While the end of 2020 was quite the positive moment for the crypto industry, 2021 has seen more of a bearish trend. Bitcoin has held around the $30k mark for some time now, and altcoins are staying low as well. With a crypto bear market seemingly in place — it certainly won’t last forever — it’s easy to be down on crypto for now.
However, you don’t have to be negative about the current market state. In fact, there are many ways to make money during a crypto bear market. This guide will detail quite a few of them. Let’s get started.
In this guide
What is a crypto bear market?
Before getting into the ways to profit during a crypto bear market, we must break down what it even is.
A bear market is when cryptocurrency prices as a whole are falling significant amounts compared to recent times. Generally, these times follow an incredibly positive, high-priced market. Traders might seem more pessimistic than usual, and millions of dollars will pour out of the market. It might seem like a bad time for crypto, but all markets go through periods of drought.
All it takes to get out of a bear market are a couple of positive stories and some institutional money pouring in. It’s best to stay positive during these times, against all odds. Now, here are the tips to keep you optimistic and trading.
Yield farming is the act of staking, or locking in, your cryptocurrencies into a platform to earn interest on them, not unlike holding money in a savings account. The amount of interest is based both on how much you stake and the popularity of the token at the time. Your tokens are being lent out to other users, who are taking out loans at various interest rates.
In doing so, you’re rewarded that interest in the form of the platform’s token. The idea is that as more people use the platform for lending and borrowing, its asset will rise in value, bringing more profits to all contributors. On top of this, you can also earn tokens for simply participating on the platform. So, you’re earning from the interest on your lending as well as from the platform’s various payouts.
Similar to yield farming, staking is, well, the act of locking in your cryptocurrencies. However, instead of lending them out for loans, staking is used to validate transactions on your blockchain network of choice — also known as a Proof-of-Stake (PoS) consensus method. By staking, you’re essentially telling the network you’re willing to keep your device connected and validating transactions.
The more you stake, the more priority you’re given to validate transactions, and the more you earn overall. The amount you earn is based on the network, and payouts vary as well. It all depends on what the community decides. As you can imagine, it’s a perfectly valuable way to profit during a crypto bear market.
To many, staking is the ideal alternative to Proof-of-Work (PoW) as it enables network participation from all, no matter how powerful their hardware. Ethereum 2.0 is the largest network working to push this method forward, and will have PoS within the next few years.
While Proof-of-Stake is one of the more energy-friendly methods of profit and transaction validation, cryptocurrency mining is the original one — and it’s still a valid way to make money even in a bear market. That said, you’ll need some powerful hardware.
Mining is the act of utilizing computer hardware to solve complex equations and find a unique, hexadecimal code representing each block. Those codes validate the specific existence of each block, proving the transactions within it are valid. The first miner to find the code earns rewards in the network’s token, which is why you want the most powerful hardware possible. It’s a race to get there before the rest.
If that sounds too difficult, however, you can participate in a mining pool. A mining pool compiles the power of all participants to find the hexadecimal code. From there, rewards are divvied up based on each user’s contribution to the pool, though it takes some of those fees as well. It’s not the most profitable way to mine, but it’s certainly more accessible.
Otherwise, you also have the option of cloud mining, which is the act of contributing money to a platform that does the mining for you. As a result, you earn the rewards based on your investment. It’s not the most ideal way for many to mine, but it’s there for those who don’t have the hardware to participate.
Forks and airdrops
If you’re interested in various altcoins and alternative cryptocurrencies, you can certainly profit from forks and airdrops. As you may know, a fork is when users vote to diverge one blockchain network from another. The two share a history up until the forking block, but from there, they exist as their own networks with potentially different rules, consensus, and more.
A simple example is Litecoin, which is a fork of Bitcoin. Some users wanted Bitcoin to validate transactions faster and cheaper, so they forked the network to program in their own solutions. What’s interesting here, however, is when a hard fork involves an airdrop.
