Bear markets are difficult to navigate, but that doesn't mean you can't profit from them. You only need to adjust your technique to earn $25 to $50 each day in passive revenue. First and foremost, quit attempting to short cryptocurrency. It's simply too difficult to do it correctly.
Shorting crypto when the market is down or purchasing at all-time highs is precisely what the market wants you to do, and it won't earn you any money. When Bitcoin crash in value, a lot of people wonder if it's a bubble or if cryptocurrency, in general, is some kind of clever sleeper cell fraud.
Why do you think that is? Because people click on it, it generates revenue for media firms and YouTubers. Both sides have a never-ending supply of counter-arguments. And the fact is that no one knows what will happen next.
This is due to the fact that we're all simply clueless animals swaying in the market. As a result, we need tactics that can make us money even when the markets aren't cooperating.
Method Number 1
So at the beginning of this article, I said you probably shouldn't short crypto, and that's still technically true. But there's one strategy that automatically balances long and short positions, making it very, very hard to lose money on your investment while kicking you out some passive income at the same time that's using spot-futures arbitrage bots. And trust me, it's not as scary as it sounds.
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| pic credit: pionex |
I've actually been testing out a few of these bots myself to see what is possible to earn in a bear market. So allow me to summarize. Using bots on Pionex, which I have linked in the description, you can basically split a buy between long and short positions.
Let's say you invested $1,000, the bot would take the crypto of your choice, put $500 into a long position and $500 into a short position. So say if Bitcoin goes up in price, your long position goes up and your short position goes down.
The result is your $1,000 never goes much above or below that starting investment amount. This strategy basically insulates you from market movements while the bot works to earn you money. But of course, that in itself doesn't make you any money.
That's like betting $100 for and against the exact same basketball team. Not a great way to make money, but here's where it gets interesting. A spot-futures arbitrage bot earns profit from something called a funding fee or funding rate.
These are fees paid to investors as an incentive to move their capital into either long or short positions. This is to ensure that the futures and spot prices for an asset stay in line. It's really no different than a company lowering its prices because they ordered too much inventory.
Funding fees often change based on market sentiment. I've seen rates as high as 1.2% daily during bull runs, which is absolutely insane. But bull runs don't last forever and neither do those insane rates. However, because this strategy is market neutral, you can still make money in bear markets, just not quite as much money.
Average returns seem to be somewhere between 15% and 50% annually. In my test, during a severe downturn, I was making about 5% APR in the worst of times, which of course isn't an insane return. But this is at nearly zero risk and you'll be one of the few people who are actually making money during the dip.
Then once markets turn bullish again, you'll see that APR shoot way up beyond 50%. So let's assume an average yearly return of 27%. At that rate, it would take an investment of $34,000 to make $25 a day in passive income. And of course, that can be scaled up or down. An investment of $1,400 at 27% APR would get you $1 per day passive income. The app that I used for this was Pionex.
Method Number 2
Now the next strategy to profit in a bear market has to do with a smarter way to buy the dip. Now trigger warning, this uses a bit of technical analysis, which if you aren't familiar, you can think of technical analysis kind of like Astrology for guys. And while I'd never bet the farm on TA, they are tools here that can give us some insights. One of my favorites is the Relative Strength Index or RSI.
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| pic credit: trading view |
This can give you more information on when maybe the best time to buy the dip. RSi is pretty easy to find. Here you can see the candlestick chart for Luna. Select the indicators on the top right. Search for RSI and it shows the purple line on the bottom beneath the candlestick chart. As Shown below
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| pic credit: trading view |
That is RSI. Under normal market conditions, when RSI dips below 30, this means an asset is oversold and may be due for an increase in price. The opposite is true for when the RSI is over 70, the price is more likely to decrease. RSI doesn't use any black magic. It just measures the magnitude of price changes over time. Anyway, you can use this to help find a good time to buy.
One strategy is to use the RSI divergence strategy. Here we need to compare price trends and RSI trends and find where these two go in the opposite directions. Typically RSI follows price movements, but on rare occasions, it doesn't and a trend reversal is more likely to happen.
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| pic credit: trading view |
We can see an example of this on TradingView, line A traces a downwards trend in Bitcoin's price, while the RSI in the same period moved upwards, and in the days that followed we saw a reversal and the prices moved back up.
