5 Tips for Surviving a Crypto Bear Market
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5 Tips for Surviving a Crypto Bear Market
During a bear market, we need more security and less risk.
Navigating Web3 tides with focused insights
Author: DappRadar
Translation: TechFlow intern
During a crypto bear market, asset values decline, but there are always ways to survive this downturn. At DappRadar, we often talk about opportunities—when the market is booming, it's easy to get carried away by profits. But during bear markets, we need more security and less risk. That’s exactly what this article focuses on.
Surviving a bear market doesn’t mean pulling all your funds out of the crypto space. Instead, it's more about finding lower-risk opportunities that may also offer lower returns. While a certain cryptocurrency token might drop 90% in price, the dollar value of an NFT might only fall by 30%. Or, for example, its value could even increase when measured in ETH, SOL, or BNB. It's safe to say there are still plenty of opportunities in the market for those looking to survive the crypto bear market—that’s why we’ve listed the following five tips.
1. Swap into stablecoins instead of withdrawing to your bank account
Stablecoins are cryptocurrencies designed to maintain price stability and are backed by reserve assets. In this case, the most popular asset is the U.S. dollar. Traders use these stablecoins to maintain stability and move in and out of positions. Another benefit of holding stablecoins is the ability to stake them widely, often earning yields up to 6%. Regardless of market conditions, you preserve your dollar value while growing it at a steady pace. Alternatively, you can provide liquidity to two-sided stablecoin pools to earn rewards on platforms like Curve.
2. Sell tokens with weak fundamentals
A bear market offers an excellent opportunity to carefully review your cryptocurrency and NFT portfolio. Of course, everyone feels guilty about being overexposed, so now, when these assets are under serious pressure, it's important to research harder and determine whether an asset will rise enough to recover your capital—or better yet, return to or exceed its all-time high.
Regarding fundamentals, key metrics to examine include market cap, user base, and popularity. The user base can be assessed by checking the number of active wallets interacting with dApps on a specific network and reviewing the trading volume of a given token. Popularity can also be evaluated through social media platforms. Additionally, a high market cap to some extent reflects popularity.
3. Sell NFTs lacking innovation
For NFTs, we have a slightly different perspective. This is mainly due to the developmental nature of NFTs and the lack of tangible metrics available for guidance. First, consider the floor price—if it's lower than before but still significantly above the mint price, the NFT remains profitable. However, based on utility and demand, it may have already peaked. Therefore, checking the trading volume of an NFT collection is one way to gauge how much demand exists for the project. Perhaps even more critical is the roadmap, which tells us what to expect next and whether the team has delivered on their promises. Repeated failures could also be a sell signal.
For those holding large NFT collections (possibly made up of many low-value items), another option is to completely liquidate them if possible, and reinvest the proceeds into blue-chip NFTs such as Bored Ape Yacht Club, MeeBits, or CryptoPunks.
4. Blue-chip NFTs can serve as a hedge
Blue-chip NFTs are typically well-known, mature, stable, and considered excellent long-term investments. They are also seen as safer investments compared to most other NFTs and have a solid track record in terms of growth and value. In the NFT market, CryptoPunks are considered a blue-chip collection, as are Autoglyphs. Other potential NFT collections with strong foundations include Bored Ape Yacht Club, CloneX, and select Art Blocks collections such as Fidenza and Chromie Squiggles.
It's also worth noting that NFT floor prices are dynamic since they’re traded in cryptocurrencies like ETH. Many NFTs may simply lose 20% because Ethereum drops due to reduced demand and selling pressure—though this may not hold true for high-demand NFTs, whose floor prices might actually rise as ETH falls.
For most NFT collectors, blue-chip NFTs are often too expensive. The floor price for CryptoPunks is around 53 ETH, while Bored Apes sit at 105 ETH. This is where fractionalized NFTs come into play—people can buy a portion of an NFT at a fraction of the total cost and experience the ups and downs with much smaller risk.
5. Reduce higher-risk liquidity positions
You can convert all or part of your holdings into USDC or USDT, but what should you do about tokens locked in liquidity pools—especially those involving staked LP tokens? In such cases, this could be a good time to evaluate the value of these assets. How much do you have in these pools? What are you trying to protect? First, you must assess whether the tokens in the liquidity pool have strong fundamentals capable of surviving a bear market. For example, here's how you might categorize risk levels:
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Very low risk—liquidity pairs with stablecoins, such as USDC/USDT.
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Low risk—stablecoin paired with ETH or BTC (e.g., USDT/BTC or USDC/ETH). Yes, values may decline, but depending on the yield earned from staking, they could remain resilient.
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Moderate risk—ETH or BTC paired with smaller-market-cap tokens, such as ETH/SAND or ETH/REVV. These smaller projects may suffer significant devaluation.
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High risk—pairing two small-market-cap projects, such as REVV/SAND.
This entirely depends on the yield you can capture from these liquidity pairs. But to minimize financial losses, you may want to consider closing some liquidity positions. Of course, holding on is also a viable strategy if you're bullish on a project in the long term—but be mindful of position sizing.
An additional tip: when you claim your interest or rewards, consider transferring them into other more stable assets. This way, you better secure the value of your staking rewards. While this reduces potential gains if the market rebounds, it also limits your potential losses.
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