While cryptocurrency bear markets are likely to occur, they’re not usually a guarantee of the world’s end. What exactly is a crypto bear market? What is the duration that bears needs in crypto last? These are the most common questions investors or traders are asking these days. The readers in this piece will discover the characteristics of crypto bear markets, how to spot the signs of a bear market in crypto, and how long the bear run could be. The readers will discover what differentiates cryptocurrency bear markets and winter seasons. Furthermore, this article will give crucial information on how to survive a bear market in the crypto market.
What Is a Crypto Bear Market?
A bear market in crypto begins when a cryptocurrency asset trades at a lower level than its previous record high by more than 20% and continues to fall for a period of duration. The drop usually is followed by fear of the near-term future of the asset.
While a decline of 20% can be a good starting point for an economic downturn, it’s not a reliable all-inclusive indicator to define one. The cryptocurrency market is often volatile every day. A 20% decline may occur simply during a weekday that is not performing well. But, a bearish market isn’t identical to a healthful correction, which could be termed a Retracement.
How to Identify Crypto Bear Markets
Many investors opt not to buy during bear markets. Please consider checking the Cryptocurrency markets carefully. The previous article discussed the fundamentals of bear runs in the crypto market. But, knowing more specific information on their most important aspects can assist investors in determining if they’re entering a bear market, a crypto winter time, or an economic correction. These are the primary characteristics in crypto bear markets that you should be analyzing.
Extreme Fear and Pessimism
Pessimism and fear reign in cryptocurrency bear markets. The sentiments are longer and more intense than other times, causing panic selling. To gauge the opinion of the market, it is recommended to use a Crypto Fear and Greed Index, which has scores that range from a single number to 100. Lower scores represent greater fear. Scores lower than 49 tend to be on the frightening end, while scores that fall from 50 to 100 are more optimistic.
Low Trading Volume
A lack of activity is typically caused by extreme anxiety and pessimism in cryptocurrency bear markets. When there is a bear run for cryptos, the trading is generally reduced significantly as investors’ confidence decreases. However, some investors may attempt to sell assets to avoid further losses. If the trading volume remains minimal, appearing to be more like an unchanging line with only tiny changes, this is an upcoming crypto winter. Due to the fear of wash trading occurring on certain crypto exchanges and misleadingly increasing trading volume, more investors are now looking to the decentralized exchange (DEXs) to find reliable indicators. Decentralized crypto exchanges make it harder to boost trading volume fraudulently. Soft-FX Crypto Trading Platform is a flexible and versatile crypto trading platform software for a trading business looking to launch or expand its range of operations with cryptocurrencies.
Lack of Investor Confidence
If investors don’t trust their investments and trust, they will tend to be less active in trading. A bear market in crypto can be accompanied by lower confidence in various currencies. In May 2022, a lack of confidence in investors swept across the crypto community due to Terra’s BTC/USDT stable coin failing to recover despite being a big-cap venture. Stablecoins are meant to be liquid and hold worth to enable trades in conjunction with other cryptocurrencies. But, Terra dropped sharply, dropping by as much as $5 billion over a single day in market value. The demise of Luna’s stable coin demonstrated to investors that stable coins could still generate the same cryptocurrency risks without the advantages.
Unfavorable Macroeconomic Conditions
Because economic stability can affect confidence and liquidity affects trading volume, adverse macroeconomic conditions could lead to a bear market in cryptocurrency markets. Typically, crypto bear markets are accompanied by the combination of yields on inverted curves, rising inflation, and increasing interest rates. The longer timeframes of these adverse macroeconomic conditions could turn cryptocurrency bear markets into winters in crypto.
Intensified Interventions by Regulators
The crypto market is awash with a myriad of regulatory issues. The regulatory environment is constantly changing. Startups entering the market typically seek lawyers to know the regulatory areas that impact their business. Beyond the limit order in the futures or spot markets, you can use cryptocurrency trading bots to do this for you. KuCoin’s Trading Bot includes one. You can build your bot for an exchange pair and automate trading by buying low and selling high by itself. The changing regulations, coupled with the other elements discussed in the earlier sections changing in tandem, could trigger an economic downturn in the cryptocurrency market. Discussions of tighter government regulations for cryptocurrency have resulted in downward markets as worries grow.
Be An Opportunist – But In A Good Way
If investing in contrarians has taught us a lesson that it’s “buy when there’s blood in the streets.” Every downturn and bearish market cycle provides an opportunity to purchase cryptocurrency at a reduced cost. Highly educated investors know when to buy and are on a buying spree during every market dip or market slump.
Instead of a capitulation (selling everything you own during the event of a downturn all at once), You should think about making investments in the projects you are considering during recessions to generate a return when the market rebounded. It is essential to research the assignments before investing in them. Investors should also consider having stable coins in their portfolios, as these investments could protect against sudden market fluctuations and black swan-related situations. They’re also great options to buy crypto quickly whenever a dip occurs.
