Can You Earn Passive Cryptocurrency Income In A Bear Market? – A Complete Guide

A bear market is a common practice in the cryptocurrency market and everyday traders are used to it. It has been experienced for a number of times in the past and it will also happen in the future in all financial markets. The value of the assets has been depreciated by almost 70% from their high values in 2021 and many of the new traders faced their first bear market.

Everyone has to face the consequences of the bear market, but it can prove more challenging for the traders who have just began the market experience and have no idea about how to deal with the volatility of crypto market.

However, there are still multiple opportunities available for the traders in the bear market. The traders who have enough market experience know how to deal with the market volatility and ongoing downtrend.

This is a detailed article to help the readers in understanding the effects of a bear market on the crypto economy and the way out to deal with in a better way.

What is a Crypto Bear Market?

Traditionally when the prices of the assets fall by more than 20% of their actual prices in the market, it indicates the occurrence of crypto bear market. However, in the ecosystem of cryptocurrency, when the market prices of assets start declining for a longer period of time and the traders start losing confidence in the market, it refers to crypto bear market.

There is no specific time period defined for the crypto bear market to last. The experts and professionals are of the view that it may take about 3 months or more to end. There have been examples in the past where the bear market lasted for about three years that was from 2017 to 2020.

During the bear markets, the traders become hopeless and start losing confidence in carrying out further trade. This creates an environment of pessimism and hopelessness in the market. The traders do not pay heed to any good news spreading in the market and liquidate their assets anticipating the further decline of the prices.

Since the inception of Bitcoin in 2009, there have occurred about three bull markets in the crypto ecosystem and equally three bear markets have been experienced by the traders. During the bear market, the price of the assets falls, and asset loses its value.

After some time, the traders find out the assets being sold on bargain prices. They slowly gain the confidence to invest again and repair their economic losses. They start buying the assets and thus it marks the start of the end of a bear market.

Indicators of a Bear Market

Though there are several factors that could cause the bear market to occur but some of the common indicators can predict the start of a bear market for the traders.

  • Decrease in trading volume

Due to the prevailing uncertainty and unpredictability, people stop investing in the market. This leads to decline of market due to low economic activity.

  • Involvement of higher authorities

The interference of the government officials and unnecessary regulations imposed by them is also an indicator. It creates a hurdle in the crypto activities when the government officials make the situation complex. Many trade activities then happen offline causing a decrease in the financial activities.

  • Pessimism

It happens when the higher officials or the authorities start calling the crypto trade or market as a scam or fraud. This causes the traders to lose confidence in investing that leads to downfall of the market.

  • Death cross

This is a technical indicator for the start of a bear market. This is related to crossing of an asset from a moving average of 50 days to moving average of 200 days.

Causes of a Bear Market

As any stock market trends could be predicted easily by the professionals and experts if any downfall occurs, but this is not the case here. Similar to any crypto market, it is difficult to predict if the bear market will follow the trends in past or not as the crypto market is relatively still a new concept.

Natural calamities such as pandemics, disasters, wars or even geographic political crisis act as the trigger warning for beginning of bear market. This causes the economy to slower down. The policies and regulations set up on the local businesses and the intervention of government officials in the market activities also lead to crypto bear market.

When the market prices begin to fall, this marks the beginning of crypto bear market. When the prices decline continuously, the investors and traders start thinking that the prices will fall further from now on. This causes them to lose confidence in investing in the market that leads to the downfall of the economic activity further.

Survival in the Bear Market

When the market conditions become volatile and difficult to survive, it creates a situation of panic among the traders. The traders create their portfolio with a lot of struggle, during the difficult times it becomes difficult for them to make such decisions that could considerably take their market profile towards the wrong direction.

Even if any asset is making a development or have become popular among the traders in the time being, it also loses its value as soon as the bear market hits the market environment. Therefore, the traders should look forward to investing in long-term instead of focusing on the present prices in the market.

After the end of the bear market, it takes long for the traders to recover their losses and sometimes it becomes impossible to get back to the initial position. Therefore, the traders should learn the importance of capital preservation before investing in any project.

Advantages of a Bear Market

However, a bear market also provides a number of opportunities to the traders where they can earn passively even in the bearish market conditions. Some of the advantages a bear market provides are mentioned below.

  • Buy lower, sell higher

The experienced traders know how to deal with the bear market situation. The prices of the assets fall by about 70% of their actual prices. The traders purchase the assets at relatively lower prices and wait for the market conditions to return back to normal conditions. When the bull market returns, the traders end up selling those assets at relatively higher prices thus earning profit out of it.

  • Managing emotions

During the bear market conditions, pessimism and hopelessness prevails in the market. The traders lose confidence in trading the assets further.

During this crucial time, it is necessary for the traders to control their emotions and make decisions smartly without panicking. The traders should know that the bear market would come to an end after a certain period of time and the assets will again gain their actual prices.

  • Instills discipline and consistency

Bear market also creates a clear difference between the traders who invest in the market for short-term gains and those who believe in long-term investments. The experienced traders know how to deal with the situation and come out of the bear market smartly.

  • Risk resistance

A bear market also helps the traders to check out their risk tolerance. If a trader panics in this situation and ends up liquidating all his assets, he should know that he is not able to handle the stress situations in the market.

However, in case a trader keeps on investing further in the bear market while keeping himself calm is able carry out trade more effectively and can handle the risks in a better way.

How to Make Passive Income in Crypto Bear Market

Though it becomes hard for the traders to find out the assets that are not affected by the market downfall, still there are some commodities that may become the way for the traders to earn passive income in bearish phase. Here are some methods that could be used to make money during the bear market.

