the state of emotional turmoil of the general public.

While the bearish market naturally entails this flurry of distraught and uncertainty, it may also present a window of earning opportunity to the astute investor. While making no claims to be a financial guru, I personally find the strategies below helpful to help buffer my investment portfolio during these trying times, from my point of view.

1. Buy The Dip!

Indeed, timing the market is difficult; hence the idea of dollar cost averaging, which refers to allocating a set amount of money at regular intervals to buy an asset, regardless of the market. But perhaps a better approach during this bearish market is to buy the dip — but you will never know when the ‘real’ dip is, as the price may dip even further shortly after you have just patted yourself on the back for having made a good buy when the price spikes momentarily (bull trap). As such, you can spread out your investment into small trades, buying in small quantities on red days, and selling on green days — perhaps a modified version of DCA, rather than blindly buying assets on fixed days of the week/ month in the classical DCA strategy.

2. Trading Bots

Trading bots can automate the rather monotonous process of buying low and selling high, allowing investors to earn profits on autopilot instead of having to stare at charts for hours to determine a suitable entry point. As such, a properly configured trading bot can act as a volatility killer , as it can buffer the depreciation in value of an asset by means of the grid profits generated from market fluctuations. To better illustrate this, take a look at my following DFI Spot Grid Bot in Kucoin; a similar concept applies universally to all cryptocurrencies irrespective of the token used, which in my case was DFI. (DFI is the native token of the DeFiChain, a fork of Bitcoin with many innovative features of which I am heavily invested in. DFI has even outperformed BTC most of the time, having reached a recent all time high against Bitcoin! Read more on DFI in my previous article here.)

I started the bot a while ago when the market was relatively greener, with an initial investment of $60, buying DFI at $4.37 (Entry Price). By virtue of constantly buying low and selling high, it has generated a profit of $6.19 USDT (Grid Profit) since its commencement 32 days ago, giving a commendable grid APR of 114%. Given the current price of DFI at 3.885, if I had simply bought DFI and passively held it since 32 days ago, I would have lost $5.44 USDT (Floating PNL) from the depreciation in value of the coin. However, the grid profits of $6.19 generated by the trading bot has offset this depreciation in value, in fact resulting in a total profit of $0.74! Indeed, this is no astounding figure no thanks to the bearish market sentiments around us these days; but it has effectively buffered my otherwise unrealized losses from the dipping of price of the asset.

Of the many trading bots that I have experimented with, my favourites are Kucoin and Pionex. For more information on Kucoin’s trading bot and its strategies, check out my previous article here.

3. Sell in May & Go Away

“Sell in May and go away” is a well known adage in finance, based on stocks’ historical underperformance during the six-month period from May to October. However, this concept has met with some degree of controversy, as the pattern may no longer hold true in recent years given the surmounting influx of external influences on the financial markets. But if history does repeat itself (and indeed the market is currently anything but down in May!), it may be a good idea to sell off some of your assets and buy them back at a cheaper price, later on. A basic knowledge of technical analysis may be helpful — check out a simple graphical summary here.

4. Trade Futures

Futures trading is an incredibly great and fast way to either make or break your portfolio — hence always thread with caution on these prickly grounds. Leverage is the use of borrowed funds to increase your trading position beyond what would be available from your cash — in the context of futures trading, the higher the leverage, the more gains/ losses you will make on your position, but the narrower the range before which your position gets liquidated if the market goes against your bet. A strategy that can be deployed in this bearish market would be to open short positions in futures — however do note that unless the market is headed extremely unilaterally, it often bounces back slightly in the short term, potentially triggering liquidation if your leverage is too high. In other words, the market may indeed be headed for a downfall in the mid- to long-term, however short-lived spikes in prices can cause liquidation for short contracts. Hence, if you must trade futures, always do so with extreme caution — using low leverage (so that you have a wide margin before liquidation) and taking profits regularly.

5. Buy Leveraged Tokens

Leveraged tokens, which can be traded on major cryptocurrency exchange platforms like KucoinHuobi, Binance etc, give a leveraged exposure to the price of a cryptocurrency without the risk of liquidation inherent to futures trading. Take the following heart-breaking bearish chart of Bitcoin, for example.

Wouldn’t it be great to flip this chart upside down, and really get ‘to the moon’?

That’s exactly what leveraged tokens do — in fact, a BTC3S token will not only increase in value as the price of Bitcoin dumps, but given the 3x leverage will also triple this price action. The primary advantage of trading leveraged tokens is that you can either long/ short the market with amplified profits, minus the risk of liquidation from trading futures. However, do note that the leverage offered from these tokens is lower than that of futures contract, and that these tokens do not have any intrinsic value as they simply track the price movements of the asset of interest — hence be sure to actively engage in trading the tokens instead of passively HODL-ing them for too long! Leveraged tokens also rebalance to maintain a target leverage especially during periods of high volatility — if it makes money, those profits will be reinvested; if it loses money, it will sell some of its position — hence trading leveraged tokens is not without its own risks and disadvantages.

