What is the best way to build wealth during a bear market?

The cryptocurrency market is undoubtedly in a bear market cycle that could last more than a year. During this period, some investors panicked as they saw their gains disappear overnight. Others who were more confident in the long-term potential of cryptocurrencies saw this as a buying opportunity and continued to deploy capital in the market. In less-than-ideal market conditions, choosing the right approach is more conducive to maximizing gains.

For those looking to take advantage of current market conditions to buy more crypto, the first step is to identify which projects are selling for less than their potential future value. This is a critical step as most crypto bear markets are unrelenting to weak projects and many of the tokens in the top 50 may never reach new all-time highs again. For example, during the 2017 bull run, tokens like Neo , Nano, and Stellar reached unprecedented highs. There are likely many projects facing a similar fate in this bear market, especially those that are more supported by hype and future promises rather than based in real-world use cases. Some of these include alternative layer-ones, metaverse tokens, gaming platforms, and unsustainable DeFi projects.

In this case, the best cryptocurrencies to buy are those with a proven history, a large developer community, and ongoing activity around the project. Some of these include tokens like Bitcoin , Ethereum , Chain link, and Polkadot, but many others also fall into this category.

Once you have found your ideal portfolio, the next step is to choose when to buy. A common strategy is to buy a large number of coins at once and hope that their prices are near the bottom. Unfortunately, this is very difficult and it is easy to time the market incorrectly and end up losing more money as the market continues to fall. Trying to time the market is like trying to catch a falling knife - it rarely goes as planned.

A more ideal strategy is dollar-cost averaging. Dollar-cost averaging is when an investor repeatedly buys a specific amount of an asset, whether it be daily, weekly, or monthly. With this method, investors are able to purchase assets at a lower average cost than if they purchased all at once, and with less risk. For example, if someone purchased 1 ETH for $1,000, and then ETH continues to fall. However, if they purchased $100 of ETH over 10 weeks, they are more likely to have purchased at a lower average cost, resulting in more gains when the market recovers.

Another often overlooked bear market strategy is staking. Many top cryptocurrencies, including Ethereum, Polkadot, and Cardano , allow users to stake their tokens and earn 3-5% APY. For investors who plan to hold their tokens through a multi-year bear market, these returns can be very lucrative once crypto prices recover. For example, assuming an interest rate of 5%, staking 10 ETH for two years will generate a return of approximately 1 ETH. Major exchanges such as Coinbase and Binance offer staking support but take a portion of the profits as fees.

Dollar-cost averaging is a rigorous approach that requires a long-term outlook on the market and confidence in one’s decisions. If used properly, it can lead to greater gains than simply buying into a market crash. Many top exchanges, such as Binance and Coinbase, support regular weekly purchases, which will help retail investors accumulate cryptocurrencies over the long term. This, combined with the selection of good projects and staking, will help investors accumulate wealth during bear markets.