Now line B is a little bit trickier to spot, but the same holds true. At the point that price and RSI diverge, Bitcoin hit its relatively high and took a dive in price in the days after. Now what I want to point out here is that there are tools that can help you take a more measured approach to buy the dip.
And if you don't want to deal with looking at charts, there's nothing wrong with simply dollar-cost averaging over time, or just leaving some cash on the side.
Method Number 3
Now, allow me to show you what to do with that cash that you have sitting on the sidelines to earn you even more money. Of course, none of this is financial advice. The thing is, Bitcoin has a gravitational pull and when Bitcoin is going down, you bet it's taken just about everyone else with it.
That is unless you are a stablecoin. Stablecoins are kind of like digital cash that allows you to act like a bank earning money on your money like a bank does. This means regardless of market conditions, you can get safe returns of 8% to 20% APY. Now sure this isn't 83,000% APY, but here you can be sure that the coins that you lend are still worth a dollar while they're earning you interest.
So what do you need to make $25 a day? Using my personal experience and getting around 16% APY an investor would need to put up $57,000, $5 a day in passive income would require an investment of about $11,500.
Really not bad considering this is one of the lowest risk strategies for making passive income. Lending has been my crush when it comes to crypto income and that means if lending is my crush then staking would probably be my side chick.
Method Number 4
So let's do an honorable mention for staking which isn't the best possible method for passive income in a bear market but it has its place. So when I think of staking in a bear market, I think it's wonderful if you're staking crypto that you plan to hold long term.
If you plan to hold long-term there's really no downside to staking. You can earn an extra 4% to 12% on your crypto but of course, you are still subject to the crypto you're holding potentially going down in price and the problem is when prices go down, so do your staking rewards in relative dollars.
So here's what I mean. Let's say you're staking crypto making $10 a day the crypto has staking rewards of 10% so that means you have $36,500 invested. If that crypto tanks 40%, not only does your $36,000 not decrease but so does your $10 a day in staking rewards because staking rewards are paid out based on current value.
This is why I think if you plan on holding that crypto long-term anyways you might as well stake it. But if you're looking to just make passive income one of the other options on this list is probably better.
Method Number 5
Now let's cover a more experimental method. Just a few days ago, Cointelegraph came up with a report on their proprietary algorithmic indicator called the Vortex Score. It's available to pro subscribers, and while this isn't an investing instrument like a bot, you can use the scores associated with some cryptos to make some well-timed investment decisions.
And the proof is one strategy called Buy 90/Sell 70 was up 15% in January during a very large downturn. So let's back this up just a little bit. The Vortex Score is calculated by an algorithm that factors in as much historical data as possible, and then draws correlations to movements in price that come soon after.
It looks at things like Twitter activity, trading volume, recent price movements, and social sentiment. And the resulting score tells us how confident the algorithm is that the asset is either bullish, neutral, or bearish. And then it goes even further by factoring in how consistent the crypto's behavior is in relation to its history.
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| pic credit: Cointelegraph |
A score of 50 is neutral, which means that the Vortex score doesn't really see any correlation. But a more rare score of 90 indicates that the observed set up of trading conditions appeared before a dramatic spike in price.
Now, there are many test strategies using Vortex, but the only one that was in the green for 2022 is Buy 90/Sell 70. So using this approach, you'd basically buy your asset if and only if it attains a score of 90 or higher, and then sell as soon as it dips below a 70.
But of course, we can't bank on this 100%. Even Cointelegraph themselves issue a disclaimer whenever they report on how successful these strategies are. One, they don't account for liquidity or market depth on the exchange that you might be using.
And two, they don't account for the trading fees that you'd find yourself paying, which could wipe out the majority of your gains. So I found this an interesting algorithm to keep my eyes on, but again, I won't be betting my life savings on it.
Bottomline
Now, there's a reason for the saying Everyone's a genius in a bull market because it's simply the easiest time to make money. It's literally harder to be wrong in a bull market, but it's not always Sunshine and roses.
So it's important to be a well-rounded investor and understand opportunities that can be taken in even the worst markets. And as you can see, it's totally possible to make great passive income, whether crypto is up 20% or down 40%.