6. Earn Cash Flow While HODL-ing

Perhaps better than passively HODL-ing your funds in wallets is to hold them in Centralized Finance (CeFi)/ Decentralized Finance (DeFi) platforms that offer an attractive yield on your digital assets. While you are at it, earn some attractive signup bonuses, if you are new to the platforms!

Some notable CeFi offerings include the following:

  • Nexo: A giant digital assets institution offering instant crypto loans, daily earning on assets, exchange, with services in 40+ fiat currencies in more than 200 jurisdictions. HODL your assets in Nexo to earn APYs of up to 17%, paid out daily. Sign up here to earn $25 in Bitcoin when you deposit and hold at least $100 in supported assets for a month!

  • Hodlnaut: A Singapore-based fintech platform offering high yield interest accounts with APYs of up to 13.86%. Sign up here to avail an upsized $50 bonus when you deposit and hold supported assets worth at least $1500 for a period of 31 days! Hodlnaut is currently running 3 promotions which are stackable for a bonus of up to $290 — find out more here.

  • Cake DeFi: A Singapore-based CeFi that derives its name partly from the DeFiChain network on which most of its services are based, offering the finest in liquidity mining, staking, lending and borrowing services with APYs of up to 100%! Sign up here to earn an upsized $40 bonus + $10 in learn & earn with a $50 investment in 1 lending batch/ liquidity mining shares frozen for 1 month/ staking shares frozen for 1 month. Also, be in the running to win $5500 in Bitcoin if you can correctly guess the price of Bitcoin on Bitcoin Pizza Day on 22/5/22! For more information, check out my previous article on Cake DeFi here.

  • Celsius: A fintech platform offering interest-bearing savings accounts, borrowing and payment services with digital and fiat assets. Sign up here to get $50 in BTC with a $400 deposit, held for a period of 1 month.

  • Youhodler: An EU and Swiss-based brand fintech platform focused on crypto-backed lending with fiat , crypto and stablecoin loans, crypto/fiat and crypto/crypto conversions, as well as high-yield crypto-saving accounts (crypto-rewards & staking) offering APYs up to 13.07% APY! Sign up here.

  • BlockFi: A fintech platform offering a cryptocurrency exchange, interest-bearing accounts, and low-interest-rate loans. Sign up here to earn $10 in BTC with a deposit of $100, held for a month.

  • Cabital: A relatively new fintech startup registered in the Republic of Lithuania as a cryptocurrency exchange operator and a cryptocurrency depository wallet operator, offering high yield crypto accounts with APYs of up to 12%! Sign up here for a $20 bonus, with a minimum investment of $200 held for a period of a week.

Some notable DeFi offerings include the following:

  • Elephant Money: The DeFi protocol behind Elephant Money and its stablecoin TRUNK — a stablecoin which is 75% backed by BUSD and 25% by Elephant Money. TRUNK can be entered into Stampede perpetual bonds to generate a generous APY of 672%! Read more on Elephant Money in my previous article here.

  • Anchor Protocol: Stake UST for APYs of up to 19% using the Anchor Protocol. However, do take note of the recent developments in the depegging of UST.

  • Libero Financial: Invest in Libero to earn an APY of 158893.59%! Although I am less than convinced of the sustainability of the project given the outrageously insane APYs, I have invested a small amount in it just to test the waters.

7. Earn A Passive Income With A Side Hustle!

There are many underutilized resources in our everyday lives that can be harnessed to generate a small but steady stream of passive income. In my younger days, I used to experiment with harnessing solar power to generate electricity — which was not sustainable given the small scale of my project and the expensive, cumbersome equipment needed! As high-speed broadband internet has pervaded almost every aspect of modern civilization, our internet bandwidth is more often that not in excess of our daily requirements — these surplus resources can actually be monetized to earn money! Of the few notable contenders on the market, my favourite is Honeygain, which is a free app that works on virtually any mobile or desktop device, earning you passive cash flow by securely sharing your excess internet bandwidth to transmit publicly-available web data crucial for businesses seeking to improving their ad ranking, compare prices, and prevent ad fraud etc; all without compromising your data security! To learn more about how to monetize your internet connection, check out my previous article here!

