Introduction
The cryptocurrency market is down yet again, after fallout from Silvergate Bank and a U.S. regulator-led lawsuit against KuCoin weighed on investor sentiment, effectively wiping out much of Bitcoin’s gains in the first quarter of 2023. Opinion is split on whether the bottom is in; or if we are headed for more trouble yet: Is this a time to buy the dip, or is it wiser to sell? While technical and market sentiment analysis may help to predict price movements, the markets tend to catch many by surprise.
As an investor, the idea of a market crash can be unnerving, and the instinctive response is to sell to avoid losing money. However, while this may seem like a good strategy in the short term, it could be the worst decision you ever make in the long run. In this article, I will share a way that I have found to profit from a bear market and turn losses into gains.
The Rationale
Imagine you had a bag of coins. The market is crashing — but you are undecided on whether to sell or hold, for fear of selling at the trough of the market and missing out on potential gains as the market recovers; yet at the same time, worried about sustaining further losses as you are unsure of when the bottom is in. At such point of uncertainty, it would make sense to sell half of your holdings into cash, so that you have a balanced proportion of assets — if the market crashes further, you would have cash to buy back the asset at a cheaper price; if the market picks up, you would be left with the asset to sell off at a higher price. Even better is if this process could be automated by a trading bot that would let you buy low and sell high automatically, isn’t it? Welcome to the concept of a reversed grid trading bot!
My Experience
On June 13th 2022, as cryptocurrency prices were crashing, I deposited 0.005 BTC into a reverse grid trading bot on Pionex, which sold half my Bitcoins into USDT at the price of $24,000 then, leaving me a bag of both BTC and USDT. During these periods of market turbulence, the bot has been trading seamlessly in the background, buying BTC when it dips and selling when it rises, in a series of preset grids bound by a predefined price range.
As shown above, the bot has made a total of 4154 transactions in the past 269 days since its creation, generating a grid profit of 0.00139 BTC which is well over 27% of my initial capital!
With a reversed grid trading bot, a dip in asset price is deemed a profit (as the bot would be able to buy back the asset using the cash earned from selling it at a higher price), while a rise in asset price is deemed as a loss (as the asset could have been sold at a higher price).
To learn more on how to configure a reversed trading bot, feel free to check out my previous article here!
Final Thoughts
A great alternative to panic selling is to run a reversed grid trading bot — so that whichever direction the market heads, you are cushioned against massive losses:
- Should prices continue to tank, you would be in relative profit as you would have cash reserves to continue buying the dip, within the preset price range of the trading bot.
- Should you sell at the bottom and the market unexpectedly rebounces after running the reversed trading bot, at least you would still have remaining assets to be sold off at a higher price, and would be able to benefit from the grid profits generated by the process of selling high and buying low, rinsed and repeated.
Running a reversed grid trading bot as shown above is just one of the many strategies to remain profitable even in a bear market — check out 8 other such strategies here.
What are your thoughts on this?
Feel free to check out my previous articles on my favourite 6 cryptocurrency trading bots that have generated passive income for me no matter the market conditions!
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