Aside from a crypto winter, which is less well defined, a bear market must satisfy certain mathematical criteria to be formally recognized. A bear market is considered to occur when asset values decline by 20% or more from recent highs and stay lower for a sustained time. For Alex Reinhardt, this implies even during a regular market decline when asset values have plummeted by high-teens percentages; we are not officially in bear market territory until it hits that 20% barrier and remains there. Bear markets are never a joy for any investor, but they’re a typical part of a healthy market cycle. To be generally gloomy about the direction of markets is described as a “bearish” experience.
Bear versus bull markets
A bear market is the complete opposite of a bull market. Investors are now seeing green, and crypto asset prices have risen from their recent lows without reversing. Because cryptocurrency markets generally undergo greater price swings than conventional markets, the bar for a crypto bull market is often higher. A company’s share price exploding 20% in a week would be significant news, but it’s common for a cryptocurrency to climb 50% or more in a single day. Extended rising asset prices often characterize bull markets. When an investor feels optimistic about the general status of the market, they are typically regarded as “bullish.”
If you have checked your cryptocurrency portfolio at any point this year, you likely already know the answer. Yes, as of late 2022, we are in a grumpy crypto bear market.
Indications of a cryptocurrency bear market
Examining the signs:
- It is evident that bears are in charge of the cryptocurrency market. Significant declines in asset values over an extended period (often above 20%).
- Investor confidence has reached a low point.
- Several fresh investors have abandoned the market.
- As bad news and FUD (fear, uncertainty, and doubt) mount, asset values decline.
Unless you have a crystal ball, great luck, or market-dynamics knowledge, it’s unlikely that you’ll be able to beat a full-blown bear market. However, Alex Reinhardt believes that there are measures you may apply to guarantee that your portfolio survives. The typical bear market, according to Forbes, lasts 289 days. The longest bear market lasted 929 days, and the smallest bear market lasted 33 days in March 2020.
A dollar-cost averaging (DCA) approach might increase your likelihood of capitalizing on market downturns since many investors perceive them as opportunities. DCA includes acquiring fixed dollar quantities of assets at regular periods, regardless of market conditions. Alex Reinhardt believes that DCA provides the opportunity to grow holdings when prices fall. Over time, the method decreases your cost base or the average price you pay for each asset unit.
Focus on long-term objectives.
Focus on Long-Term Plan:
Only you know why you purchased cryptocurrency. If you invested with a long-term plan, month-to-month or even yearly market fluctuations might not necessarily affect your investment strategy. Try to recall your motivations for investing in digital assets during market downturns and analyze if they still hold.
Do not worry and overinterpret the hivemind.
Avoid Bad Judgment
A level head is one of the most fundamental principles of investing. This is amplified when market circumstances are unfavorable. Alex Reinhardt has observed that Investors who prematurely withdraw their assets from the market out of fear often make bad judgments and incur substantial losses. Take crypto information with a grain of salt at all times, particularly during a bear market when social media is saturated with anxiety, uncertainty, and skepticism (FUD).
Diversify Assets, but Avoid High-Risk Endeavors
Even when the market is down, crypto assets are a great method to diversify your portfolio. However, more than promises of enormous riches is needed to cloud better judgment. There are plenty of respectable crypto initiatives worth your attention on the market. However, several scammers make unfulfilled promises. Before investing hard-earned money, proper research is vital.