Crypto Bear Market

02.12.2022

Whether you’re looking into cryptocurrency, stocks, real estate, or any other asset, you’ll often see markets described in one of two ways: as a bull market or a bear market. Both descriptions refer to the outlining situation that's happening on the market, whether they are appreciating or depreciating in value. A bull market is one in which the value has gone up, and a bear market is one in which they have fallen. Among investors, a bull market is a time in which you should harvest your gains, as the charts glow in green colour. On the other hand, the bear market is a time of caution and uncertainty as the charts burn red. But what exactly defines a bear market, and how should we behave when the bear is on the hunt?

Definition of Bear market

Given that the crypto market is generally volatile and fluctuates daily, a bear market is a period of prolonged decline in the price of nearly all assets. But not every decline in prices is referred to as a bear market. A true bear market is one in which the value of cryptocurrencies has fallen by at least 20% and is continuing to fall. An example includes the famous cryptocurrency crash in December 2017, when investors saw Bitcoin fall from $20,000 to $3,200 over the course of a few days.

The typical attitudes and actions that characterize a bear market are:

• Decreasing prices over a sustained period of time;
• Supply is greater than demand;
• Lack of investor confidence in the market;
• No talk (or negative talk) of cryptocurrency in mainstream media as well as social media;
• General distrust in cryptocurrency among economists, analysts and traditional finance;
• Lower highs in the event of good news;
• Lower lows in the event of bad news.

Fear and greed

Bear markets lack the general optimism and confidence that most investors have during bull runs. Investors undergo contrasting feelings at different stages of bear markets. From the initial denial of the inevitable to the incessant buying of dips to the feeling of being completely defeated. Crypto bear markets present a rare opportunity to not only accumulate holdings but to position yourself to outperform by prudently managing your risk. However, the reality is that most investors fail to accomplish such feats during bear markets. Typically, crypto traders aim to purchase assets during a bear market, especially during rock bottom. However, it can be hard to know exactly when a bear market has ended, making it hard for investors to take the gamble and purchase low-value crypto that may or may not recover. Constant tension, stress caused by "lost" money, uncertainty and lack of financial stability cause doubt that ends with the disposal of crypto assets at a discounted price.

Tips for investing in Cryptocurrencies

Bear markets can certainly be scary times for investors, and nobody enjoys watching the value of their portfolios go down. On the other hand, these can be opportunities to put money to work for the long run while stocks are trading at a discount.

With that in mind, here are some tips you can consider while in the bear market:

• Focus on quality - When bear markets hit, indeed companies often go out of business. That's why it's important to focus on solid projects that are backed up by stable principles.
• Don't try to catch the bottom - Trying to time the market is generally a losing battle. One thing to keep in mind during bear markets is that you aren't going to invest at the bottom. Don't try to fight with the bear, maybe waiting for the bull to give you a ride up the chart might be a smarter move.
• Build positions over time - This goes hand in hand with the previous tip. Instead of trying to time the bottom and throwing all your money in at once, a better strategy during a bear market is to build your portfolio. Averaging the price might make the discomfort of the bear market less sensible. 
• Do your research! - The most important thing is to be accountable for your doings, and decisions and accept their outcomes without placing the blame on others. Therefore do your own research before your next move and don't thoughtlessly follow the words of other people.

Conclusion

In the Economy world, bear markets are quite common. Since 1900, there have been 33 of them, so they occur every 3.6 years on average. Cryptocurrencies are still something brand new and people don't know the depth of possibilities that are coming from blockchain technology. Endless possibilities, enthusiasm, the ambition of developers or simple ideology might be the solid base of optimism while waiting for the upcoming bull run.