  • Staking

The importance of owning tokens is realized by the traders during the bear markets. One can make his market profile better and can easily generate income in such difficult days by using staking method.

The method by which one can gain interest by locking the coins is termed as staking. There are two kinds of staking methods offered by many platforms.

These two types include flexible staking and fixed staking. Using the flexible staking method, one has the authority to withdraw his assets any time. Whereas in fixed staking, the assets have to be locked for a certain defined period such as one month or more than that.

That are many centralized platforms that offer the staking of tokens such as Bybit, Kucoin, Crypto.com and Binance. Moreover, tokens can also be staked at multiple decentralized platforms. These platforms, earn the trading fee by providing the opportunity to the investors to liquidate their assets. These platforms include Curve, Balancer and Uniswap etc.

  • Crypto Trading

Trading crypto assets helps the traders to earn profit during the crypto market. The traders can buy the assets at lower discounted prices and when the market conditions return back to normal, they can sell them at relatively higher prices, thus earning profit. The traders can also compensate any loss that happened during bear market via crypto trading.

It can be hard for the traders to earn profit during bear markets but the ones who know how to earn and capitalize during difficult market situations can easily get through it. There are a number of available platforms that help the traders to earn money.

These are both centralized and decentralized platforms such as Kraken, Binance, dYdX2 and Uniswap. The traders can also trade through the social platforms such Robinhood and eToro.

  • Airdrops

It is another commonly used way to generate income. This method provides the opportunity to the traders to earn rewards from a firm for creating awareness among the public or promoting their project. There are a number of websites that offer earning through airdrop.

These websites include Earn Crypto, CoinMarketCap or Airdrop Alert. However, using these platforms, the traders have to be aware of the scammers and cybercriminals.

  • Mining

Income can also be generated in the bear market using mining. It proves helpful for the traders though the rewards earned are lower than a traditional bull market. The traders can participate in mining by joining the mining pools or doing it on their own.

In pool mining, a group of miners work on solving a cryptographic problem together and are rewarded according to the contribution of their hash power. When person mines by himself, he tries by himself to solve the problem and win rewards.

  • Dollar-Cost Average

When an asset is bought by the traders at regular price irrespective of the fluctuations in the price, this is said to dollar-cost averaging the investment. There are risks of buying an asset at its highest prices and then losing it all due to any mishappening.

Bitcoin, altcoins or initial cost offerings (ICOs) can be bought using this method. This provides a good opportunity to the traders to earn profit when the market rebounds.

There are a number of advantages that dollar-cost average provides to the traders. The two-third of the amount is contributed by the employer and the remaining one-third is made up by the profit gained from the investment. The traders who utilize the tax-advantaged saving vehicles can be greatly benefited by this approach. Therefore, the traders may compensate back their losses after the bear market.

  • Affiliate Marketing

The way of earning where a person advertises a product and promotes its. In case anyone buys that product, the person is then paid rewards for it. The traders could do this through different platforms such as social media, email and blogs. The traders can earn rewards in native tokens or may eb offered with high commission.

  • Stable Coin Investment Strategies

Usually, any stable asset such as US dollars or gold is hooked to the digital assets known as stablecoins. Any change in the market conditions or the volatile nature of the market cannot affect such assets.

Therefore, one can store capital in the form of stablecoins even in hard market conditions. The traders how find it difficult to deal with bear markets and difficult situations can find using the stablecoins such as USD coin or Tether profitable.

Stablecoins can be used to control the volatility of crypto market. It can provide the traders a compensation option in the case of bear market or inflation. However, one should be aware of the fact that the stablecoin failure can also lead the traders to loss. Therefore, it is important to peg the stablecoins against highly stable assets.

  • Creation of Nonfungible Tokens

A broad range of commodities is represented by the nonfungible tokens in the market. These commodities may include in-game items, art or collectibles etc. Like many other cryptocurrencies, one can sell, buy or trade the NFTs as they are stored over the blockchain network.

One can create his own nonfungible tokens to generate income during the bear market. There are multiple platforms with whom one can mint his NFTs with such as OpenSea or Rarible. Projects and other work can be sold as NFTs over these platforms by the photographers, artists or creators.

  • Working in Crypto Market

One can look out for some job opportunities in the crypto industry during the bear market. As the crypto trading is getting hype all around the world, the firms have increased their demand for the experienced workers who have a sound knowledge of cryptocurrency and blockchain. A wide range of jobs are available in the crypto industry.

These jobs offer the opportunity of product management, engineering, marketing, social media workers etc. A number of these offer the reward or salary in cryptocurrency. As the bear market ends, the value of the cryptocurrency rises upwardly.

  • Finding Better Opportunities and Be Optimistic

During the bear market, one has to keep control over his nerves and look for better opportunities in the market. There is no hard and fast rule of generating revenue during the bear market. One just has to stay optimistic and confident that the market will rebound back after some time and make his investments accordingly.

The best way to earn from the bear market is to buy the assets at lower prices and then sell them when the bull market returns. Trading volume could also prove fruitful for the traders who have the courage to wait for the normalization of the market conditions. The decentralized finance (DeFi) platforms have a number of opportunities for the traders to earn profit from.

Conclusion

There is no shortcut for making money during the bear market. However, one can refrain from moving towards loss by implanting correct investment strategies and looking forward to the long-term benefits of those investments.

One should always keep in mind, that bear market ends consequently and the market conditions normalize again. Therefore, one should try to capitalize from the available opportunities instead of panicking and losing it all at once.

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