How to make money on the fall of crypto
How to make money on the fall of crypto
The current macroeconomic environment combined with a sustained crypto bear market and the recent catastrophic events related to the downfall of the FTX crypto exchange have limited the number of earning opportunities for investors in the crypto space. The market value of nearly every digital currency, including NFTs, has decreased substantially. Many retail investors – facing realised or unrealised losses – have fled the crypto market or invested in more stable assets, at least temporarily.
2022 has been one of the most challenging years in the modern crypto history.
Still, there are ways to make money on the fall of crypto if you are a disciplined trader or willing to explore earning opportunities outside trading. We want to help you to find these opportunities and, therefore, in the course of this article, provide you with answers to the following questions:
- Why is crypto crashing?
- Can you make money when crypto goes down?
- 4 ways to make money when crypto crashes
- Other crypto considerations
Why is crypto crashing?
The crypto market is crashing right now due to a variety of factors. The primary reason is the unprecedented macroeconomic environment that led to a recession in many developed countries and sent interest rates to new heights to fight inflation. This resulted in massive downward pressure for high-risk assets, including the stock markets and cryptocurrency markets.
In addition, 2022 has seen some of the biggest crashes in the crypto industry, including the meltdown of the Terra-Luna ecosystems and the bankruptcy of Three Arrows Capital, Celsius, FTX and BlockFi. These blow-ups have lost customers billions of U.S. dollars and destroyed trust in the broader cryptocurrency space.
Finally, the increased regulatory pressure on the crypto industry from governments worldwide has been rising. Governments have been cracking down on cryptocurrencies for various reasons, ranging from financial crimes to money laundering.
Multiple factors have led to a significant crash in cryptocurrency prices in 2022.
These factors have created a perfect storm for the crypto market and caused it to crash. However, it is important to note that this might only be a temporary setback and that the crypto market will eventually recover.
Can you make money when crypto goes down?
Directly investing in crypto during a downtrend, for example, through dollar-cost averaging (DCA), can be successful if you have a long-term investment horizon and deliver a strong market recovery at some point. But also, if you have a shorter investment horizon, there are ways to build economic value during a bear market. This includes refinement and potential pivot of your investment strategy, alternative trading strategies like short-selling and day trading and alternative means like creating crypto-related content.
4 ways to make money when crypto crashes
Refine your investing strategy
Cryptocurrency markets have been volatile in recent years, with prices rising and crashing in short periods. During bear markets, it can be difficult to know where to invest your money.
However, long-term investing strategies are still viable and can help you maximise your returns. Here are a few tips to help you refine your long-term investing strategy during a crypto bear market:
- Don’t panic. Bear markets can be stressful, and it’s easy to get caught up in fear and make bad decisions. Remember that the market will eventually recover; don’t let yourself be swayed by short-term fluctuations.
- Do your research. Make sure you thoroughly understand the fundamentals of the coins you invest in through an analysis of market charts. Be aware of the project’s roadmap, team, and any potential risks associated with the coin.
- Diversify your portfolio. Don’t put all your eggs in one basket. Consider investing in various coins, as this will reduce your risk and increase your chances of profiting from a bull market.
- Set realistic goals. Don’t expect to make a fortune overnight. Set realistic goals for yourself and be prepared to ride out the bear market for a while.
- Take advantage of the market. Bear markets can be a great time to buy coins at a discounted rate, so take advantage of any opportunities.
Following these tips ensures that your long-term investing strategy is effective during a crypto bear market. With the right strategy, you can maximize your returns and ensure you’re well-prepared for the next bull market.
Short-selling crypto during a bear market
A way to make money when crypto goes down is through a strategy known as “shorting,” which involves taking advantage of a price decline by borrowing cryptocurrency and then selling it for a profit when the price drops.
Shorting is a form of trading that can be used to make money regardless of whether the market is going up or down, but it can be risky since you are betting on the price going down. If the price continues to rise instead of dropping, you could be stuck with the debt from the borrowed cryptocurrency.
On an exchange, you can borrow cryptocurrency from other users, sell it, and then buy it back when the price drops. If you are considering shorting cryptocurrency, you should research the market and understand the risks involved.
You should know the fees associated with shorting, as there may be higher costs associated with borrowing cryptocurrency and then selling it.
Day-trading on fast-rising altcoins
Day-trading on fast-rising altcoins can be a great way to make some extra money for any crypto trader. Altcoins are alternative cryptocurrencies that are not Bitcoin. They can often be traded for Bitcoin or other cryptocurrencies. Day-trading on these coins can be very profitable, as their prices can rise quickly and fall just as quickly.
The key to successful day trading on fast-rising altcoins is to do your research and to stay up-to-date with the market. To start, it is important to understand the basics of cryptocurrency trading and the different types of altcoins. It is also important to watch the news to keep up with any major events that may affect the prices of the coins. It is also important to understand the risks involved with day trading on fast-rising altcoins and volatile assets in general. While these coins can rise quickly and offer the possibility of huge profits, they can just as quickly crash and result in losses. It is important to have a plan to help manage the risk, such as setting a stop-loss or taking profits at certain levels. Also, don’t underestimate the amount of time this investment strategy requires on a daily basis, for example, analyzing market charts.
Finally, it is essential to remember that day trading on fast-rising altcoins is not a “get rich quick” scheme. While there is the potential to make big profits, there is also the potential to lose big. As with any investment, it is important to research, understand the risks, and make informed decisions.
Create cryptocurrency content
In addition to investing in cryptocurrency, many people are turning to content creation to earn money from their cryptocurrency investments. Content creation can involve creating videos, blogs, and other types of content that can be used to educate and inform potential investors about the cryptocurrency market. Content creators can be compensated for their work in cryptocurrency or fiat currency.
Creating content about crypto and Web3 can be a lucrative side hustle.
Not only can content creators earn money through their work, but they can also help educate others about the cryptocurrency space and help spread awareness of the potential of cryptocurrency. Content creation is an excellent way to capitalise on the potential of the cryptocurrency market, even during a bear market.
With the right knowledge and dedication, content creators can make money while helping to spread cryptocurrency awareness and make the cryptocurrency space more accessible to everyone.
Other crypto considerations
The crypto market has always been hard to predict and fast-moving. The market sentiment can change quickly, and new trends come and go in weeks. It’s, therefore, essential to stay on top of the ecosystem and observe events closely, which can influence the overall direction the crypto markets are moving. As we have seen since the outbreak of Covid-19 and the crisis in Ukrania, events outside the blockchain industry can have a high impact on the crypto markets, as they are still highly correlated to risk assets such as tech stocks.
But being curious and staying on top of trends are attributes that can set you up for success, despite a more prolonged market downtrend. This environment can also offer the highest upside potential, especially compared to investing at market heights where the sentiment is typically incredibly positive.
Even in a bearish crypto market environment, skilled and disciplined investors, traders and content creators can engage in profit-generating opportunities through specific trading strategies for crypto assets like short-selling and day trading or via alternative ways to earn money like content creation.
Also, remember that the crypto market is still nascent and that sentiment and the overall trend can change quickly. Keeping a close eye on the macroeconomic dynamics, regulation, and the blockchain industry can make you advantageous for future investments.