Crypto trading mistakes to avoid in a bear market

by Arthur · October 2, 2022

A bear market can be scary and brutal for investors who haven’t experienced such dreaded cycles. If you lack the knowledge of a crypto bear market, your emotions can cause you to make trading mistakes.

Compared to traditional stocks, the swings in crypto can be more volatile. In a bear market, it is not uncommon for some altcoins to lose more than 90% of their value from their all-time highs. So a bear market can be an emotional roller coaster.

In this article, we point out the most common trading mistakes that investors make during a crypto bear market.

Table of Contents

Panic decisions

Panic during a crypto bear market leads to feelings of anxiety and fear, causing you to lose control of your emotions. This makes you make impulsive decisions. More often than not, these panic decisions lack logic and common sense.

Of course, it is not easy to see the entire portfolio plummet. However, in such market conditions, you should make decisions based on objective merits. For example, Ethereum is considered the second largest cryptocurrency with real-world use cases. Similarly, Bitcoin is considered a store of value, just like gold. These have only increased in value if we look at their larger history.

So avoid panic selling and don’t let aggressive selling worry you because these are common in a bear market. The only time you should be concerned is if the narrative behind cryptocurrency shifts 180 degrees and it stops fulfilling its fundamental role. Perhaps using Bitcoin 360 ai can keep you in a calm state of mind.

Party with your bags

This is the opposite extreme of panic selling. Sometimes it is important to recognize a bad investment and cut your losses. Many investors get too attached to their wallets. Therefore, they choose not to sell despite seeing a complete shift in the narrative and market interest.

This happened to many investors in 2017-2018 during the ICO boom. Investors made good returns but ended up losing everything after the crash that followed. Some micro-cap coins may not even recover when a bull market returns.

If you haven’t experienced a crypto bear market before, be especially careful not to get attached to your portfolio.

Hours the bottom

They say that the bear market is the perfect time for a long-term investment. However, another common mistake potential investors make is trying to time the bottom.

It’s an old story – “I buy Ethereum when it goes lower” and this usually results in two scenarios:

Ethereum is plummeting in value, but investors are not taking the opportunity to buy because they think it will go even lower.
The bottom forms, and Ethereum stops going lower, but investors continue to wait for another leg down.

Instead of timing the bottom, consider dollar cost averaging your position. This will bring your average entry price closer to the bottom while minimizing the risk of losing the opportunity to invest.

Forgetting about your health

Watching your existing portfolio go down can be emotionally and mentally draining. It will eventually take a toll on your mental and physical health. Remember, no amount of money or cryptocurrency is worth risking your health for.

Overtrading

Overtrading, or impulsive trading, is not too unusual either. After taking a big hit in their portfolio, investors often try to scalp any short-term rallies during the bear market. However, market volatility doesn’t really depend on your emotions.

This form of trading is also the result of abused emotions. So remember that there is no room for your emotions when it comes to cryptocurrency trading. Bear markets can be brutal, and bull traps are common. Don’t let the fear of missing out (FOMO) get the best of you!

Conclusion

As you may have noticed, managing your emotions is the key to surviving a crypto bear market and avoiding taking further losses. However, managing your emotions can be difficult.

Even the most experienced traders sometimes give in to their emotions, especially when they are desperate to restore their portfolio.

So make sure you invest with a long-term vision and make stronger conviction bets in larger microcap coins that are more likely to survive. Finally, as always said, don’t invest more than you can afford to lose!

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