5 Mistakes to Avoid During a Crypto Bear Market

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Contributor, Benzinga
October 27, 2022

No one wants to lose money, which is what makes a crypto bear market so stressful. As investments start trending down, investors may struggle to decide how to best manage their portfolios. Should they sell to gain a profit or minimize a loss? Buy the bottom? Or hold onto all assets and simply ride it out?

The best course of action in a bear market will be different for every portfolio and investor. However, many people make emotionally-driven decisions during bear markets that have the potential to negatively impact their portfolio’s long-term success. The best way to avoid common mistakes during bear markets is to learn what they are and why people make them.

What Is a Crypto Bear Market?

A crypto bear market indicates a period of market decline, where the majority of assets trend lower in price. Supply of an asset outweighs demand (pushing prices lower) and market sentiment is overwhelmingly negative. Pessimistic investors who believe prices will continue to fall are, therefore, referred to as “bears.”

In traditional stock markets, a market is generally referred to as bearish when asset prices have declined 20% or more from their recent highs. However, given the extreme volatility seen in crypto markets, short and sharp drop-offs can often be misinterpreted as the end of a bull run. Because crypto markets often experience day-to-day (or even moment-to-moment) volatility, the term bear market is generally reserved for longer time horizons.

A bear market can be caused by several factors in the macroeconomic environment, including inflation, high unemployment, and geopolitical turmoil. However, it’s important to remember that it is normal for markets to cycle through different stages.

Avoid These 5 Mistakes During a Crypto Bear Market

It can be scary to watch your investments drop in value. However, avoiding these common crypto investing mistakes can help protect your portfolio and reduce stress in a bear market.

Panic Selling

When you see your assets declining in value, it may be tempting to sell off to prevent further potential losses. This is typically an emotional response, not in the best interest of your portfolio. Panic selling may seem like the right move in the moment, but it can be detrimental to your portfolio in the long run. 

On the flip side, holding onto every asset during a bear market may not be the right course of action, either, but selling your entire portfolio in a panic is rarely the answer. Instead, always conduct your own research and consult a personal crypto broker before selling or purchasing crypto in a bear market.

Making Emotional Investments

People tend to make emotionally driven investment decisions during times of high stress when their judgment is clouded. As a result, they are less likely to take rational action to manage their portfolio so (larger) losses could be on the horizon, which could otherwise have been avoided.

One of the most common instances of emotional investing is selling at the market bottom. It’s important to remember crypto bear markets are normal, and the declining value of an asset isn’t necessarily a cause for immediate concern. Bear markets don’t last forever and, eventually, turn into bull markets, which will raise the value of cryptocurrencies again. You don’t want to regret emotionally selling once you see the asset price rebound in the bull market to a price higher than you sold for in a panic.  

Exercising emotional restraint is key in bull markets, too. For example, buying into cryptocurrency because you’ve seen others turn a profit is no guarantee of gains. 

Being an educated investor is key to success. If you have nothing but a gut feeling to guide your decisions, ultimately, you won’t realize the returns you hope for. You need to invest time in order to invest with success. Research assets to understand their: use case and reason for existence; the team behind them and if they’ve reliably delivered against project objectives in a timely fashion, and how the asset has fared through market cycles. You’ll be able to lean on this fundamental analysis in mentally testing times, rather than instincts and luck, to make decisions that will better shape your portfolio to deliver strong returns. 

Trying to Time the Market

Some people try to predict the market’s movements to sell at assumed highs and buy at assumed lows. However, the market is often erratic and unpredictable. Timing the market rarely pays off and can lead to selling too soon or buying too late. The market doesn’t always move in the same patterns so there’s no surefire way to time it. 

Focusing Only on Short-Term Investments

It’s tempting to buy into crypto just to try to flip it in the short term. However, investors should know that short-term investments are riskier and overtrading can eat into your returns – more trading incurs more fees. While there is room in a portfolio for short-term investments, they shouldn’t make up an entire portfolio. Only holding short-term investments in hopes you can flip them might count as emotional investments. Short term investing is often seen as emotional due to the fear of missing out. 

High-quality, long-term investments may see slower growth in the short term, but they can better preserve your portfolio’s value during crypto bear markets. Historically speaking, even quality assets such as Bitcoin and Ethereum suffer through a down market, but they have a better chance of emerging from crypto bear markets, cycle after cycle, retaining value in the long term compared to lower quality assets that won't perform as consistently over time. Chat with a crypto broker to ensure you have a diversified short- and long-term investment portfolio.

Constantly Checking Your Portfolio

In a bear market, crypto will fluctuate and lose value. Constantly checking your account won’t change that, but it will cause stress. The more investors check on their portfolios in times of volatility, the more likely they are to act irrationally. Investors should stay on top of their portfolio’s movements, but checking it constantly is unhealthy for their well-being.

Should I Hold During a Bear Market?

The decision to hold or sell during a bear market depends on each investor’s portfolio in respect of their investment plan, risk tolerance and external cash requirements. Panic selling is never a good idea, but sometimes stubbornly holding an investment isn’t a good idea either, if warning signals are flashing

No matter what, investors should stay calm and make logical decisions on what’s best for their portfolio with their goals in mind. The smart way to do this is to stay on top of current trends and news to understand why the market is moving the way it is, avoid the above mistakes and always keep to a time horizon. Investing is seldom about instant gratification. Taking a loss in the present can be the best way to build wealth in the future.

Investors can work with a crypto broker to help create a robust crypto portfolio with the potential to achieve financial success. Crypto brokers live and breathe the markets daily and can pass on their insight to educate investors, who in turn can assemble a diverse portfolio and make decisions based on research, not emotions.

Signs Indicating a Bear Market Is Ending

Luckily, bear markets don’t last forever. Eventually, they give way to bull markets. So when these three things happen, it typically indicates the bear market is almost over.

  • Slower decrease in value: As a bear market ends, cryptocurrencies will still lose value, but more slowly. 
  • Volume increase: When assets reach their lows, many investors will buy in to hopefully gain a profit. An increase in volume can be a good indicator that the bear market could slowly turn into a bull market. 

No Risk, No Reward

It would be nice if the crypto market was always on the rise. However, that’s not realistic. As the old saying goes, no risk, no reward. The volatility in the market allows investors to profit. In crypto markets, volatility is considered a feature, not a bug.

It’s normal to worry about your portfolio during a bear market, and it can be hard to determine the best move. That’s why it’s a good idea to seek education from a personal crypto broker. They’ll help you build a diverse portfolio and navigate times of volatility.

Frequently Asked Questions


What is panic selling?


Panic selling is when investors get nervous about downward market trends, so they sell all or most of their holdings to try to make a profit or minimize losses, typically to the long-term detriment of their portfolio.


What are the signs of a crypto bear market?


Crypto bear markets are defined as long-term downward trends with a 20% decrease The definition of a bear market in traditional finance is when asset prices fall 20% over a period of time. In the world of crypto, the definition is more arbitrary and refers to a period of time where prices are falling and market sentiment is low.


How long do crypto bear markets last?


Crypto bear markets can last between a couple of weeks and years, depending on the larger economic environment.