How to control your crypto portfolio during a downturn: 7 proven approaches

The cryptocurrency market is not a frozen system, but a dynamic organism that breathes in cycles of rise and fall. A bear market in crypto is one of the most testing periods for any trader. It’s a time when optimism turns into doubt, prices lose zeros, and trading volumes evaporate. But the paradox is that it’s precisely during these moments that future states are born.

Understanding the Nature of a Crypto Downtrend

A crypto bear market isn’t just a 20% decline like in traditional finance. It’s a long period when investor confidence hits a minimum, demand disappears, and prices can plummet by 90%. History remembers the “crypto winter” of 2017–2019, when Bitcoin dropped from $20,000 to $3,200.

Such periods occur approximately every four years and usually last more than a year. It’s part of a cycle, like the changing seasons. And if you’re prepared for this, you can not only survive the crisis but also profit from it.

Strategy 1: Dollar Cost Averaging Instead of Panic

DCA (Dollar Cost Averaging) is a simple idea: invest equal amounts at regular intervals, regardless of the price. While the market is falling, you buy cheaper. When it’s rising — you’re already in profit.

Action plan:

1. Choose an asset (for example, Bitcoin at the current price of $89K)
2. Determine a fixed amount ($100, $500, $1000 to choose from)
3. Set a schedule (every Monday, the first day of each month, etc.)
4. Automate purchases through a reliable exchange

The main trick of DCA is that you automatically buy more when cheap, and less when expensive. The risk is spread out, emotions are turned off. It’s a salvation for beginners who are afraid to “catch a falling knife,” and a clever move for professionals who know: market timing is less important than market participation.

Strategy 2: HODL — The Philosophy That Works

HODL came into crypto due to a typo — someone in 2013 typed “HODL” instead of “Hold.” But it’s more than just a word, it’s a philosophy: buy an asset and hold it despite volatility, panic, and FUD.

HODLers believe in the fundamental value of the technology, not catching every daily candle. They sleep peacefully while others panic because their horizon is not months but years.

When does it make sense?

• If you can’t trade short-term (and honestly admit it)
• If you believe in the future of crypto with all your heart, not just seeking quick profit
• If you want to avoid a double psychological blow: missing the rebound after a panic drop

HODL protects against FOMO (fear of missing out) and FUD (uncertainty). When everyone panics, HODLers keep working out at the gym and don’t check the price.

Strategy 3: Diversification as a Lifeline

A diversified portfolio is not just a trendy word, it’s insurance against collapse. Concentrating on one asset risks losing everything. Spreading investments gives you a chance.

By Asset Types:

• Bitcoin — portfolio anchor, safe haven asset. Less volatile than altcoins, but also rises more cautiously
• Altcoins — high-risk dynamo. Can fall 95%, but also increase 100-fold
• Stablecoins — a “canned food” for a quiet night. USDT, USDC let you sleep peacefully
• NFTs — access to new sectors: GameFi, metaverse, digital art

By Market Capitalization:

• Major projects (top-20) — more stable, but growth ceiling is lower
• Mid- and small-cap — more volatile, but higher potential
• Micro-caps — gambling, not investments

By Sector: Layer-1 solutions, DeFi, AI tokens, Web3 projects — each sector lives its own life. When one falls, another might grow.

Strategy 4: Shorting — Earning on Decline

If you’re confident the market will fall further, why not bet on it? Shorting is selling crypto you don’t own, with the expectation of buying it back cheaper later.

On paper: borrow 1 BTC, sell for $89,000, wait for it to drop to $70,000, buy back, return 1 BTC, pocket the difference.

In reality: you need composure, because BTC might rise to $120,000, and your losses will grow exponentially. Shorting isn’t for beginners. It’s a weapon that can kill the owner if misused.

Strategy 5: Hedging — Insurance

Hedging is when you open a counter-position to insure your main one. For example, you hold 10 BTC (worth ~$890K), but fear the price will drop.

Solution: open a short position on 10 BTC in futures. If the price crashes, your long will lose, but the short will profit. Losses offset each other, leaving only the fee.

This isn’t an investment, it’s a layered risk reduction. Use futures and options as financial tools for protection.

Strategy 6: Limit Orders at the Bottom

Most traders dream of catching the exact bottom. No one can. Markets operate 24/7, drops happen in milliseconds, and you’re sleeping.

Instead, place multiple limit buy orders at different levels: 10%, 20%, 30% below the current price. When the market falls, orders will trigger automatically. You won’t catch the exact bottom, but close to it. Virtually without cost.

Strategy 7: Stop-Loss as a Discipline Tool

A stop-loss order is a safety net. “If the price drops by 15%, sell half of the position and take the loss.” It sounds painful, but it saves from catastrophe.

Stop-loss helps:

• Prevent irrational emotional decisions
• Limit maximum loss
• Protect profits if a rebound occurs

Set a stop-loss when entering. Forget about the order. When it triggers, you’ll thank your past self.

Key Survival Rules

1. Invest only surplus funds If you need money for food, loan payments, medical bills — this isn’t investing, it’s gambling. Crypto can fall another 80%, and that’s normal.

2. Keep learning constantly Read project whitepapers, analyze tokenomics, study price histories. Follow influential crypto figures but don’t copy blindly. Draw your own conclusions.

3. Due Diligence — Sacred Before each investment, study:

• Whitepaper — document explaining what the project does
• Tokenomics — how token distribution is arranged, avoiding pump-and-dump schemes
• Team — who created it, who manages it, their backgrounds

4. Security — Not a Game Your crypto costs money. Store it in a cold wallet (Ledger, Trezor), not on an exchange. Private keys are your real money.

5. Realistic goals and risk limits Before buying, decide: what’s the maximum loss you’re willing to accept? 50%? All? Set take-profit and stop-loss. It’s like a battle plan — once the fight begins, it’s too late to think.

Final Truth

Bear markets come and go. They’re part of every market’s history. Experienced investors don’t fear them because they know: after winter comes spring. Those who bought during the “crypto winter” of 2018 are now millionaires.

The key is proper psychology, discipline, and strategy. Don’t panic, don’t go to extremes. Use DCA, diversify, set stop-losses, believe in the long-term future of crypto.

Crypto bearish market — it’s not the end of the world. It’s an opportunity. The only thing that matters is knowing how to use it.