Bear markets can be brutal. Don’t try to predict the next one, rather be prepared for it!
Bitcoin is down as much as 40% from recent highs, so it is understandable that many fear the onset of a prolonged bear market. It is not yet clear whether Bitcoin will recover soon or whether the current situation will turn into a long-term decline. In any case, it is better to be prepared for a bear market than to try to predict one. With the right strategy, you can actually benefit from a bear market!
What it’s like to live through a bear market… or three
We at Trezor know a thing or two about the hardships of a bear market. Just consider our history, retold with bear markets in mind:
We introduced the world’s first hardware wallet prototype in the depths of the first major Bitcoin bear market, in 2012. Bitcoin back then was still little more than a far-shot experiment, with price making a 93% correction after hitting an all time high of USD 30:
The official release of Trezor Model One came in the summer of 2014, just as the market was crashing and Bitcoin was entering its second major bear market, at the bottom of which it would lost 85% of its value:
And the release of our flagship Trezor Model T in the fall of 2018 was, again, marked with price crashing all around us. Bitcoin lost 84% of its value at the bottom of its third bear market:
It’s safe to say we know a thing or two about navigating a bear market both as individuals and as a Bitcoin-focused company. Things can get really tough, and you often find yourself questioning your beliefs and start to give up on your optimism.
But there are two clear facts we have learned from the past bear markets
First, Bitcoin always recovers and emerges stronger than ever before.
And second, patience and long-term outlook pay off.
What’s the best strategy for the next Bitcoin bear market?
In 2017, many people thought Bitcoin was going to drop back to sub-USD 1000 levels, but it never happened. Lesson learned: don’t try to time the market and predict Bitcoin’s price moves. You’ll only end up with less bitcoin and more regrets.
The best strategy to build up a solid Bitcoin position over the past years has been to dollar-cost-average (DCA) – to buy bitcoin regularly, no matter where the price stands at the time. Below is an illustration of the same investment of USD 2,100 deployed either in a lump sum or a DCA (USD 10 purchases every week) fashion, starting from 2017’s ATH of USD 19,500.
Adopting the DCA approach essentially means saving in bitcoin – preserving the long-term purchasing power of your earnings in the global neutral money. The main benefit of this strategy is the shift in your mindset: you no longer stress about the volatility and the fluctuating value of your stack in fiat terms; instead, you rejoice over the ever-increasing amount of bitcoin in your wallet. As DCA requires a long-term outlook, it stops you from panicking during dramatic price drops – to a certain extent, you start to welcome such opportunities to stack cheaply! The popularity of the DCA approach can be felt in many bitcoin-centric products offering it – soon Trezor users will be able to DCA with Invity, the Trezor Suite-native exchange aggregator, as it opens up DCA all its users!
Besides DCA, there are a few other important rules to safely navigate you through the next bear market:
The satoshi mindset. We are used to accounting in full bitcoins, but did you know there are 100 million satoshis in one bitcoin? Switching to the satoshi mindset helps a lot with appreciating how much bitcoin you really have. Being a millionaire sounds better than having 0.01, right? Every satoshi in your wallet matters; take good care of them and they’ll take good care of you in the future.