How To Invest In The Crypto Bear Market (2024)

Nearly every asset class has been crushed in 2022 so far. Stocks and bonds are down sharply, and gold is off by around 10%. Only cash equivalents have sustained a positive return.

None of these have seen more pain than cryptocurrency. In November 2021, Bitcoin (BTC) was close to $69,000—today, it’s around $20,700, a decline of nearly 70%. Ethereum (ETH) is down 58%.

Altcoins are no better, with Cardano (ADA) and Solana (SOL) shedding more than 70% and 55% of their value year to date, respectively.

So is there anywhere in crypto to invest right now?

Beware the Crypto Bear Market

This year’s drawdown is only the latest in a long line of bear cycles in this highly cyclical industry. So why does this time feel so stark for cryptocurrency?

It’s worth remembering that crypto was not around for the Great Recession and the financial crisis of 2008. In fact, both events inspired Satoshi Nakomoto to launch Bitcoin in the first place in 2009.

Between then and the end of 2021, the U.S. stock market enjoyed one of the longest bull runs in history.

Cryptocurrency has grown tremendously from its earlier days, so extrapolating past price data to now is a tricky business.

What we do know from previous crypto winters is that some cryptocurrencies will cease to exist, and it’s unlikely that crypto will rise substantially until the stock market recovers.

The coins to invest in are, therefore, ones that have the strongest fundamentals, chiefly real use cases. These cryptos are most likely to survive a prolonged period of subdued buying.

Cryptocurrencies reliant on marketing and community, such as meme coins, only stand to benefit from bull market hysteria, with limited survival during downturns.

Even in the less daunting crypto winters of days gone by, many coins failed to recover from previous all-time highs. Others, of course, are gone forever, and this time will be no different.

Large-Cap Cryptos Are Safest

Similar to blue-chip stocks, the biggest cryptocurrencies will likely weather the storm the best. These coins are the closest thing to an established record.

• Bitcoin. Nothing is surprising in saying that Bitcoin, the world’s biggest crypto, is the safest bet in the current bear market. It still has a market cap of $396 billion, and it’s held on the balance sheets of public companies. Institutional adoption has been scaling up and has carved out a role for itself in the mainstream financial markets.
• Ethereum. ETH has established itself as the leading smart contract blockchain, the base layer of the decentralized economy. Ethereum and Bitcoin represent nearly 60% of the market—immensely volatile and risky but the most established.
• USD Coin (USDC). With markets plunging everywhere, this stablecoin has been one of the main crypto refugees this year, based as it is on the U.S. dollar, the ultimate safe haven. “We have seen a tremendous rise in the dollar,” Matt Forester, chief investment officer of Lockwood Advisors at BNY Mellon Pershing, told Forbes Advisor. “It’s a juggernaut in the middle of every securities transaction and payment around the globe.”

Note that owning fiat-based stablecoins is a way for crypto investors to secure their wealth in dollars without leaving the crypto market.

It can also allow investors to take advantage of yields within decentralized finance protocols (DeFi). These DeFi protocols support financial products and services built on top of blockchain technology.

How to Invest in Crypto Long Term

Crypto investing should be viewed through a long-term lens. In the short term, crypto is prone to immense swings in value.

Speculators who don’t have a long-term time horizon take on massive risks from the heightened volatility of the crypto markets. If an investor can hold onto their crypto for long periods, they can weather the storm of short-term price drops as long as the underlying asset is valuable and will survive a bear market.

With short-term trading, the scope for gains (and losses) is far greater. For some observers, the difference comes down to gambling versus investing. The former offers greater potential for gains in the short term yet resides much further out on the risk spectrum. With greater upside, of course, comes the greatest risk.

Right now, it is important to remember that the vast majority of cryptocurrency investors are deep in the red for the year.