How Some Investors Earn on a Bear Market — Even When Prices Go Down
Disclaimer. Trading and investing in cryptocurrencies involve substantial risk of loss and are not suitable for every investor. This material is not a financial advice.
Key Takeaways
- A bear market is not the end — it’s an opportunity. Strategies like staking, lending, DeFi liquidity provision, and airdrop hunting can help investors generate passive income even during downturns.
- DYOR is crucial. Using tools like CoinMarketCal, Messari, TradingView, CoinGecko, and community platforms helps reduce risks and make informed decisions.
- Each strategy carries different risks. From low-risk staking to high-risk lending, understanding volatility, platform security, and tokenomics is essential before committing funds.
While many investors go into hibernation when the crypto market enters a bearish cycle, others seize the opportunity to maximize their profits. The most obvious move is buying at all-time-lows (ATL) and holding until the bull takes over. Other strategies during the market decline include staking, using lending protocols, airdrops, providing liquidity in DeFi (Decentralized Finance), etc.
Whatever you opt for, it is highly advisable to gather reliable market intelligence data, i.e. DYOR (Do Your Own Research). The best approach is to use various tools.
Firstly, to be on the right track, follow news and releases.
You can try CoinMarketCal – an online calendar for crypto assets and current events at blockchain projects. It’s a future-oriented research tool helping you keep up with NFT collection releases, new coin/token listings, the start of trading on new exchanges, and many more.
Another powerful tool providing crypto market intelligence, Messari, is an aggregator of the latest news and developments with easy-to-understand dashboards and reports.
Secondly, dive into professional market analysis. Tradingview.com provides valuable insights from crypto investors or analysts worldwide. Also, it allows to compare assets seamlessly by displaying trading pair data for thousands of assets across numerous exchanges.
Two other platforms, CoinGecko and CoinMarketCap have demonstrated reliability in terms of up-to-date market tracking. Prices, market caps, trading volumes of nearly all the coins and tokens in existence visualized in easy-to-read graphs help investors and crypto enthusiasts stay on top of things.
Thirdly, spend some time on reading other cryptocurrency market participants’ opinions and reviews. Thus, you can get a more objective, no prejudice picture of how things are. For instance, Reddit’s r/CryptoCurrency is a discussion board on crypto based on first-hand experience of real users.
Also, search social media for projects you are interested in on Twitter or YouTube to get insights and in-depth content. Specialized communities on Telegram or Discord can be of great value to monitor changes in crypto space and to dive deep into niche crypto topics.
In short, do your own research, using all the available resources before developing your crypto strategy.
In this article we will explore how to make the most out of a pessimistic market phase, while understanding the underlying risks of each option.
Staking
One of the popular strategies in a bear market is crypto staking. You lock up your assets, commit them to the blockchain for future rewards in the form of a portion of transaction fees or new cryptocurrency coins.
What is staking crypto for an investor? It’s passive income generated by producing new blocks and verifying data using one's stake (coins). The more you stake, the more likely you are to get chosen as a validator. Validators create new blocks and confirm transactions, and get rewards for doing their job and keeping the network running smoothly.
Staking is only available on certain blockchains that use the Proof of Stake (PoS) consensus mechanism. Examples include Ethereum, Solana, Cardano, Avalanche, Polkadot, Cosmos, and many others.
While in some blockchains you can stake only native tokens, such as ETH on Ethereum, in some other blockchains, you are not limited to only the native ones. For example, NOW Wallet supports staking of BNB, TRX, ATOM, XTZ, SOL, and ADA with a crypto staking calculator integrated into their app to show how you can maximize your earnings if you stake a particular crypto now.
How does staking of crypto work? For instance, you go with staking ATOM through NOW Wallet.
Use the built-in crypto staking calculator to see how much you will earn by choosing the amount you want to stake and period of time:
Follow the guidelines:
Is staking crypto worth it? Staking can generate token rewards even in a bear market, increasing token count for future value. It’s basically similar to earning interest with a savings account. More tokens translates to more staking rewards, setting up their staking yields to increase substantially during a bear market.
To maximize your profit with staking, make sure to check out highest APY (Annual Percentage Yield) crypto staking options here and now.
To choose the best crypto staking platform, mind the following criteria: what currencies are supported and their APY, reliable security protocols, fees for staking and withdrawal, user-friendly interface and fast customer support.
Simple as it is, staking bears risks: loss of funds due to volatility, price drops, or technical failures.
Lending Markets
During a bear market, many investors turn to lending protocols as a valid option for earning in this period. Lending markets in crypto are platforms that allow users to deposit assets as collateral to obtain loans, or conversely, provide liquidity and earn income from the interest on loans.
A lending platform is somewhat similar to conventional financial institutions such as banks, but focuses on crypto and doesn’t involve third parties in transactions between users. The process is decentralized, users can supply or borrow crypto assets on a smart-contract basis.
By lending cryptocurrencies, investors earn interest, thus generating passive income. The potential profit is determined by competitive rates, loan terms, and the specifics of the loan application.
As prices of cryptocurrencies fluctuate, the value of the loan may change within a few hours. Stablecoins are designed to minimize this risk and ensure more stability. Stabilization mechanisms consist of reserve assets that can be exchanged for stablecoin holdings. Additionally, stablecoins rely on algorithms to adjust supply and demand, ensuring their value remains stable.
The main stablecoins available on the market are DAI, USDT, GUSD, USDC and PAX. In lending markets, stablecoins provide reduced risk compared to other cryptos.
Still, there is substantial risk facing an investor, who engages in crypto lending. Many DeFi protocols have open-source codes. This means their smart contracts can be vulnerable. Malicious actors may find exploits and drain funds.
In addition, incorrect use of cryptocurrency-related tools can lead to the liquidation of assets.
