There are many terminologies associated with the cryptocurrency market, one of which is bear market. This is a time when there is a prolonged and sustained drop in the prices of crypto assets.
The opposite of a bear market is a bull market, which is a period during which there’s a prolonged increase in the prices of assets. Bear markets make investors cringe, because of the drop in the prices of assets since they’ll have to wait for the bear market to finish.
Bear markets can be for a whole industry like the crypto market which is currently in a bear market, and it can be for a particular asset due to developments around the particular asset that do not favor its growth.
As you wait out the current bear market, here are five things you should know about it so you can make the most of it.
Bear markets are a healthy part of the market
Bear markets scare the life out of investors, but they’re not necessarily a bad thing. A bear market is just an unfavorable part of a market cycle. It allows assets some time to cool off and prepare for the next bull market.
They also afford investors an opportunity to buy some assets they couldn’t buy before the price went up. All seasoned investors know that bear markets are great opportunities to step back and re-strategize for the next bull run.
Crypto bear markets are worse than stock bear markets
There are bear markets in all markets, but the bear markets for crypto are usually more serious than those of stock markets for instance. A stock may bottom after crashing 36%, but cryptocurrencies can crash as much as 90%, particularly the low liquidity ones.
The duration of a bear market in crypto is also longer than for stock markets, but is about the same duration as a crypto bull market. While a stock bear market can be just 10 months long and the bull market being 32 months long, both crypto bear and bull markets last around 19 to 26 months historically.
Bear markets are hard to predict
Your favorite crypto influencer may give you an idea of what is to come, but they can hardly predict a bear market in a definite manner in advance. Therefore it is advisable to not worry about a bear market that has not arrived yet.
Instead, channel your energy into making profits in the bull market and managing your risks, should the bear market strike at any time. Bear markets are also relative, depending on the duration of time in consideration.
While a short term outlook may seem bearish, zooming out and looking at the long term can change your perspective. Also note that more often than not, bearish sentiments are worse just when the market hits a bottom. This means you should watch out for when investors are most depressed, for that may be when the bear market ends.
Stock and crypto bear markets don’t always happen together
You may have heard the idea of correlation of Bitcoin and Ethereum price to the stock market. This means that the crypto market – often led by Bitcoin – mimics what the stock market does. This isn’t always the case though, as the crypto market can be bearish even when the stock market is in a bull market.
A typical example is the 2016-2017 crypto bull market which started just when the stock market entered a bear markt.
You will gain if you endure the bear market
The bear market is a painful time when most investors sell off their assets after giving up any hope of recovery. These are referred to as weak or paper hands. From history however, those who hold on throughout the bear market eventually gain as the market cycle switches into a bull market.
If you know these facts about bear markets and arm yourself with them, you’ll be more likely to bear and survive the current bear market and also make profit in the end.
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