Protective Strategies During Bear Market

At a current combined market capitalization of $894 billion, the digital currency ecosystem is experiencing a phase of extended low price action best tagged “Crypto Winter.”

This current crypto winter started technically after Bitcoin and some major altcoins attained their All-Time Highs (ATH) last November. Since that feat was recorded, there has been a gradual decline in price, which pulled BTC down to the $20,000 range recently, the lowest level seen last about 18 months ago. 

Overall crypto winters pose a time when investors become so cautious about making any bet in the space for fear of getting liquidated. 

Navigating Crypto Winter

While crypto winters are a global phenomenon, there are still a number of investors or traders who do not stay off the markets. However, handling investments during the crypto winter requires a very special skill that not all possess, and as such, some relatively cautious investment strategies should be adopted across the board.

Some of these are discussed below;

• HODLING: Is a term that suggests keeping the digital currencies idle in whatever wallet one is keeping them on. 

This poses no risk at all to the owners, however, the coins/tokens will still stand the risk of depreciating in value as almost every digital asset is affected negatively when there is crypto winter. Considering the fact that one loses even when some safeguarding through HODLing is done, it makes this strategy not so much of a perfect one. The two currently best options for hodling today are Metamask and Trustwallet. 

Metamask is available as a browser extension and as a mobile app, it equips a user with a key vault, secure login, token wallet, and token exchange—everything needed to manage digital assets. It provides the simplest yet most secure way to connect to blockchain-based applications. MetaMask generates passwords and keys on the user’s device, so only the user has access to accounts and data. 

Trust Wallet is a cryptocurrency wallet, which enables businesses to store, buy, exchange and collect non-fungible tokens (NFTs) and cryptocurrencies. Professionals can utilize the DApp browser to access decentralized applications according to requirements. Trust Wallet supports multiple types of cryptocurrencies and stablecoins. Trust Wallet provides mobile applications for Android and iOS devices, which help professionals track transaction history, securely store private keys and send, receive or buy and sell NFTs.

However, If you are in fact holding some coins on hand, then it makes sense to get additional profitability by placing these funds into liquidity pools and start farming. You can use any of your stablecoins, bitcoins, ethereums and any other altcoins in this way. Since the market has a huge number of liquidity pools to offer for every taste with different returns. 

• Staking: Staking is a peculiar investment strategy in which a token holder will lock up their digital assets on – mostly – a Proof-of-Stake (PoS) platform in order to earn a reward in return. Staking rewards can be paid out in the form of the other token that was being locked up, but the earnings are estimated based on an Annual Percentage Rate (APR) model. For instance Pancakeswap has a variety of different coins that can be obtained by staking CAKE token

Staking is a better strategy during periods of extreme market volatility like the crypto winter, however, not all platforms out there are viable productive outfits for this kind of venture. 

Should staking be desired at all, it will be recommended to explore reputable platforms such as Pancakeswap or Nomiswap for the highest APR in the market. In all, investors should note that the percentage accrued does not typically account for the loss in the value of the coin at the end of the day. 

• Yield Farming: Farming is a trading strategy that can prove to be very profitable if done in the right way and with the right platform. Farming is the process of accruing tokens in the form of a reward for providing liquidity to a project by placing a certain pair of tokens in a pool.

In farming, a user deposits a token pair into a liquidity pool and earns rewards via a predefined token. There is a massive amount of various pairs, possessing different levels of risk. The less risky pairs consisting of stablecoins are more preferred during the crypto winter phase as the stable coins are usually immune to price drops. Stablecoin pairs are available at different platforms, but some pay relatively more than the competitors around. For instance APR for USDT-BUSD and USDC-USDT pairs on Nomiswap are 6-7 times higher than the same pairs in Pancakeswap. Overall If comparing these two dexes average APR for the common pairs is higher on Nomiswap, however the total amount of pairs is considerably lower. The APRs is usually higher on middle-size DEXes due to less competition in farming pools compared to more popular counterparts.

Farming generally can be tagged as the most technical of these investment modes as it is largely new, and many investors do not yet understand how to navigate the complexities of the Decentralized Finance (DeFi) ecosystem. However, the APRs attached can be enormous, and coupled with the fact that there are farming pools dominated by stablecoins like BUSD/USDT, the risk involved in this venture is further minimized.

That being said, one should take note that trading in stablecoin is not an immunity from risk, as the unprecedented collapse of UST became an eye-opener for many, and as such, only assets with years of stability record should be embraced. 

• Trading: In a bear market as we are, traders usually resort to short selling, a trading system in which an investor borrows security, sells it on the open market and expects to buy it back later for less money. This strategy can be very profitable but it requires a lot of skill and is very time-consuming.

Agreeably, the urge to trade on volatility during periods of extended price drawdown may be there, and while this can pay off, inexperienced traders are better advised not to take the risk. Traders should be suspicious of Telegram channels or other avenues that send trading signals as most of these do not work. The best platforms for trading are Binance, OKX, Coinbase and Nominex. The latter one possesses pretty much all liquidity and trading pairs of Binance, but also allows numerous independent benefits such as unlimited referral program and fee reduction. Consequently, it becomes the first choice if Binance is blocked in your country for some reason.

Farming in a quiet harbor

As investors are looking to navigate through this current crypto winter, it should be understood that a positive success story is rather an exception from the general outcomes of crypto engagements during this phase. But one particular strategy can provide a more or less safe and  profitable outcome. The NMX/USDT pair on Nomiswap can guarantee quite a lot of benefits and reduced risks compared to other competing decentralized exchange platforms.

During periods of crypto winter, a lot of investors run at a loss, companies generally tend to declare bankruptcy, trades are liquidated, and a lot of negative realities dawn on people across the board. 

While this may be the obvious reality, there is a defined set of investors who make the most of the period to double their assets and whose valuation may generally grow as the market recovers over time. With HODLing, trading, staking, and farming among the strategies being adopted across the board, investors who choose high APR yielding strategies like Farming and who pitch their tents on trustworthy platforms can get the most out of this downtime.

Being an active participant in the Blockchain world, I always look forward to engage with opportunities where I could share my love towards digital transformation.

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.