Bitcoin Crash: How To Survive The Bear Market
There is a lot of worry and worry in the crypto market right now. The crypto market seems to have been hit by a wrecking ball that sounds nothing as smooth as Miley Cyrus’s classic. It’s been pure grief for the last few days.
According to a report by Bloomberg, the market tanked by over $1 trillion in market value loss. As it stands, stable coin volume is now $74.11 billion, accounting for 78.96% of the total crypto market 24-hour volume. Bitcoin dominance, on the other hand, increased by 0.24% over the day to 40.75% of the total market.
Bitcoin, the king of cryptocurrency, has had a rough start to 2022, falling by 12% in the last seven days, prompting experts to believe that the cryptocurrency bear market has arrived. Some experts believe that this bear market will be shorter than previous ones based on social trends and investor sentiment.
Bitcoin is approximately 35% lower than its all-time high of nearly $69,000, which was set in November. The drawdown, or percentage decline from peak to trough, is the most significant since July. Previous drawdowns reached nearly 80% and took several months to recover from.
Well, what is a bear market?
A bear market is defined as a downward trend in a market’s prices. It is widely used not only in cryptocurrency markets, but also in traditional markets such as stocks, bonds, real estate, and commodities.
A bear market, in general, refers to a strong market downtrend with significant falling prices over a relatively short period of time. Cryptocurrency markets are smaller and thus more volatile than traditional markets. As a result, it is quite common to see stronger and longer-lasting crypto bear markets, with 85% price drops not being uncommon.
While a 20% drop in market prices is typically regarded as the start of a bearish trend, most indicators of an impending bear market are not so obvious. Traders and analysts employ a variety of tools and systems to assist them in identifying other, less obvious bearish signals and trends. Moving averages (MAs), Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI), On-Balance-Volume (OBV), and other technical analysis indicators are examples.
A bull market, which occurs when investors are optimistic, is the inverse of a bear market. Rising prices (bullish trend) generate a positive market sentiment, and as traders gain confidence, they tend to invest more and more, causing prices to rise further. According to economists, the United States experienced 25 bull markets and 25 bear markets between 1929 and 2014. The average bear market loss was -35%, while the average bull market gain was approximately +104%. These trends reflect how the market momentum maintains continuous price increases (on bull markets) and decreases (on bear markets).
According to experts, all previous bear markets were accompanied by a short-term price spike until the traders’ Fear, Uncertainty, and Doubt subsided. The Fear and Greed Index, a tool that indicates whether the market is in a bullish or bearish phase, has already indicated “extreme fear.”
Given the volatility of the cryptocurrency market, it is too early to tell whether we are in or out of a bear market. It is not uncommon for a drop in prices to be followed by investor pessimism. It would be an understatement to say that 2021 has been an unpredictable year for cryptocurrency.
However, if you play your cards correctly, even a future bear market can help you improve your cryptocurrency portfolio.
Way Out? Surviving the Crypto market crash!
To avoid being slaughtered in the bear market, it is key to get into real value projects with great utility. The second would be to HODL.
When confronted with a bear market, there are a few things you can do as a wise cryptocurrency investor.
- Buy Right.
The bear market may be the ideal time to make some good cryptocurrency purchases that will benefit you in the long run. The problem with a bear market is that you never know how long it will last or how far prices will fall. As a result, you run the risk of making a hasty purchase or passing up an opportunity to make a good investment entirely.
You will need to be patient because this is a speculative investment. However, one way to avoid this problem is to follow a plan in which you invest a fixed amount at regular intervals during this phase, regardless of how the cryptocurrency market is performing. This strategy is known as Dollar-Cost Averaging.
2. Always have a diversified portfolio
If you’ve been using only one type of cryptocurrency, now might be a good time to branch out. Not all cryptocurrencies experience drops at the same time. Remember when the value of Dogecoin skyrocketed after Tesla founder Elon Musk abandoned Bitcoin due to its high carbon footprint? Controlled and well-researched investments during a downturn can thus assist you in building a versatile portfolio during this period.
3. Long-term Thinking
A bear market could be the ideal time to add some long-term cryptocurrency investments to your portfolio. With prices so low, focus on investments that will pay off in the long run, as short-term investments are less likely to pay off in such a market.
Given the volatility of cryptocurrency markets, considering the long term can be intimidating. Making wise investments can be advantageous in the long run especially Tokens and assets that have great utility.
There is a saying that gets around a lot- “Buy the dip”. Well, the dip is here. Making controlled investments with a long-term view of crypto wealth management could be beneficial. Sound knowledge about how to stir the waters of the crypto markets will prove really beneficial. The bull run is inevitable someday, don’t miss it as well.