How do you adjust to a bullish or bearish market?

The crypto market is notoriously unpredictable. So, how do people adapt to these constantly fluctuating prices? Let’s take a look.

What is a bull and bear market?

Before we begin, let’s first recap on what it means for a market to either be bullish or bearish.

A bull market occurs when there’s a positive trend in prices in which they are rising or are expected to rise. These tend to take place when there’s a 20% increase stock prices, following two previous 20% declines.

In contrast, a bear market indicates negative movement in prices, with a fall of at least 20% from recent highs.

You can find out more about bull and bear markets in our previous Community Forum blog.

Adjusting to a bullish market

A bullish market is relentless, and people always want to get the best out of it. In order to get the best returns possible, many traders implement certain approaches to take advantage of the market’s positive movement. These include:

  1. Diversifying your portfolio – this involves holding several different crypto assets. A well-diversified crypto portfolio allows people to take advantage of multiple tokens that are performing well, all at the same time.

  2. Taking up long positions – this refers to purchasing crypto in anticipation that its price will increase. This typically involves buying certain assets when the value is low and then later selling them on at higher price.

  3. Defining your strategy – before trading on a bullish market, people will often set a strategy first. This includes defining a financial goal, how much they’re willing to invest, how often they will invest and having an exit plan in place.

  4. Getting in the right mindset – while a bullish market indicates positive market movements, it’s easy to get carried away by the opportunity of high gains, leaving people constantly in “FOMO mode” over further gains or losing out on their current gains. Therefore, many try to get into a good mindset when trading in a bullish market and not let emotions get the better of them, such as taking time off when needed, defining how much time to spend looking at crypto charts and sticking to their strategy.

Adjusting to a bearish market

When a market becomes bearish, many become anxious over their investments and want to make as many gains as possible. Here are a couple of useful approaches that traders often take to survive a bearish market:

  1. Exchanging cryptocurrencies to fiat or stablecoins – when trading in a bear market, people tend to keep the risks to a minimum, including converting their crypto into stablecoins or traditional currencies.

    Another great solution for minimising risk is opening an X-Account. With interest rates of up to 16% AER on selected currencies, it offers a simple and secure way to boost your crypto balance. Find out how much you can make with X-Accounts by trying out our live calculator.

  2. Taking up short-term positions – in contrast to long-term positions (in which crypto assets are bought with the hope that its value will increase), short-term positions involve selling assets with the intention of repurchasing them later as a lower price. People create short-term positions when they believe that the value of their assets is likely to decrease in the near future.

  3. HODLing – this involves holding onto a digital currency despite the price action. People often HODL their crypto in a bearish market in hopes that its value will increase over time.

  4. Swing trading – this is a strategy that involves trying to predict an asset’s price movement within a certain period before entering a long or short position. This requires studying the market and completing a thorough technical analysis. When implemented correctly, traders can take advantage of both upward and downward swings in the market.

DISCLAIMER – this article is for educational purposes only and should not be taken as financial advice.