3 ways to trade Bitcoin and altcoins during a bear market

Markets are scary right now, and while the situation may be getting worse, that doesn’t mean investors should sit and watch from the sidelines. In fact, history has proven that one of the best times to buy Bitcoin (BTC) is when no one is talking about Bitcoin.

Remember the 2018-2020 crypto summer? i do. Hardly anyone, including mainstream media, was talking about crypto in a positive or negative way. It was during this long period of stagnation and sideways breakout that smart investors were stocking up to prepare for the next bull trend.

Of course, no one knew when this parabolic advance would take place, but the example just goes to show that crypto may be in a crab market, but there are still good strategies for investing in Bitcoin.

Let’s look at three.

Stock through dollar-cost averaging

When it comes to investing in real estate for the long term, it’s important to be price agnostic. A price agnostic investor is immune to price fluctuations and will identify a few assets they believe in and keep adding to their position. If the project has good fundamentals, a strong, active use case, and a healthy network, it makes more sense to have dollar-cost averaging (DCA) in place.

For example, take this chart from DCA.BTC.

Average weekly dollar cost results to Bitcoin. Source: DCA.BTC

Investors who automatically buy $50 in BTC every two years are still profitable today, and with DCA, there’s no need to trade, look at charts, and subject yourself to the emotional stress that comes with trading.

Change the trend and go from high to low levels

If not stable, reasonable dollar-weighted averaging, investors should be sitting on their hands and waiting for next-generation buying opportunities, building a war chest of dry powder. If the market is oversold and all parameters are extreme, entering the market is usually a good place to open a position but with less than 20% dry powder.

When assets and price indicators move two or more standard deviations away from the norm, it’s time to start looking around. Some traders use a three-day or weekly time frame to see when assets are moving toward higher time-frame support levels or previous all-time highs as a signal to invest.

200-week moving average heatmap for Bitcoin. Source: LookIntoBitcoin

Others look for price to reverse key moving averages such as the 118 DMA, 200 WMA and 200 DMA. On-chain enthusiasts often follow the Puell Multiple, MVRV Score, Bitcoin Pi indicator, or a proven price indicator to signal when to buy at extreme multi-year lows.

Either way, an opening position that goes long during a high sell-off is often a good swing trade or entry point for a multi-year long position.

Related: Or the moon? Maybe not soon: why Bitcoin traders should make friends with the trend

Don’t do anything until the trend changes

Trading during a bear market is difficult, and capital and portfolio preservation are top priorities. For this reason, for some investors it is best to just wait for confirmation of a trend reversal. As the saying goes, “trends are your friends.” Everyone is a genius and a great trader during a bull market, so if you are, wait for the next bull trend to turn around and be a happy-go-lucky genius.

Declining, consolidating, and bear markets are notorious for undercutting traders and reducing the size of one’s portfolio, so unless one has a positive PNL method for trading during a bear trend and has some shorting skills, it is unwise to trade with the trend.

It is important for crypto investors not to be in a vacuum and to monitor the stock markets. Crypto traders tend to focus only on crypto markets, and this is a mistake because the stock markets and BTC and Ether (ETH) prices have shown a strong correlation in the last two years. In one’s preferred charting set, it is wise to place the S&P 500, Dow Jones or Nasdaq charts alongside the BTC or ETH daily chart.

Bitcoin’s Relationship to Stock Markets. Source: TheBlock

The canary in the coal mine was the canary in the coal mine when BTC’s price action strengthened its desire to raise interest rates in a recent reversal. It’s easy to get misled by the subtle movements on Bitcoin’s four-hour and daily price charts, and one can easily be tricked into some serious territory by believing that BTC is about to reverse.

Monitoring the market structure and price action of the major stock indexes provides critical insight into the strength and duration of any bullish or bearish trends that Bitcoin may exhibit.

This newsletter is written by Big Smokey, author of the Humble Pontificator Substack and resident newsletter writer at Cointelegraph. Every Friday, Big Smokey writes market insights on potential trends in the crypto market, including how-tos, analysis, and early bird research.

Disclaimer Cointelegraph does not endorse any product content on this page. While we aim to provide you with all the relevant information we can find, readers should do their own research and take full responsibility for their decisions before taking any action related to the company, this article cannot be considered as investment advice.