To mitigate these risks, lenders are advised to thoroughly evaluate the volatility and value of the collateral, consider the loan-to-value ratio, be mindful of the risk of borrower default, and understand the intricate regulatory environment.
Also, it is necessary to carefully research any lending platform to make sure it is trustworthy, before depositing any funds. Go for established platforms that store the majority of user funds in secure cold storage and prioritize security.
You can check out one of trusted crypto lending services, CoinRabbit with 24/7 live support and continuous monitoring of your loan to avoid risks of losing crypto. No fixed duration loans is also one of the advantages of this platform. As well as good reviews from independent users.
The world's second largest cryptocurrency exchange, Bybit, also offers lending opportunities. Their advantage is high APY (Annual Percentage Yields) on stablecoins for a lower-risk competitive returns on investments. At the same time, it boasts a comprehensive risk-management system with top-notch security tech.
Airdrops & Testnets
Airdrop crypto is a relatively simple way to receive some coins for free without any initial investment. What is airdrop crypto, how does it work?
An airdrop is a free distribution of coins as part of a promotional campaign. New or early-stage projects distribute cryptocurrency (tokens) to users at no cost.
Apart from raising awareness of a new token, getting potential investors engaged with the platform and its social media, some new projects also perform tests of its developing ecosystem (testnet).
The participants are requested to perform tasks: conduct transactions, exchange and receive test tokens, and use the test network. In some testnets users also interact with DeFi protocols and engage in Discord communities. Free airdrop crypto conditions vary from project to project.
Some notable aidrop examples:
Arbitrum rewarded early users of the network on March 23, 2023 with its ARB tokens, up to 11.62% of the total supply. To be eligible for this airdrop users had to meet some transactions and interactions requirements. For instance, activity on Arbitrum One and Arbitrum Nova.
On November 29, 2024, Hyperliquid conducted a large-scale airdrop, distributing its native token HYPE to more than 90,000 users. 31% of the tokens were allocated for the initial distribution, while 38.88% was reserved for future emissions and community rewards.
After the airdrop, the price of the HYPE token increased by more than 60%, and its market capitalization approached $2 billion.
Although there were no official airdrop announcements by Linea yet, the crypto community has long been on the hunt. Totally for a reason: Linea’s parent company, ConsenSys is one of the most significant players in the cryptocurrency market. Besides, Linea does not hesitate to give some hints – they are looking for ways to reward users for testing their protocol.
The Starknet Foundation rewarded participants in their testnet or early stages in 2024. Other eligible recipients included Ethereum LSD holders, non-Web3 developers, and various groups within the StarkNet ecosystem. What is remarkable about the airdrop is that StarkNet users received 51.33% of the token allocation - over 700 million STRK tokens to nearly 1.3 million addresses.
Bera’s airdrop to incentivize participation in its ecosystem and reward early adopters was a highly anticipated event in crypto space. To be eligible for a portion of the $80,000 in BERA tokens, users had to employ their Bitget Wallets for staking, making swaps and other transactions.
To wrap it up, participating in multiple major airdrops can generate income. Active participants can earn anywhere from a hundred to several thousand dollars per year, depending on the number of successful campaigns.
Nevertheless, rewards are not guaranteed. The growing number of participants reduces the values of potential earnings. And beware of crypto airdrop scams! Giving access to your wallet or personal data without due diligence can lead to disastrous consequences.
Providing Liquidity in DeFi
Another popular method to profit during a bear market is providing liquidity in DeFi (Decentralized Finance). Liquidity in DeFi is a cornerstone of its proper functioning, it ensures smooth trading and market efficiency.
How does it benefit the investor? In simple words, liquidity provision is depositing your assets on a DeFi protocol and earning special tokens named LP (Liquidity Provider), which correspond to the investor’s share in the liquidity pool.
What is liquidity pool in DeFi? A liquidity pool in DeFi is a collection of digital assets accumulated for trading on a decentralized exchange (DEX). They are created when users deposit their cryptocurrency into smart contracts, allowing the tokens to be used by others.
Liquidity providers earn trading fees from swaps of other market participants. The more liquidity a provider adds, the more fees they can potentially earn.
Participants typically lock token pairs; the share of the contribution corresponds to the current exchange rate of these tokens within the pool.
For providing liquidity, usually popular trading pairs like ETH/USDC or WBTC/USDT are used. The high demand for these assets in the liquidity pools in DeFi ensures continuous fee generation for the liquidity provider.
Liquidity provision in DeFi can be quite profitable. But there are certain risks involved.
One of them is impermanent loss, which occurs when the price of your tokens deposited in a pool changes significantly compared to holding them in a wallet. This is a so-called opportunity cost, meaning you could be better off by simply holding your assets.
Protocol exploits is the other risk, connected to the smart contracts used in DeFi. Smart contracts automate transactions and eliminate intermediaries, but at the same time they are vulnerable to various attacks and can contain bugs.
Also, market volatility can substantially impact the outcome of providing liquidity in a negative way: the value of LP tokens can decrease if abrupt price changes occur.
Conclusion
A bullish crypto market phase, backed up by positive investor sentiment, gives chance to many investors grow their portfolios and maximize profits.
However, crypto markets are cyclical, and a bear market always waits around the corner. Is it the time to give up or reduce activity in the crypto world? Crypto experts and enthusiasts use a whole variety of methods to take advantage of a market decline period.
In this material we reviewed some of them: staking, DeFi liquidity provision, using lending protocols, etc. The range of risk among these strategies starts from relatively low (e.g. staking) to quite high (e.g. crypto lending).
While weighing the pros and cons of crypto investment opportunities, it is highly advisable to do your own research. There are various tools out there for gathering market intelligence and mitigating risks.
