20% or more drop in the asset prices for two months is considered a bear market.
There is no agreed-upon definition of the bear market. In that case, when it comes to the Cryptocurrency asset market, there is even more confusion. What’s happening with the prices lately? What’s going on in the market? No one got a plain answer to it.
So this is the definitive guide you were looking for to find answers to most of your questions. What is a bear market? What does it mean to be in a bear market? Is it actually a bear market? What are the consequences? Will the prices stay low forever? Do coin prices really matter? Are we aiming for higher Bitcoin prices?
And the most important one, when are we going to hit the moon (or rock bottom)?
What is a bear market?
The term ‘Bear Market’ comes from the way bear attacks. Their claws go downward. The Bull charges upward with his horns, which coined the term ‘Bull Market’ (sudden increase in prices).
A continuous downtrend across all the markets in an asset class is called a bear market. In simple words, the prices of coins are going down. And no one can see a reason for them to come up again any soon.
But just like the Bull Market (steep rise in the assets price for a long period of time), a bear market is also a phase.
There are many factors that contribute to the decline in prices. But the underlying force is human emotion. A short decline in prices leads to panic selling. And panic selling intrigues a lot of hodlers to cash out before the party is over. Before you know what’s happening, everyone is selling like it’s Black Friday. Pessimism leads to a bear market. For the prices to rise back again from a low point, it takes investors optimism, new and useful products, and protocols coming out in the market, and a fresh wave of newcomers (market adopters).
Is it actually a bear market?
Bitcoin has seen extreme fluctuations and more downtrends in the past. Right now the difference, there are more people keeping an eye on it. Thus, more people talking about it.
In January 2013, one Bitcoin was valued at $13.30. By the end of 2013, it was soaring at $1050+.
All that in a year. Hitting its all-time high. Then Bitcoin took a downtrend and never reached anywhere near $1000 for almost two and a half years.
No doubt that was a bear market.
In December 2017, the Bitcoin price discovered a new high of $18,900. That was the all-time high for Bitcoin and since then it is in a downtrend. Currently, it is valued at ~$59,000. This fluctuation is nowhere near the volatility of the year 2013.
What will be the consequences?
Nothing wrong can come out of the Crypto bear market. Apart from the losses that people suffered in their investments.
Bear markets don’t bring a recession. But they are the result of unhealthy markets. It is close to the chicken-egg problem. It cannot be said whether the bad markets lead to bear or bear leads to a bad market.
On the upside, the weak products find it hard to survive in the bear market. The coins without a use case or sustainable algorithms won’t survive. Only the well-planned coins and well-thought-of coins will function in such market conditions.
As a result, over 800 cryptocurrencies were dead by 2018. Here is a list of dead coins (it includes the scams and the coins that hit the rock bottom on the exchanges).
What does it mean to be in a bear market?
It means it's time for serious work. It’s time to focus on creating real value. Building valuable Dapps and protocols that can help more people onboard the Blockchain ecosystem and benefit from it.
The Crypto-Blockchain space is no more a reality show.
This is the time when we figure out the issues like scalability, transaction speed, the efficiency of blockchains, real use cases for consumers, simplify the technology, and let the end users say that they love the blockchain/cryptocurrency powered products. Now we can figure out the domain that needs decentralization and how to bring stability to the market.
Do coin prices really matter?
It does, as long as it doesn’t hit ground zero.
There are many aspects of a coin that matters more than its price. Only those with the investment perspective should concern about the coin prices.
A token (coin) is the blood of a Dapp or protocol. It incentivizes the miners, developers, and users. At which rate is it being traded on the exchanges comes at the later stage.
The use case of a coin in the Daap/Protocol environment comes first. Then the fact that how easy it is to exchange the coin with services. The algorithms which keep them steadily working and the checks that ensure that there will never be a rundown on the exchanges are more important than the price.
Although, bear markets should not be confused with a market correction. A market correction means that a particular asset price suddenly spiked and then took a downtrend to hit the moving averages. In the end, the token prices only matter to the traders and those who look at it as an investment. The people who work on the Dapps and protocols have many more things to worry about other than the speculative prices.
When is it going to end?
The total capital that ICOs have raised in three years (2016, 17 & 18) is close to $25 Billion.
A lot of ambitious blockchain projects have raised huge capital in recent years. Almost all the roadmaps extend to the year 2022 and beyond. I’m not concerned about the short-term bull and bear markets. But the exciting times would be when most of the projects will be entering the markets with their products and competing with others.
It will be exciting to see all the blockchain projects that are raising venture investments and funds in ICOs/IDOs. We’ll see the actual market prices when these products would be running and acquiring users. Right now the entire trading space is highly speculative and we haven’t seen a genuine consumer usecase.
What should I do in the Bear Market?
No can tell you that!
There is no way anyone can spot a forthcoming bear market or a downtrend or a bull market. For example, a bull market doesn’t mean the prices will keep finding a new high, but that, they will come down one day or the other. Similarly, a bear market doesn’t mean that it will hit ground zero with that rate of decline.
If you find your investments stuck in a bear market, the best you can do is play dead. This is not investment advice. Pulling out the money at low price points from the tokens (projects) that once you believed in is not worth it.
It is clear that the bear market is just another state of the market and it is too early to lose hope. While the prices are low, it is nowhere near to the traditional market crashes and global depression that we’ve seen in the past.
Do let me know your views in the comments below, what do you think about the crypto bear market, and what’s your take on the current market scenario?