This article comes from DappradarThis article comes from

, Original author: Charlie Butler, compiled by Odaily translator Katie Koo.

To this end, we have compiled a set of bear market bottom-hunting rules, techniques and tools to help you establish an objective analysis method based on a comprehensive understanding of the market.

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The general principle of bargain hunting

1. It is difficult to find assets that are really suitable for bargain hunting. The target asset needs to meet at least two conditions:

(1) A sharp drop in price;

(2) There are strong signs that prices will rise again.

2. Manage risk. Decide how much you can afford to lose and place stops on any trades you make. If your assets are worth too little, you sell them, cutting your losses.

3. Proceed with caution, recognizing that no one can get signals right every time. Be objective, seize the moment of the sell-off, and move on. In theory, bottom hunting means you're buying a strong asset that has fallen but should rise again as the broader market recovers. But sometimes, when you think you're hunting the bottom, you might just be grabbing a falling knife.

4. Don't make dip-hunting your only strategy. Find other ways to generate long-term profits. Cost averaging is a method of extending the investment horizon. You can also buy tokens or NFTs that are on the rise, they need to show strong enough fundamentals. Therefore, it is essential to learn the basics of technical analysis, and don't be partial to the way to make money from the "Great Leek".

The following is an introduction to the technical analysis of commonly used cryptocurrencies. May you take full advantage of these tools:

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The candlestick represents the performance of a token over a period of time. The K line is divided into four parts, namely the opening price, closing price, highest price, and lowest price. According to the European and American market habits, when the closing price is lower than the opening price, the K line is red; when the closing price is higher, the K line is green (you can also customize the settings on the brokerage or exchange page).

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Relative Strength Index (RSI)

The Relative Strength Index helps analysts gauge the magnitude of recent price changes. It appears as an oscillating line graph under the price chart.

If you use this indicator in conjunction with support and resistance level analysis, you will get a better idea of ​​which cryptocurrencies may be about to rise.

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Support and Resistance

Support and resistance levels represent predicted points at which an asset bottoms or tops, respectively. There are three ways to be sure:

1. Look at the price chart and see at what point the token's value repeatedly drops or bottoms out (this is not particularly accurate and does not take into account other traders' activity).

2. Find out who is likely to buy and sell when an asset hits a certain price point.

For example, in some tokens, a small number of whales control the majority of shares. The top 50 ETH holders control 17.93% of the entire ETH supply. This wallet alone holds more than $2 billion worth of ETH, the largest individual account holding ETH.

3. Use moving averages. In a downtrend, moving averages usually act as resistance. When the price hits that price, it usually reverses.

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MA is often used to determine the support and resistance levels of asset prices, and can also be used to judge the upward or downward trend of assets. A rising 200-day moving average indicates that the asset has been rising for an extended period of time. The MA can be combined with other indicators to help determine if an asset is about to reverse, or continue on its current trajectory. Understanding long-term moving averages and what they mean is a good way to avoid getting stuck in a "dead cat rally" (a short-term price bounce).

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Average Directional Index (ADX)

TradingView has developed a built-in ADX tool that helps us spot trends instantly and place trades quickly. ADX is measured between 0 and 100. A higher number indicates a stronger trend.

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It is worth noting that the ADX index rarely exceeds 60. If the ADX index is above 25, it means there is a strong signal. If it is below 20, it means a weak trend. Where the lines are, and whether they cross, can be a sign of a buy or sell. For example, if a positive indicator crosses a negative one, it could be a good time to buy. It is recommended to use ADX with other tools.

Common sense and metaphysics

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Gossip & Trust Your Intuition

The above tools are all examples of quantitative analysis, based on mathematics and statistics.

When a series of bad news about a project makes people start to lose faith in it, or you learn in advance that the CEO is leaving, this will affect the value of the token. Charts and quantifiable trends are the best way to make long-term decisions. But don't underestimate your own intuition.

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Not all asset prices bounce back

How many of the top ten tokens by market capitalization at the peak of the bull market in 2017 are still popular? How many of them are in today's top 10?

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Source: CoinGeckoOf the 10 coins listed above, only 4 are still in the top 10 today. BTC and ETH are still firmly in the top ten.

Ripple (XRP) has also managed to maintain its position. How long it lasts is another question. The token peaked at $3.84 on January 4, 2018. Even during last year's strong bull run, Ripple could only rise as high as $1.84, less than half of its all-time high.

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Source: CoinGecko

History is littered with examples of once successful companies failing. Don't indulge in the illusion that "everything will bounce back in the next bull market."

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Lay the foundation for success early

Instant riches can be achieved in a bull market, but those who are successful in the long run build their foundations in a bear market.As Shelby Cullom Davis puts it,Buying when an asset is already in an upward trend is not a good idea if the intention is to hunt for dips. The best time to plant a tree was ten years ago, and the next best time is now. You can start doing your research and find out which tokens and NFTs are right for you.

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The ranking pages of data tracking platforms are the best place to find the best platforms and projects. Recommend these tools and learn how to use them to do your own analysis, such as DappRadar, Dune Analytics, DeFi Llama, Nansen, etc.

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Find out why asset prices are falling

Check out Twitter for news and rumors about the project.

Start asking your soul: Did they have a mass turnover 6 months ago? Were there hacks and bugs that caused its community to stop playing or withdraw funds? Perhaps a platform whose token price fell because it was too aggressive during the 2021 bull run and back to reality at the start of the 2022 bear run?

If you find out that the founder of an NFT project has participated in multiple rug pulls, it may be wise to avoid the project. But if the NFT is only down due to external factors, then maybe it's still worth buying when it drops low enough.

In the case of The Sandbox, the price of the SAND token reached an all-time high on Nov. 25, at the height of the crypto bear market and metaverse boom. Since then, the index has been on a downward trend and is now well below its peak.

• Summarize several reasons for the price drop of SAND:

• SAND is overvalued in a crazy 2021;

• Markets become more risk-averse as the Fed raises interest rates;

• After the initial Metaverse hype surrounding Facebook's renaming to Meta, people are thinking and are working on the meaning of the Metaverse;

The decline in SAND prices has both external and internal factors. But that doesn't mean it's a bad product.

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Learn about the project

Research the project's leadership, team, and roadmap to see if they'll hit their stated milestones, check out the list of angel investors and their backgrounds. Join Reddit and Discord. Talk to community members who have done their own research and have a wealth of knowledge. Google search.

You should practice it yourself before you start. If you're going to buy AXS, then start playing Axie Infinity to see if you agree with the game and think it has a future. Analyze if Sky Mavis, the developer behind Axie Infinity, has big plans for the future. If you think that REVV Racing was once very popular and has a chance to make a comeback, open the Dapp and experience a few races.

Source: Twitter

Source: Twitter

Self-analysis of the reasons for wanting to start

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After going through the stage of finding assets suitable for bargain hunting, the next thing is to start with a good price.Your decisions should be based on knowledge, not a whim.

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Summarize

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Understanding your motivation for buying cryptocurrencies or NFTs is key to long-term success. If you can't explain your reasons to yourself or a friend, then you probably don't understand these assets at all.

Buying the bottom is a buzzword, not an investment strategy. To be successful, it takes a lot of work and knowledge to get your hands on an asset at a low price. You also need to be patient and know when to stop losses. The best way to make money is not to spend it all.