An airdrop is when holders of the old token are given the new token as an incentive to participate in the forked blockchain. Depending on the value of the said forked token, you can earn quite a bit from simply holding it. Forks are somewhat common in the blockchain space, and paying attention can ensure you’re profiting off of each one. It’s a different form of passive income, for sure, but one that can truly benefit you by paying attention.
Margin trading is the act of trading bitcoin with money you borrow from another trader. This means that any profits are losses are essentially multiplied by how much you borrow. This is a process called leverage, and it can be a great way to earn some extra funds. That said, it’s risky and can also mean you’re losing more.
This is a method of trading only recommended to more experienced traders. It’s certainly a way to increase your profits during an otherwise bear market, but newer traders be wary. You can lose a lot more than you otherwise would in this case.
Like margin trading, scalp trading is only recommended to more experienced traders. Basically, you’re taking advantage of the small, daily movements of various altcoins. You want to focus on more volatile currencies, for sure, and read vast amounts of technical and fundamental analysis.
As you begin to understand trading patterns in your various coins of choice, you can make trades at a more accurate level — and with just minutes in between each one. You’re not really profiting a ton with each trade, but these conversions will add up over time, generating you a great amount of funds in the long run. This is a more dedicated version of day trading, often involving hundreds of transactions a day. It’s somewhat dangerous, but a certainly valid way of profiting during a crypto bear market.
Analyze smaller projects
Newer crypto projects are a dime a dozen, but there are certainly diamonds in the rough. If you spend some time doing research on the newest tokens and investing in them as they become available, you can likely profit off of the right projects. Even if we’re in a bear market, you’ll ideally get in early enough that even a slight increase would generate reasonable gains.
There’s always something going on in the market. You just have to learn how to properly pay attention.
Work in crypto
If you have enough knowledge to trade in and profit with crypto, why not get paid for it? There are various jobs all over the crypto space that will be more than happy to pay you. Plus, most of them pay in cryptocurrency, which will probably become more valuable shortly after you acquire it. There are so many options out there, too. You can consult, write, market, or associate yourself with specific projects and get paid to assist.
The possibilities are endless, here. All you have to do is get creative.
Tips for profiting during a bear market
While the aforementioned are valid methods of profiting during a bear market, here are a few tips to consider no matter how you choose to participate.
Don’t fall for FOMO
The fear of missing out (FOMO) is a significant factor when it comes to trading in any industry. Point is, don’t lose your money investing in something just because others say so. The prospect of profiting off of some random altcoin that everyone’s talking about is a lot to handle. But, most of the time, when you’re hearing about a project, it’s already too late. At least, too late for a short-term profit.
Never invest blindly based on another’s word. Do your own research and generate your own profitable moments. It’s difficult to resist, for sure, but worth doing so in the long run.
Never invest more than you can afford
You’ve surely heard this multiple times by now, but it’s always worth stating. Never invest your life savings in something as volatile as cryptocurrencies. The prospect of doubling all of your funds is exciting, no doubt, but it’s not worth the alternative.
No matter where you’re investing, only do so with money you can afford to lose. You and your family will be grateful for following this mantra.
Learn how to analyze
It’s best to follow different charts around the Internet from reputable sources. Mix your knowledge with both technical and fundamental analysis, follow experts and reputable content creators on YouTube and Twitter. Join Discord and Telegram communities and see what others have to say. Of course, there’s a fine line between listening to advice and falling for FOMO. Don’t do the latter if you can help it.
There’s nothing wrong with learning from more experienced traders and such. Just make sure it’s balanced with your own research and insights.
Crypto bear markets can also be rewarding
Now you’ve learned pretty much all there is to know about making money during a crypto bear market. Many of these policies are ways you can profit during better market days as well, but now you have a foolproof bag of tricks to keep going no matter the state of the market.
There’s no question that there are good bargains to be had in a bear market, especially with pioneering projects developing breakthrough solutions. It’s a matter of patience and caution, but it can be extremely rewarding. The crypto market also has multiple profit routes in the form of DeFi, and any good investor would know to take advantage of that.
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