Bear Market and sound economies are characterized by. Low gas prices, operational supply chains, high consumer sentiment, corporate investment (FAI), reliable earnings, and increasing stock markets. But regrettably, some markets are cyclical rather than linear. Even though they are relatively new compared to traditional banking, cryptocurrencies in particular are severely impacted by the economic cycle.
Even while day trading can be thrilling and interesting. Both long-term and short-term investors should be mindful of the macroeconomic environment. And the stage of the economic cycle they are in. The world is currently transitioning towards a new economic cycle, one characterised by rising interest rates, as of spring 2022.
What is Bear Market in Crypto
A consumer, an investor, and an economist’s greatest fear are bear markets and recessions. Particularly devastating bear markets in the cryptocurrency space have seen losses in the billions of dollars.
Crypto bear markets are protracted periods of steep decreases. That are followed by consistent price declines for the majority of cryptocurrencies. Following the crypto-craze of late 2017 that drove coins like Bitcoin and Ethereum to new highs in the $19,000 and $1,500 price ranges. The most recent bear market began in February 2018. Then, several cryptos saw a protracted period of price decreases from 2018 to 2020, which led to their eventual demise.
Are We In A Bear Market For Crypto
We are currently in a bear market, according to the current situation of the global economy. Which is characterized by broken supply chains, decreased demand, soaring debt, rising central bank interest rates, and falling stock markets. The ongoing decline in cryptocurrency markets—which peaked in November 2021—also supports this.
However, the worst drops didn’t occur until the United States Fed started its tapering/quantitative tightening campaign in early 2022. One can claim with certainty that these are indicators of a bear market. When coupled with unsustainable DeFi returns, subpar VC and hedge fund risk management techniques, and the crises from algorithmic stable coins.
How Long Will This Bear Market Last
Although it is impossible to predict with certainty how long the present bear market will endure. Previous predictions indicate that it may go as long as two years.
Nevertheless, there are a few things to keep an eye out for that might change this prediction. Including the Fed slowing or stopping rate increases, the halving of Bitcoin in 2024, government adoption, and Twitter integration.
Cryptocurrencies would certainly benefit if the US Fed decides to scale back its aggressive rate hikes. Which might then prevent further losses.
Second, in anticipation of the subsequent Bitcoin halving in 2024. When supply will be halved and demand will double, prices will typically rise.
Thirdly, greater government adoption could result in a rise in demand for cryptocurrencies, particularly if the US Republican Party publicly backs Bitcoin or other crypto innovations or if more developed European nations implement pro-cryptocurrency legislation.
Twitter integration is the final step. Elon Musk has been a steadfast backer of cryptocurrencies, and it’s possible that his investment in Twitter may set off a domino effect that will increase in-app integration and drive other businesses like Google, Amazon, and Apple to accelerate their cryptocurrency goals.
Therefore, if any of these occur, the market may reverse sooner than anticipated.
Build a Stable Crypto Portfolio
However, for the purposes of this article, which serves as educational material about the principles investors can apply to increase their chances of being a successful trader and investor, it is always advised to seek the advice of a financial advisor for those seeking investment advice on specific trading and investing strategies.
First, present investors should work toward developing a crypto portfolio that is shock-resistant. For instance, selecting a mix of big and small coins, diversifying among industries like currencies, gaming, the metaverse, stables, DeFi, L1s, and L2s, as well as utilising safe trading techniques that avoid going all in, that avoid risky high leveraged long or short positions, and that avoid ownership of particular coins.
To guarantee that not all investments are in cryptocurrency during downturn markets, financial professionals advise diversifying a portfolio. If one asset performs poorly, you’re also less likely to endure a huge catastrophe if your portfolio is diversified.
However, cryptocurrency investors can also diversify their portfolios by concentrating on coins with a solid track record while also looking to invest in fresh initiatives.
Staking is an additional effective investment tool for diversification. Thirdly, greater government adoption could result in a rise in demand for cryptocurrencies, particularly if the US Republican Party publicly backs Bitcoin or other crypto innovations or if more developed European nations implement pro-cryptocurrency legislation.
Twitter integration is the final step. Elon Musk has been a steadfast backer of cryptocurrencies, and it’s possible that his investment in Twitter may set off a domino effect that will increase in-app integration and drive other businesses like Google, Amazon, and Apple to accelerate their cryptocurrency goals. Therefore, if any of these occur, the market may reverse sooner than anticipated.
Staking the Best Option in Bear Market
Being in such a hectic state Crypto traders search for option to help their trading process. Crypto staking is one of the best option in such a situation. As staking helps you in long term investment. It reduces the risk of emotional sabotaging your order. When you are staking for a long time you won’t be worrying about daily price fluctuation this alone saves lots of mistakes in crypto trading.
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