What is a bear market in crypto - how do you identify and survive it?
If you’re new to investing, then you may be a little confused about the ups and downs of the market. This is understandable, and while a bear market is not nearly as fun as one that is shooting up in price, there are some ways to take advantage of it. In this article, we’re going to define what a cryptocurrency bear market is. We’ll tell you how to survive and even thrive within any trading cycle.
What is a bear market in cryptocurrency?
A bear market is a situation when the total value of the market is falling. In other words, it is an environment that encourages selling. Many times when a bear market occurs investors will be very pessimistic about the potential of future assets, and they may begin selling out of fear.
As a crypto investor, bear markets can be scary, and you’ll need to work much harder to make money in them and to protect your current gains. Below we’ll go over some information about this trading cycle, including how to identify them, how to protect your assets, and how you can continue to profit off your trades in them.
How do you identify it?
It can be tough to spot a crypto bear market before it hits. Though, they often follow intense bouts of positivity. If the market has recently been pumped up and is experiencing euphoric highs where everyone thinks they are about to be very rich, then a bear market could be incoming.
This is particularly true of new markets where assets are not very stable yet such as cryptocurrencies. If rallies are slow or buying volume is decreasing, then it could be a good sign that more bad news for traders is on the way.
How long can a crypto bear market last?
It’s impossible to know for sure, but bear markets could last for years. If investors were hurt particularly badly by the last falling, then they could be slow to come back.
It will likely take a very big event to encourage more buying or at least a long time with stable pricing to encourage them that the bottom has finally arrived. Burned investors will be very cautious about losing more capital.
How do you survive it?
Hopefully, you don’t have all your eggs in one basket, and you have diversified properly. If not, then you should make a note to do that for next time. When the market is at its high point, it’s a good idea to remove some money and put it into other markets that are more stable for safe keeping. If you think a bear market is looming, then taking some money out and placing it into stable assets or fiat currencies could be a good move.
The benefit of this is that you’ll be able to purchase more assets when they are at rock bottom prices. This will put you into a very good position when the market does finally rebound, and it’s possible that you could have many more coins or tokens than you did before the falling started. In fact, if you’re an investor on a budget, then a bear market is the perfect time to stock up on high-quality assets which you could never afford before.
Is it possible to make a profit in bear markets?
Bear markets still have volatility, and as long as there is some movement you can still make money. In fact, unless an asset has completely stopped trading activity, there is money to be made there. Day trading and arbitrage are still possible on small price movements, and you can use many different short-term strategies to take advantage of tiny rallies to make daily profits or to add to your portfolio.
Trading in this manner could even double the size of your portfolio before the bear market ends with no further outside investment yourself. Bitsgap has many tools available, which can help you to identify and take advantage of these opportunities. Smaller repeated profits over the course of several months could be worth just as much or more than waiting to take larger profits later.
Cryptocurrency bear market versus a correction?
A correction is what happens when the price of an asset rises above a reasonable level. It could be possible that a massive correction in price triggers a bear market, but they aren’t really the same thing.
A bear market refers to a prolonged timeframe of pessimism for the entire environment. Unfortunately for the cryptocurrency, most assets still follow Bitcoin, and this means that even corrections can be extremely painful and cause panic, lowering the entire market’s value.
Is a bear market good or bad?
It is neither good or bad; it’s just something that happens. Markets move in cycles, and you have to experience all the points in the investment cycle if you want to participate. This means you have to take the highs and the lows, the good and the bad. Of course, there can be positive aspects to the bear market for smart investors.
Like we talked about earlier, bear markets can provide excellent opportunities to accumulate a nest egg for the future. However, not every asset will survive the falling trend, and you need to be good at picking out which projects are quality and which ones aren’t. Use this time to invest in what is on sale but avoid assets with no real use case or following behind them.
When does a crypto bear market end?
It’s really hard to say when a bear market ends. Investors and traders could be stuck in these markets for years at a time. In a traditional financial system, it’s believed that a bear market is finished when prices exceed 20%.
However, small markets regularly experience bumps like this. So how much does cryptocurrency need to rally before the bear market will be over? It’s hard to say because crypto is still very new in the eyes of every other market.
Bitcoin has the most available pricing data, so comparing the bull and bear times for its chart may help you to pinpoint how long we can expect to be in a bear market. Since altcoins are so connected to Bitcoin, you’ll need to watch its price movements to see how the rest of the market will react. It will take some serious price action and positivity here for the cryptocurrency bear market to end.