Crypto bear market – Disaster or Opportunity

Mature and established investors know what defines a bull and a bear market. For those less experienced in the market terminology or jargon, it would be helpful to have a basic understanding of what bull and bear mean in trading terms. The financial market comprises stocks, bonds, and commodities influenced by consumer confidence. Essentially, a bull market occurs when securities are on the rise whilst a bear market occurs when securities fall for a sustained period.

In a bull market, consumer confidence is very high and sustained through good economic growth and activity plus low or full employment. In such an economic environment, investors who hold the stock, bonds, and other financial utilities will be more prone to buy and invest more while keeping a firm grip on their current investments. There have been many instances in Europe, the United States, and other parts of the world that have experienced a bull market but nothing last forever, including the lucrative bull market. The bull market is a buyer’s market, a place that Bitcoin bookmakers somehow relish.

Difference between bull and bear markets

Contrary to the bull market, a bear market occurs when investors start losing confidence, and the investment prices fall by 20% or more for some time. Whilst bull markets are fueled by economic growth and a healthy economic situation; bear markets often occur during the economic slowdown, high employment, or as a consequence of a major event happening worldwide. In a bear market, investors will be eager to sell their securities rather than hold on and flee the market for the safety of cash. The bear market is a seller’s market.

If the global economy is going through a major slowdown or recession, bear markets can last for years. The most remembered bear markets include the Great Depression in the United States of America, the dot com bubble and the housing crisis of 2007-2008.

The fluctuating financial market deprived of profits

Experienced investors know that financial markets are in constant flux, and any losses or gains on securities are not necessarily limited to the bull or bear markets. Small gains and losses usually offset each other leading to flattened markets. In addition, investors have learned not to panic and evaluate the opportunities offered by the market, whether it is a seller’s or a buyer’s market. Experienced investors can make the right moves even in a bear market, eventually leading to higher gains and profits.

Understandably, it is not easy, especially for the less experienced investor, to hold your nerve in a bear market. Recently, the crypto assets portfolios brought double-digit losses, with Bitcoin dipping below $20,000 in June 2022. This is its lowest price since November 2020. Crypto investors are not the only ones concerned about their investments. The General market sentiment is bleak and continued to be negatively enhanced by the political situation in Europe and Russia. The economic view is that it will continue to be bleak for the foreseeable future and will take time for the European economy to recover.

Investment opportunities in a bear market

Even in these bleak bear markets, there are investment opportunities for those who were wise enough to secure expendable funds in their bank accounts. Investors have a golden opportunity to purchase dipped securities, including cryptocurrency, at a low price, and buying now at a significantly reduced price can redeem profitable returns.

Buying dipped cryptocurrency has to be made intelligently aimed at safeguarding fresh investment. A buying transaction can be made through what is called a single trade. This investment method involves staggering one’s saved funds into smaller tranches and making several trade deals over time. The primary objective is to avoid investing the money in one go; it is usually better to purchase small amounts and mark time to see if the asset falls in price further. If it does fall further, buy a little more. The old saying goes, “it is better to spread your eggs in different baskets” rather than invest all your capital in a single trade”.

Unlike novice investors, professional and experienced investors possess a higher market knowledge. With their understanding of the market and through technical analysis, they can more or less predict the price movement of market securities. Experience and technical understanding can help investors see when an asset has reached a bottom and the right time to intervene in the market. The operative word in all this is “predict”, as no tool can give you a strong and concrete signal when to buy a dipped asset.

How the bear market will affect cryptocurrencies

Whatever method is used to guess the bottom of a bear market, it is almost impossible to ascertain which of the 17,000 plus cryptocurrencies will recover faster and give the investors a high financial return. Diversifying your investments will not only protect the cash in hand or at the bank, but it will also reduce the overall risk of the assets. Losing on one particular cryptocurrency could be offset by gains made by other cryptocurrencies. All investors participating in a bear market must perform rigorous due diligence before deciding which crypto to invest in. Due diligence is always a paradigm when working with crypto and financials.

A few guidelines to look at before diving into new investment include the previous all-time high of the crypto. This does not mean that such crypto will give the maximum return, but it can give the investor an idea of what kind of security potential it has. Looking at past performance will give the investor an indication of how the asset faired during previous crashes. Although this does not guarantee that the same pattern will evolve, it is an excellent tool to guide future investments. The re-branding or launching of a major roadmap can also be a strong element to look at.

A bear market is not necessarily a disaster. It can offer a window of opportunity for the investors to make money, given that they can manage their emotions and withstand current economic challenges. This is easier said than done, but it is one of the hardest things to master when trading on the financial market. This is especially relevant to the crypto market. A highly volatile market can also be very frustrating if you succumb to the pressure and eventually lose the opportunity to buy into dip assets.