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How to Profit off a Bear Market Rally

Validated Individual Expert

People like to think that crypto winter is akin to a Scandinavian winter, that it’s long and bleak, and depressing. Well, maybe. But like the north with its northern light, a crypto winter has some really interesting stuff, if not a lot. All the gut-wrenching drama, the volatility. It’s never at all boring. But on top of all that — beautiful-est of them all — is the bear market rallies.

Bear market rallies are a fascinating phenomenon in itself. Especially for this cycle, there have been some interesting patterns or characteristics I witnessed on it since last year. There’s something you can do — or you can game — to your own advantage.

The FED blackout period

This bear market is all about FED rate hike. Like, I’m totally FED up (sorry nor sorry for the lame pun lol.)

It’s no denying that the grandmaster Jerome Powell and co has been wielding such power over us all lately. Every month, from his mouth, came a string of words that made or broke (mostly broke) the market. The sacred FOMC meeting, the volatility trigger. $2 Trillion dollar value wiped up from the stock market that day, you can thank daddy Powell.

But there were several times when the FED takes a break, and when they do, the market uses the vacuum period to rally. The speculators go berserk, like a bunch of school kids when the teacher goes out of the classroom for a while.

This phase is called the Fed blackout period, since the first time the fed raised 50 bps in May 2021, so far it happened twice already. The first was in August, coincidentally at the same time as the merge rally and also it was a post-3AC rally, and the second was this January 2023, where there’s no rate hike announcement for the new year. Not until February. Fueled further with inflation easing.

For 2023, I did some digging and found the FOMC meeting for this year to be,

  from https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm


You can take note of when the FED will have a months-off for this year.

Of course, past performance doesn’t indicate the future. But just in case it does, and the market’s herd mentality dictates so, it’s useful information to keep in mind.

Farming the heck out of things in between

So, we knew about the FED blackout period. So what’s the best thing to do during months when there’s no blackout? or worse, no volatility as well? In other words, the most boring period of the winter.

One of the low-risk stuff is to farm, or if you are already doing so, just to let your asset accumulate yield.

Stake the cheap coins, and that’s how a bear market rally can feel sweeter.

Recently I harvested a bunch of stuff that I haven’t touched in almost half a year now. Prior it was nice to see your coins adding up gradually through yield, but on the bear rally, it’s even nicer to see them increase in value by a lot.

What to do after harvesting? You can sell to take a clean profit — which I did on some assets — or you can re-stake it again, it’s up to you.

Buying low

One major thing that I learned about the bear rallies was that it showed me that it was never, never, a bad idea to pick up coins when a mega crash happened.

There’s nothing about that $900 ETH buy, or that $0.2 FTM haul, or ATOM accumulation whenever it’s under $10 that I ended up regretting. So far, they turned out great. 

Smaller market caps

For those who wish to go bolder, a bear rally offers an awesome opportunity to max out a profit even more through smaller-caps trading.

With smaller crypto, you can buy high and sell higher. Smaller caps usually lag compared to Bitcoin and the bigger blue chip, so you usually you’ll get a cue beforehand.

Of course, it’s only for those who are seasoned with the crypto wild market. If you wish to play it much more safely, just stick to the previous point (buy low.)

Even better, just find smaller cap crypto assets that you happen to be bullish fundamentally, and accumulate them whenever. 

However, it’s important to note that smaller caps move wilder than big caps. Resulting in extreme price swing that makes you lose your money if you’re not paying attention. Often they even dump first before the bigger caps (and have bigger dumps.) when the market reverse. Hence the next point.

Don’t hesitate to book your profit

You never profit if you don’t take profit. That’s why you need to take every unrealized profit with a grain of salt. With every rally, there’s always a moment of greediness of ‘what if it goes higher?’ which refrain you from closing positions and continuing to invest in something that was meant to be short term.

Again, there’s no reason to hold on to something you aren’t sure about. Oh, Aptos? Tell me if you’re really bullish on that scam chain.

Letting go of irrational desire and focusing on what’s in front of you, the profit you already get often saves investors from being taken aback later on.

With rallies, it’s important to manage our expectations. The rule of the market is what goes up must come down and vice versa. It’s always like that.

Being realistic

To further strengthen the market pragmatism argument, being realistic also prevent an investor from doing one big mistake during a bear rally: Buying the local top.

Why not go both ways?

Lastly, for the degens out there, a bear market rally is fun in two directions. Not just up, but also down. When you’re done with your long, perhaps it’s time to go the other way.

Notice the sentiment, pay attention to the funding rates, hop on/off out of trades and be flexible. All the while, don’t forget to manage the risk.

Like if you're a degen, I don’t even have to tell you about all this stuff. Just like what we say in CT, iykyk. (If you know, you know)

Meanwhile, normies, stand aside lol. Grownup stuff here.

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