Cryptocurrencies are back in the spotlight after their meteoric rise last year. Cryptos are notably known for their wild swing in price, and in their history, cryptos have experienced multiple cycles of both bear and bull markets. That refers to periods when the price of cryptos in the market goes up wildly and when it falls beyond every expectation. The last cryptocurrency downturn began in mid-2018 and lasted about two and a half years.
Recently, there has also been another sharp fall in crypto prices after their rise in early 2021. Bitcoin has dropped from a high of $48,000 to about $23,000 today. And many investors and crypto enthusiasts have been asking if the bear market is finally over or if we are in for another winter season in the crypto space.
In this post, we will show you what a bear market looks like and some indications that show when the market is in its winter season. You will also see if the bear market is finally over and if it’s the best time to buy Bitcoin and other cryptos or not. Let’s get into it.
What Exactly Is the Bear Market?
A bear market is a period of low prices and a lack of investor confidence. This period is characterized by low prices, low trading volume, low investor interest, and low media interest. The bear market is also known as the crypto winter. A bear market can last anywhere from a few days to several months. If a bear market lasts longer than six months, it is considered a long-term bear market.
A short-term bear market may occur when the price drops sharply but recovers soon afterward. Short-term bear markets are not uncommon. The drop in price that occurs during the bear market is usually caused by such factors as:
- The introduction of new regulations, which are implemented to protect investors and reduce risk.
- A lack of institutional investment, which causes an overreaction from retail investors.
- General economic instability (such as a recession), which can lead to reduced consumer spending and lower demand for cryptocurrency products.
Some Characteristics of a Bear Market
To know if we are still in the bear market or if it’s finally over, there is a need to know some things that characterize this season for investors. When we know them, then we can safely conclude whether the season is over or not. The following are some characteristics of a bear market:
- The price of cryptocurrencies falls for an extended period of time
- There are fewer people buying than selling each day
- The price of major coins drops below their historical average prices
- Fewer investors are entering the market
- A decline in trade volume
- Lack of interest in cryptocurrency trading
The Recent Bear Market
The recent bear market began in 2018. There were two major reasons for this. First, the price of Bitcoin fell from $20,000 to under $6,000. Second, the SEC shut down the ICO craze. As a result, people lost interest in crypto and started looking elsewhere. That’s where stablecoins came in.
Stablecoins are digital currencies that are pegged to fiat currency. So if the dollar goes up, the value of the stablecoin goes up. If the dollar goes down, the value of the coin stays the same.
Bitcoin’s price dropped from $20,000 to under $3,000 in 2018 alone. Many people thought that cryptocurrencies would never recover from their lows, but they did. Since then, the value of cryptocurrencies has continued to fluctuate wildly, reaching a high point of almost $19 trillion at the start of 2019 murah4d.
But now, some analysts believe that we could be nearing the bottom of the market. However, while the bear market continues, many people still remain bullish on the future of digital currencies. One analyst even predicted that Bitcoin would hit $100,000 this year.
While the bear market is characterized by investors’ despair and stunted confidence which prompts them to often ignore any good news and keep selling hastily, thrusting prices even lower. It is as well a good investment opportunity for Investors who aren’t looking at the down moment but the future, knowing that the bull market always follows every bear and often lasts longer.
Is the Bear Market Finally Over?
The bear market in cryptocurrencies is not over yet. There are still many reasons to believe that the bear market is not over. Some experts say that we have just started the bear market. Many factors contribute to the bear market. One is the lack of regulation. Cryptocurrencies are unregulated. This means that they do not fall under any government authority. Therefore, no government agency can regulate them.
Another factor is the volatility of cryptocurrency prices. Prices fluctuate a lot. Sometimes it does go down; sometimes it goes up. This makes it hard for investors to predict what the future holds. Also, the bear market is due to the high number of scams in the crypto space bintangplus4d.
Many people are getting scammed by fake ICOs (Initial Coin Offerings). These ICOs promise big returns but end up scamming their investors. This causes a lot of damage to the bear market
Common Mistakes to Avoid During a Crypto Bear Market
#1: Buying the wrong coins
One of the most important things you can do as an investor is to research coins before buying them. While this seems like a no-brainer, it’s actually a mistake made by many people who are new to cryptocurrency. If you don’t know much about crypto, or if you just want to get involved in it to make money quickly, then you might be tempted by some of the hype surrounding certain coins and rush into investing. This could lead you down the wrong path and could cost you big time in the long run.
Buying Bitcoin instead of other altcoins, which may have more potential than BTC does at any given time (and vice versa).
#2: Panic selling
Another mistake to avoid is to panic-sell your cryptocurrency when it’s going down. Everyone gets scared and wants to sell their coins when prices are low, but this is one of the worst things you can do, especially if you’re new to crypto investing and don’t understand the market well.
There are many reasons why an inexperienced investor might panic during bear markets. They may feel that they don’t understand what’s happening in the market or fear being left behind if everyone else seems to be making money on crypto investments.
It’s important to remember that while a bear market may appear scary at first glance, it actually presents an opportunity for investors who know how to navigate these challenges successfully.
#3: Trying to time the bottom
You’re wrong if you think you can time the bottom. It’s impossible to know when the market will rebound or whether it will ever rebound. You can’t predict how long a bear market will last, and even if you could, that doesn’t mean there aren’t other factors at play that could affect the price of your favorite cryptocurrency.
The best way to avoid getting burned by bad timing is to take a deep breath and focus on what you’re trying to achieve through trading—not on any particular price point or “bottom” in general.
#4: Over leveraging
Overleveraging is a common mistake that traders make in bear markets. A trader who overleveraged would be one who borrowed money to buy Bitcoin at a time when the price was high, hoping that it would keep going up. When the price started to fall and the borrower couldn’t pay back their debts, they were forced to sell their assets to repay creditors — often at a loss.
To avoid overleveraging, don’t borrow more than you can comfortably afford to pay back with interest (if required).
#5: Making impulse trades to “get even”
It’s easy to tempt yourself into making impulse trades if you have a lot of money invested in the crypto market. Don’t trade to get back to even. This isn’t a good idea for several reasons: if you sell low and buy high, you will never make any gains on your investment. Also, you won’t be able to take advantage of future opportunities that might arise.
#6: Letting emotions lead to trading decisions
Emotions can cause you to make bad decisions. It’s easy to get caught up in the moment and make impulsive decisions when trading, especially during a volatile market like this. However, it’s important that you keep your emotions in check so that they don’t lead you down a path of poor decision-making and ultimately cost you money.