Most traders hate bear markets. Prices are tanking, portfolios are bleeding red, and every news headline seems to predict an even darker future. But here’s the thing — the “smart money” doesn’t see bear markets as something to fear. They see them as an opportunity. In fact, some of the biggest fortunes in crypto are made during bear markets, not during the bull runs everyone brags about.
I learned this the hard way. My first bear market felt like a slow, painful bleed. I panic-sold coins that would later recover tenfold, jumped into random “recovery” projects that failed, and convinced myself I was done with crypto altogether. It wasn’t until I started studying what veteran traders, hedge funds, and early adopters were actually doing in bear markets that my perspective flipped.
Today, I want to share exactly what I learned — the habits, strategies, and mental frameworks that the smart money uses when the market is down, and how you can adapt them for yourself.
They Hold Cash and Stablecoins Like a Weapon
When you’re in a bull market, it’s easy to think cash is useless. Everything’s going up, so why sit on the sidelines? But the smart money treats cash (and stablecoins) as dry powder — a weapon to deploy when fear grips the market.
In a bear market, prices don’t just dip — they get discounted. Projects that were overpriced hype-fests suddenly become affordable. That’s when having liquidity gives you an edge. While most retail traders are trapped in losing positions, the smart money can scoop up quality assets at a fraction of their true value.
I started keeping at least 20–30% of my portfolio in USDT or USDC during uncertain times. This wasn’t about timing the exact bottom — no one can do that consistently. It was about always having the ability to buy when others are forced to sell.
They Double Down on Research
Bear markets filter out the noise. When prices are high, every project looks like the next big thing. When the market’s down, the pretenders get exposed, and only the real builders remain.
The smart money spends bear markets digging deep into:
Founding teams — Are they still active and transparent, or have they gone quiet?Roadmaps — Are they shipping updates even when hype is gone?Tokenomics — Is the supply structure sustainable long-term?Community engagement — Is there still activity, or has everyone moved on?
I used to chase projects based on influencer hype and social media buzz. Now, my bear market watchlist is built on fundamentals. That’s how I found gems that later exploded when the market turned bullish again.
They Accumulate in Ranges, Not All at Once
Another key lesson I learned from watching experienced traders: they don’t try to catch the bottom with one big buy. Instead, they use dollar-cost averaging (DCA) to accumulate over time.
The logic is simple — no one can perfectly time market bottoms. But by spreading out purchases, you average into a strong position without betting everything on one price point.
During the last bear cycle, I started buying one of my favorite altcoins at $0.40. I bought more at $0.35, $0.32, and even $0.28. By the time the bull market returned, my average entry price was so low that even a modest recovery gave me massive upside.
They Focus on Building, Not Just Buying
One thing that shocked me when I started paying attention to the smart money crowd is how much time they spend building during bear markets. This doesn’t necessarily mean starting a new blockchain project — though some do. It can mean:
Creating content in the spaceNetworking with developers and investorsLearning new skills like coding smart contractsSetting up trading systems and bots
Bear markets are quieter, which means there’s more time to prepare for the chaos of the next bull run. I used one downturn to finally master DeFi yield farming — a skill that paid off big when things heated up again.
They Diversify Beyond Just Coins
Smart money investors see bear markets as a chance to rebalance and diversify. Instead of going all-in on tokens, they look at:
NFTs (blue-chip collections with long-term potential)Blockchain infrastructure projectsDeFi protocols with real revenueCrypto-related stocks and ETFs
The idea is to spread risk while staying positioned in the overall blockchain ecosystem. When one sector recovers faster than others, you’re already in the game.
They Study Past Cycles
Every bear market feels like “the end of crypto” — until the next bull run comes along and everyone forgets the fear. The smart money studies past cycles to recognize patterns:
Bitcoin dominance often rises as traders flee altcoinsQuality projects keep building quietlySentiment reaches peak pessimism right before the market turns
In 2018, Ethereum dropped from over $1,300 to around $80. By 2021, it was back above $4,000. History doesn’t repeat perfectly, but it often rhymes.
They Avoid Emotional Trading
This might be the hardest one. When your portfolio is down 70%, every instinct tells you to act — to sell, to chase a pump, to “make it back” quickly. The smart money avoids this trap by having a plan before emotions kick in.
I now set clear buy ranges, stop-losses, and profit-taking targets before entering any trade. In a bear market, discipline matters more than hype.
They Network With Other Smart Investors
In bear markets, the loudest voices tend to disappear. But the serious players — the ones with long-term vision — keep talking, sharing, and collaborating.
The smart money surrounds itself with other informed, level-headed traders. These aren’t Telegram pump groups. They’re smaller circles where ideas, research, and strategies are exchanged without the noise of retail FOMO.
During one bear market, I connected with a trader who introduced me to a low-cap project I’d never heard of. I started accumulating early, and by the next bull run, it had grown over 15x. That never would have happened if I wasn’t networking.
They Take Profits Strategically — Even in a Downtrend
Not every bear market trade needs to be held for years. The smart money knows there are mini-cycles within the larger trend. A project might pump 40% in a week even if the overall market is down.
I’ve learned to take partial profits on these short-term moves. It keeps my portfolio healthier and my mindset clearer — and it ensures I’m never fully dependent on a moonshot to recover.
They Prepare Mentally for the Next Bull Run
When prices are down, it’s easy to forget how crazy things get during a bull run. The smart money uses the quiet time to prepare:
Setting exit targets for holdingsDeciding how much they’ll cash out when certain price points hitPlanning diversification into other assets
This way, when the market turns euphoric again, they’re selling into strength — not buying the top.
Final Thoughts
Bear markets are where the real opportunities are. The smart money knows that fear creates discounts, research creates confidence, and patience creates wealth.
If you can train yourself to think like they do — to see red markets as a chance to position yourself for the future — you’ll not only survive the downturns, you’ll thrive when the next wave comes.
The next time the market takes a hit, remember: this is the time to get strategic, get disciplined, and get ready.
What the Smart Money Does During Bear Markets (And You Should Too) was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.