Bitcoin (BTC) dropped below $20,000 in June 2022, its lowest rate since November 2020. In addition to the gloomy outlook for crypto, many investors are concerned about the general market and exchanges such as FTX handling their business in questionable ways which resulted in catastrophic impacts for both investors, institutions, and the entire crypto market as a whole.
However, this is not a reason to give up and avoid the crypto market altogether. Cryptocurrency is naturally a volatile asset. If you play your cards right, you can see rewards in the long run, but you can only do that by understanding how the bear market works. Keep reading to find out.
What Is a Bear Market?
Bear markets occur when stock prices stay low for an extended period. It causes widespread pessimism and low market sentiment, which leads to a steep drop in share prices of 20% or more from recent highs. Bear markets frequently follow significant drops in a bigger market or index. Because Bitcoin and Ethereum are the front-runners in the cryptocurrency field, and other cryptocurrencies follow in their footsteps, the entire market looks to those cryptocurrencies to determine the direction the markets will go.
What Causes a Bear Market?
Recessions often precede or follow a bear market. To gauge the state of the economy, investors keep a close eye on critical metrics like employment, inflation, wage growth, and interest rates.
When stock market investors observe an economic decline, they expect corporate profits to fall sharply. As a result, they unload their stock holdings, driving down prices and decreasing market activity. More long-term unemployment and harsh economic conditions could be in store if the market continues to fall.
How to Navigate Crypto Bear Markets
If you stick to these rules, you should be able to weather the bear market with relative ease.
Charts and Technical Analysis
Before doing anything else, you should study the crypto chart carefully. If you use charts and technical analysis, you can predict when a cryptocurrency’s price will meet support or resistance. If you want to know if Bitcoin’s price has found support or has solid support measures on the way down, you must watch the market.
Market News and Sentiments
Market sentiment and financial charts complement one another and are inseparable. Moreover, investing in a single sector during a bear market is a great way to control your gains and losses. Therefore, more is needed to be an expert in technical analysis and chart reading; you should also pay attention to market sentiment.
You can use social media signals from investors to gauge the market’s mood. Data points, including social media posts, price levels, social media activity, and so on, are used to calculate an indicator called the Crypto Fear and Greed Index, which displays sentiment. Sentiment analysis can gauge how deep an industry has fallen into a bear market.
Portfolio Diversification
A bear market is an ideal time to diversify your holdings. Get rid of the stocks that didn’t perform as expected during the bull market and restructure your portfolio to reduce the risk of having too much exposure to alt coins. You can also use fundamental analysis to find promising new alternative cryptocurrencies. One of the best places to discover coins if you’re looking to diversify is on https://coinmarketcap.com/ so be sure to stay on top of market activities there.
Roger Scott WealthPress 