8. Invest In Precious Metals

Precious metals like silver and gold have long been hailed as a safe haven for investors, although their prices have taken quite a fair share of beating from the recent economic turmoil. It may be a good idea to invest a portion of your portfolio into precious metals, the value of which have stood the test of time. With the advancement of technology, digital gold is quick emerging as the preferred method of buying and investing in a virtual form of the yellow metal without having to physically hold the gold. Cryptocurrencies have further taken this revolution to the next level, with brilliant offerings such as the following:

  • Tokens tethered to the value of gold, such as the PAX Gold, each of which is backed by one fine troy ounce of a 400 oz London Good Delivery gold bar, stored in Brink’s vaults and held in custody by Paxos Trust Company. Existing on the Ethereum ERC20 blockchain, PAX Gold essentially has a value that is tethered to that of gold, much like how USD Tether’s value is tied to that of the USD. PAX Gold can be traded on major cryptocurrency exchanges like Binance, Coinbase, Kraken etc; a notable platform is Nexo, on which PAX Gold can be purchased, traded and held to earn an APR of up to 8%, with free monthly withdrawals — a feature much welcome on the expensive Ethereum network!

  • Decentralized assets: Decentralized assets represent a revolutionary way of investing, combining the best of both worlds of the high yields of liquidity mining of cryptocurrencies with the familiarity of investing in a conventional stock market. These decentralized assets are known as dTokens, which exist on the DeFiChain network and are essentially a digital reflection of a valuable asset, for instance major stocks, ETFs and precious metals, whose price is tracked by the corresponding dToken.

    Examples of decentralized assets

The dTokens of precious metals include the dGold and dSilver, which can be combined with dUSD (the USD stablecoin of the DeFiChain blockchain) into liquidity mining pools to earn attractive APRs of up to 100% (this can fluctuate depending on market conditions)! In other words, in addition to riding on the price movements of the underlying assets of interest, passive cash flow can be generated from liquidity mining rewards, thanks to the innovation of the DeFiChain. Decentralized assets can be purchased via the DeFiChain wallet, or more easily on a CeFi like Cake DeFi which simplifies the process. Read more on decentralized assets in my previous article here.

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9. Try Arbitrage Trading

According to Investopedia, arbitrage is the simultaneous purchase and sale of the same asset in different markets in order to profit from tiny differences in the asset’s listed price, exploiting short-lived variations in the price of identical or similar financial instruments in different markets or in different forms. In simpler terms, arbitrage is the process of buying an asset low on one platform and selling it high on another platform, then making use of the price discrepancy between the two to make a profit.

However in reality, while theoretically possible, arbitrage trades can be difficult to execute due to the following reasons:

  • Trading costs are incurred during the purchase and sale of the asset.

  • Transfer fees are incurred during the transfer of the cryptocurrency from one platform to the other.

  • The price deviation of assets between different platforms can cease to exist within minutes — effectively nullifying any potential profits and may even incur losses if the said asset dips in value over the short period of time it takes to transfer from one platform to another.

  • The price difference between the 2 platforms is not significant enough to make a profitable arbitrage opportunity.

  • It is time-consuming to manually identify arbitrage opportunities and to execute the trades.

An automated arbitrage trading platform is able to overcome the difficulties above, of which Swapnex is a notable example. Swapnex is a multifunctional arbitrage trading platform with access to a wide range of cryptocurrency exchanges such as Binance, Coinbase, Bithumb, Kraken and many others, and hence is able to perform arbitrage trading effectively and profitably as they have a large pool of liquidity spread across these different exchanges. Based on my experience with Swapnex so far, arbitrage trades on the platform fetch me a daily 2.1% return of investment (ROI) of my capital. Withdrawals are manually processed, but done so rather promptly as shown below.

Withdrawals are processed rather promptly on Swapnex

For more information on Swapnex, check out my previous articles for an overview of Swapnex, and a subsequent review of Swapnex 2 weeks down the road. Sign up here, if you’d like to try arbitrage trading with Swapnex.

A Silver Lining Behind Every Cloud

Indeed, given the sea of red that is the financial market these days, trying moments are upon us. Do stay level-headed as you maneuver through the turbulent market, making sure to invest with a rational mind, and not steering the wheels by emotions! As risk appetites will vary between individual investors, customize your investment strategies according to your own profile — the decision to buy, sell or hold is entirely yours; nobody has a crystal ball to foresee into the future. As always, never invest any amount of money that you cannot afford to lose; even in the worst case scenario of losing a substantial amount of your wealth to the bear market, do always remember those other little things in life that truly matter, such as family and friends that are close to heart! The strategies I have presented above are simply my opinions — feel free to share your thoughts and feedback! Take care and stay safe, dear fellow investors!

As always this is not financial advice! But simply investment platforms I have invested in and have found worthy of sharing with. Do your own research before investing and never deposit money you cannot afford to lose. Feel free to ask me any questions below.

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